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KSS Q2 Earnings Beat Estimates on Margin Gains, Outlook Raised
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Key Takeaways
Kohl's Q2 adjusted EPS rose 128.6% to $1.28, beating the 55-cent consensus estimate.
Gross margin expanded 305 bps to 43%, helped by about $100 million of tariff refunds in merchandise costs.
KSS raised FY26 adjusted EPS outlook to $1.80-$2.40 and operating margin to 3.5-4%.
Kohl's Corporation (KSS - Free Report) posted adjusted earnings of $1.28 per share in the second quarter of fiscal 2026, up 128.6% from 56 cents a year ago. The figure beat the Zacks Consensus Estimate of 55 cents per share.
Total revenues fell 0.9% year over year to $3,515 million and narrowly missed the consensus estimate of $3,516 million. The company’s net sales fell 0.9% to $3,318 million, while other revenues fell 1% to $197 million. Comparable sales were down 0.9% year over year. We expected comparable sales to decrease 0.9%.
Kohl's Corporation Price, Consensus and EPS Surprise
This Zacks Rank #2 (Buy) company’s gross margin expanded 305 basis points year over year to 43%. Kohl's received about $150 million of IEEPA tariff refunds during the quarter, with roughly $100 million benefiting cost of merchandise sold. A portion of the refund was also recorded as a reduction of inventory, shared with vendors and invested to deliver greater value to customers.
SG&A expenses declined 0.9% to $1,188 million and remained flat at 33.8% of total revenues. We anticipated SG&A expenses to be 33.7% of total revenues.
Operating income decreased to $261 million, down from $279 million in the prior year. Operating margin was 7.4%, reflecting a decrease of 45 bps year over year.
KSS’ Financial Health Snapshot & Other Updates
KSS ended the quarter with $821 million in cash and cash equivalents, up from $174 million a year earlier. Merchandise inventories declined 3% to $2,913 million, while long-term debt fell to $1,325 million from $1,520 million. The company also had no borrowings under its revolving credit facility at quarter-end.
For the first six months, net cash provided by operating activities was $478 million compared with $506 million a year ago. Free cash flow rose to $332 million from $306 million, while adjusted free cash flow increased to $288 million from $270 million.
The company is restarting share repurchases of up to $100 million in 2026 under its existing $3 billion authorization.
On Aug. 18, 2026, Kohl’s declared a quarterly cash dividend of 12.50 cents per share, payable on Sept. 23, to its shareholders of record as of Sept. 9.
What to Expect From KSS in FY26?
Kohl's now expects fiscal 2026 net sales and comparable sales to range from flat to down 1.5%, compared with its prior outlook for a decline of up to 2%. Adjusted operating margin is projected at 3.5-4%, up from the earlier forecast of 2.8-3.4%, while adjusted earnings are forecasted at $1.80-$2.40 per share, compared with the previous outlook of a $1.00-$1.60 range.
The company’s shares have gained 33% in the past three months compared with the industry’s growth of 12.3%.
The Zacks Consensus Estimate for Target’s current financial-year sales and EPS indicates growth of 4.6% and 37.7%, respectively, from the year-ago reported numbers. TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.
Five Below, Inc. (FIVE - Free Report) operates as a specialty value retailer in the United States and currently holds a Zacks Rank #2. FIVE delivered a trailing four-quarter earnings surprise of 70.1%, on average.
The Zacks Consensus Estimate for Five Below’s current fiscal-year sales and earnings calls for growth of 15.1% and 36.7%, respectively, from the year-ago reported numbers.
Dollar General Corporation (DG - Free Report) is one of the largest discount retailers in the United States, selling low-priced merchandise, typically $10 or less. The company currently has a Zacks Rank of 2. DG delivered a trailing four-quarter earnings surprise of 21%, on average.
The Zacks Consensus Estimate for Dollar General’s current financial-year sales and EPS is expected to rise 3.9% and 7.6%, respectively, from the year-ago reported figures.
