Kohl's Corporation (KSS) Q4 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook, with declining sales and credit revenue, flat to negative comps, and margin pressures. Although there are optimistic initiatives for proprietary brands and digital growth, the lack of clear guidance and specific timelines raises concerns. The market cap indicates moderate volatility, but the negative financial guidance and uncertain management responses outweigh potential positives, leading to a negative sentiment.
Key Financial Performance
Comparable Sales Declined 2.8% year-over-year in Q4 2025. The decline was attributed to severe weather (70 basis points impact) and operational issues such as inventory depth and allocation problems, particularly in smaller format stores.
Diluted Earnings Per Share (EPS) $1.07 in Q4 2025, which is an improvement from the previous year. This was driven by strong inventory discipline and expense management.
Net Sales Declined 3.9% in Q4 2025 and 4% for the full year. The decline was primarily driven by a decrease in transactions, especially in stores.
Digital Sales Grew low single digits in Q4 2025 but were flat for the year. Growth was driven by higher traffic but offset by lower conversion rates.
Gross Margin Expanded by 25 basis points to 33.1% of sales in Q4 2025. This was due to strong inventory management and lower clearance markdowns, partially offset by increased shipping costs.
SG&A Expenses Decreased by $76 million or 4.9% in Q4 2025. The reduction was driven by lower store, marketing, and fulfillment-related expenses.
Inventory Decreased approximately 7% compared to the previous year. This was attributed to disciplined inventory management and timely flow of transitional receipts.
Operating Cash Flow $750 million in Q4 2025 and $1.4 billion for the full year, representing a $700 million increase from 2024. This was driven by improved inventory management and operational efficiencies.
Adjusted Net Income $125 million in Q4 2025, resulting in adjusted diluted EPS of $1.07. For the full year, adjusted net income was $186 million or adjusted diluted EPS of $1.62.
Cash and Cash Equivalents Ended the year at $674 million, an increase of $540 million from 2024. This was due to improved cash flow and reduced borrowings.
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Operating Highlights
Proprietary Brands: Solid progress with proprietary brands, including juniors business growing 8% in Q4. Expansion of FLX Kids to all stores by Q2 and launch of new proprietary tween brand, Sea + Skye.
Sephora at Kohl's: Launched M.A.C in over 850 stores and planning to expand assortment with brands like Tarte and Charlotte Tilbury.
Impulse Initiative: Rolled out Impulse Q Line in nearly all stores, with plans to implement Deal Bar and Impulse Toy Tower for seasonal moments.
Customer Engagement: Improved Kohl's Card customer performance by 120 basis points in Q4. Non-Kohl's card customers and new customer acquisition also showed positive trends.
Digital Sales: Digital sales grew low single digits in Q4, with higher traffic but lower conversion.
Inventory Management: Improved inventory discipline, reducing inventory by 7% and ensuring fresher spring inventory for 2026.
Omnichannel Enhancements: Focused on improving inventory depth and allocation to strengthen omnichannel performance, including BOPUS and BOSS.
Value Proposition: Enhanced promotional strategies and increased brand eligibility in coupons to deliver better value to customers.
Frictionless Experience: Investing in supply chain processes and digital modernization to improve customer experience.
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Risk or Challenges
Comparable Sales Decline: Kohl's experienced a 2.8% decline in comparable sales in Q4 2025, attributed to operational inefficiencies in inventory allocation and depth, as well as competitive pricing challenges during key shopping periods like Black Friday and Cyber Monday.
Inventory Management Issues: Operational inefficiencies in inventory allocation and depth, particularly in smaller format stores, led to missed opportunities to meet customer demand during key moments.
Competitive Pricing Pressure: Kohl's lost competitive ground during high-traffic shopping windows due to insufficient promotional strategies and pricing that failed to resonate with value-conscious customers.
Macroeconomic Challenges: The core low- to middle-income customer base continues to face financial pressures, impacting discretionary spending and requiring Kohl's to adapt its value proposition.
Seasonal Business Underperformance: The fall seasonal business underperformed due to inventory mismanagement and lack of customer choice in seasonal decor, limiting sales opportunities.
Digital Sales Conversion: While digital sales grew slightly, conversion rates were negatively impacted by inventory availability and findability issues.
Footwear Business Weakness: The footwear category underperformed, particularly in active footwear and boots, which are expected to remain soft.
Credit Business Decline: Other revenue from the credit business declined 9% in Q4 2025, driven by lower accounts receivable balances and underperformance of Kohl's Charge customers.
Economic Uncertainty: The uncertain macroeconomic environment continues to pressure Kohl's operations and financial performance, particularly affecting its core customer base.
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Guidance & Outlook
Net Sales and Comparable Sales: Expected to be in the range of a 2% decrease to flat versus 2025.
Operating Margins: Projected to be in the range of 2.8% to 3.4%.
Earnings Per Share: Anticipated to be in the range of $1 per share to $1.60 per share.
Other Revenue: Expected to decline 4% to 6% due to lower accounts receivable balances driven by sales underperformance in 2025 by credit customers.
Gross Margin: Expected to be flat to down slightly, driven by increased proprietary brand sales offset by increased digital sales and elevated promotional offers.
SG&A Expenses: Projected to decrease by 0.5% to 1.5%, driven by lower store payroll, marketing, and supply chain costs.
Depreciation and Amortization: Expected to be $700 million.
Interest Expense: Projected to be $285 million.
Tax Rate: Expected to be 22%.
Inventory: Expected to decrease by low to mid-single digits.
Capital Expenditures: Projected to be in the range of $350 million to $400 million.
Quarterly Sales Expectations: Q1 comparable sales expected to be down low single digits, with sales building throughout the year.
