Kohl’s reported significant second-quarter gross-margin expansion despite declining sales, though approximately $100 million in tariff refunds substantially boosted reported profitability.
Net sales declined 0.9% year-over-year to approximately $3.3 billion, while comparable sales also fell 0.9%.
Gross margin increased 305 basis points to 43%.
During the quarter, Kohl’s received approximately $150 million of tariff refunds, with roughly $100 million flowing through gross margin.
Relative to quarterly net sales, that $100 million benefit is roughly three percentage points of revenue, meaning the refund was comparable in magnitude to the reported 305-basis-point gross-margin expansion.
Operating income was $261 million compared with $279 million a year earlier, while operating margin declined 45 basis points to 7.4%.
Net income was $151 million, or $1.28 per diluted share, compared with $153 million, or $1.35 per share.
Inventory declined 3% to $2.9 billion.
Kohl’s balance sheet also strengthened materially.
Cash and equivalents increased to $821 million from $174 million a year earlier, while long-term debt declined by $195 million.
The retailer raised its fiscal 2026 outlook and now expects net sales and comparable sales to range from a 1.5% decline to flat.
Kohl’s is also restarting its stock repurchase program, with plans to buy back up to $100 million of shares during 2026.
KEY QUOTES:
“Our second quarter results reflect the ongoing progress against our initiatives, leading to another improvement in our comparable sales trend.”
Michael Bender, Chief Executive Officer of Kohl’s
