Key Highlights

  • KSS shares rose 1.56% in Wednesday's session to $17.96, up from a prior close of $17.68.
  • Adjusted EPS came in at $1.28, beating the $0.57 consensus estimate by more than 132%.
  • Second-quarter Revenue of approximately $3.3 billion missed the $3.3 billion consensus estimate by 0.15%.
  • The company raised full-year 2026 EPS guidance to $1.80 to $2.40, including an estimated $0.65 Tariff refund benefit.
  • Kohl's reinstated its share buyback program, its first since 2022, with plans to repurchase approximately $100 million in stock during 2026.

Earnings Beat Overshadows Soft Sales Trends

Kohl's Corporation (NYSE:KSS), the Menomonee Falls, Wisconsin-based department store retailer, saw its shares trade higher after reporting a large adjusted Earnings beat that offset softer underlying sales trends. Second-quarter comparable sales declined 0.9%, with year-to-date comparable sales down 1%, as store sales fell 2% while digital sales grew 2.8%.

Gross Margin improved 305 basis points during the quarter, aided by approximately $150 million in tariff refunds, of which roughly $100 million benefited cost of merchandise sold. Excluding the tariff impact, gross margin still rose approximately 5 basis points, pointing to modest underlying margin improvement even without the one-time benefit.

The company's proprietary Kohl's Charge Credit card customer sales increased 1% during the quarter, while sales from its proprietary brands grew 3%. Marketplace gross merchandise volume, a newer growth initiative, expanded 88% during the quarter, though it remains a small contributor to overall revenue.

Guidance Raised as Capital Return Resumes

Following the results, Kohl's raised its full-year 2026 guidance, now projecting comparable sales between negative 1.5% and flat, adjusted Operating Margin of 3.5% to 4%, and adjusted EPS of $1.80 to $2.40, which includes an estimated $0.65 benefit from tariff refunds for the full year. The company also said it expects inventory to be down by a low single-digit percentage for the year.

In a notable capital allocation shift, Kohl's reinstated its share buyback program for the first time since 2022, targeting approximately $100 million in repurchases during 2026, alongside continued opportunistic Debt repayments and its existing quarterly Dividend of $0.125 per share. The company ended the quarter with $821 million in cash and no borrowings against its asset-based lending facility.

The stock carries a market Capitalization of approximately $2.04 billion, with a forward price-to-earnings ratio of 12.54 and a Dividend Yield of 2.78%. Despite the earnings beat, analyst sentiment on the stock remains mixed, with a consensus rating of Reduce among the roughly 12 analysts covering the name and an average price target suggesting some remain cautious even as the stock trades well below its 52 week high of $25.22.

What Comes Next

Kohl's results illustrate a retailer where cost discipline and tariff-related benefits are currently doing more work than top-line growth, with comparable sales still negative even as profitability metrics improve. The reinstated buyback program signals management's confidence in the balance sheet, even as analyst sentiment toward the underlying sales trajectory remains mixed.

Investors are likely to watch whether digital sales growth and marketplace expansion can offset continued softness in store traffic, along with holiday-season performance, as the more meaningful test of whether this quarter's margin improvement can be sustained without relying on one-time tariff refunds.