View the Zacks #1 Rank List
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KSS Q2 Earnings Beat Estimates on Margin Gains, Outlook Raised
Key Takeaways
Kohl's Corporation (KSS - Free Report) posted adjusted earnings of $1.28 per share in the second quarter of fiscal 2026, up 128.6% from 56 cents a year ago. The figure beat the Zacks Consensus Estimate of 55 cents per share.
Total revenues fell 0.9% year over year to $3,515 million and narrowly missed the consensus estimate of $3,516 million. The company’s net sales fell 0.9% to $3,318 million, while other revenues fell 1% to $197 million. Comparable sales were down 0.9% year over year. We expected comparable sales to decrease 0.9%.
Kohl's Corporation Price, Consensus and EPS Surprise
Kohl's Corporation price-consensus-eps-surprise-chart | Kohl's Corporation Quote
Kohl’s Quarterly Margin Highlights
This Zacks Rank #2 (Buy) company’s gross margin expanded 305 basis points year over year to 43%. Kohl's received about $150 million of IEEPA tariff refunds during the quarter, with roughly $100 million benefiting cost of merchandise sold. A portion of the refund was also recorded as a reduction of inventory, shared with vendors and invested to deliver greater value to customers.
SG&A expenses declined 0.9% to $1,188 million and remained flat at 33.8% of total revenues. We anticipated SG&A expenses to be 33.7% of total revenues.
Operating income decreased to $261 million, down from $279 million in the prior year. Operating margin was 7.4%, reflecting a decrease of 45 bps year over year.
KSS’ Financial Health Snapshot & Other Updates
KSS ended the quarter with $821 million in cash and cash equivalents, up from $174 million a year earlier. Merchandise inventories declined 3% to $2,913 million, while long-term debt fell to $1,325 million from $1,520 million. The company also had no borrowings under its revolving credit facility at quarter-end.
For the first six months, net cash provided by operating activities was $478 million compared with $506 million a year ago. Free cash flow rose to $332 million from $306 million, while adjusted free cash flow increased to $288 million from $270 million.
The company is restarting share repurchases of up to $100 million in 2026 under its existing $3 billion authorization.
On Aug. 18, 2026, Kohl’s declared a quarterly cash dividend of 12.50 cents per share, payable on Sept. 23, to its shareholders of record as of Sept. 9.
What to Expect From KSS in FY26?
Kohl's now expects fiscal 2026 net sales and comparable sales to range from flat to down 1.5%, compared with its prior outlook for a decline of up to 2%. Adjusted operating margin is projected at 3.5-4%, up from the earlier forecast of 2.8-3.4%, while adjusted earnings are forecasted at $1.80-$2.40 per share, compared with the previous outlook of a $1.00-$1.60 range.
The company’s shares have gained 33% in the past three months compared with the industry’s growth of 12.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Target Corporation (TGT - Free Report) offers guests fashionable, differentiated merchandise and everyday essentials at discounted prices. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Target’s current financial-year sales and EPS indicates growth of 4.6% and 37.7%, respectively, from the year-ago reported numbers. TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.
Five Below, Inc. (FIVE - Free Report) operates as a specialty value retailer in the United States and currently holds a Zacks Rank #2. FIVE delivered a trailing four-quarter earnings surprise of 70.1%, on average.
The Zacks Consensus Estimate for Five Below’s current fiscal-year sales and earnings calls for growth of 15.1% and 36.7%, respectively, from the year-ago reported numbers.
Dollar General Corporation (DG - Free Report) is one of the largest discount retailers in the United States, selling low-priced merchandise, typically $10 or less. The company currently has a Zacks Rank of 2. DG delivered a trailing four-quarter earnings surprise of 21%, on average.
The Zacks Consensus Estimate for Dollar General’s current financial-year sales and EPS is expected to rise 3.9% and 7.6%, respectively, from the year-ago reported figures.