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Shareholder Return Plan
Dividend Payments: In 2025, Kohl's returned $56 million to shareholders through quarterly dividends. The Board declared a quarterly cash dividend of $0.125 per share, payable on April 1, 2026.
Share Repurchase: Kohl's repurchased $87 million of long-term debt at a discount to par value during the fourth quarter of 2025. However, no specific share buyback program was mentioned.
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Key Q&A
Q:Can you talk about the By Kohl's campaign and expectations for comps in 2026 among Kohl's Cardholders?
A:The By Kohl's campaign has already launched and focuses on showcasing proprietary brands like FLX. It aims to elevate these brands across stores and digital platforms. For Kohl's Cardholders, performance has improved from down mid-teens to down mid-single digits by the end of 2025. Efforts like coupon eligibility, jewelry and petite offerings, and investments in proprietary brands are expected to further improve performance, especially in the back half of 2026.
Q:Why is the credit revenue line expected to decline by 4% to 6%?
A:The decline is due to lower accounts receivable entering the year, which impacts interest and late fee revenue. Credit revenue lags sales because of the time it takes for purchases to accrue interest. The shift away from proprietary brands in recent years also impacted credit revenue, but efforts to reintroduce these brands and coupons are showing positive trends.
Q:What are the most immediate catalysts for recapturing market share in 2026?
A:The focus is on proprietary brands, which resonate with Kohl's Cardholders. Initiatives include offering more value items like $10 and under products, toy towers, and Deal Bars. These efforts aim to provide maximum value and enhance customer experience both in stores and online.
Q:What are the headwinds and expectations for EBIT margin guidance in 2026?
A:The EBIT margin is expected to compress by about 50 basis points at the low end due to challenges in leveraging SG&A costs. Tariffs are being managed effectively, and proprietary brands are expected to be a tailwind. Digital growth is seen as an opportunity but may add pressure to margins. Expense management and achieving flat comps are key to EBIT expansion.
Q:What are the biggest opportunities in the women's and home categories?
A:In women's, juniors showed strong growth, and there is focus on proprietary brands like LC Lauren Conrad and Sonoma. Opportunities include curating assortments and improving seasonal offerings. In home, lessons from holiday decor include offering more choices and better price points. Seasonal decor and small tests for events like Valentine's Day are being refined.
Q:What are the plans for marketing expenses in 2026?
A:Marketing expenses are expected to remain productive, with investments in digital channels like paid traffic and search terms. The focus is on driving sales and ensuring a good ROI. Productivity improvements will allow for reinvestment in areas that drive growth.
Q:What is the strategy for store openings, closings, and remodels in 2026?
A:There are no major plans for store openings or closings. The focus is on optimizing the existing store base and enhancing productivity. Relocations and annual evaluations will continue as needed.
Q:What are the plans for footwear and active categories in 2026?
A:Footwear is expected to see growth in dress casual and sandals, with innovation in active footwear coming later in the year. The category may lag in the first half but is expected to improve by the back half of 2026.
Q:What changes are being made to the store environment to drive top-line growth?
A:Changes include introducing impulse lanes, gifting zones, and showcasing proprietary brands like Lauren Conrad and Tek Gear. The aim is to create a fun and engaging shopping experience with curated assortments and storytelling elements.
Q:What is the timing and impact of trip assurance initiatives?
A:Trip assurance efforts, focused on curating assortments and ensuring stock availability, are well underway and will continue into 2026. These initiatives aim to improve customer satisfaction and drive traffic.
Q:What are the expectations for comps in 2026 and the factors influencing them?
A:Comps are guided to be flat to down 2%, with progressive improvement expected throughout the year. Factors include macroeconomic headwinds, investments in depth, and innovations in categories like footwear. Traffic remains a key focus, with marketing and inventory management playing critical roles.
Q:What are the key drivers for returning to positive comps in stores?
A:Key drivers include investments in proprietary brands, curated assortments, and enhanced customer experiences. Marketing efforts and digital growth are also critical. The focus is on building capabilities and adapting to the economic environment.
Q:What is the role of Sephora in driving customer acquisition and adjacencies?
A:Sephora has been effective in attracting younger, diverse, and digitally savvy customers. Adjacencies like juniors have been strategically placed to capitalize on cross-shopping opportunities.
Q:Review of Unclear Management Responses
A:Management avoided providing specific timelines or quantitative details for certain initiatives, such as the exact timing for returning to positive comps or the precise impact of trip assurance efforts. Responses often included general statements about ongoing efforts and macroeconomic challenges without clear metrics or deadlines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Sonoma brand
apparel
behavior
boot
brand FLX
brand LC
brand style
campaign
capability
category store
convenience
customer choice
dress category
factor
findability
footwear
foundation
frictionless experience
home decor
initiative
inventory allocation
inventory depth
issue
launch
line result
momentum junior
point item
position
result opportunity
shopper
softness category
stock level
term success
tool
touch point
turn
window
winter
woman
KSS Transcript
Kohl's Corporation (KSS) Q4 2025 Earnings Call Transcript
Unknown3-11
The earnings call reveals a decline in key financial metrics, including revenue, gross margin, net income, and operating cash flow, indicating financial struggles. Despite strategic initiatives, the negative financial performance and uncertain outlook, coupled with risks in forward-looking statements, suggest a negative sentiment. The market cap suggests a moderate reaction, leading to a prediction of a negative stock price movement in the range of -2% to -8%.
Kohl's Corporation (KSS) Q4 2026 Earnings Call Transcript
Unknown3-10
The earnings call presents a mixed outlook, with declining sales and credit revenue, flat to negative comps, and margin pressures. Although there are optimistic initiatives for proprietary brands and digital growth, the lack of clear guidance and specific timelines raises concerns. The market cap indicates moderate volatility, but the negative financial guidance and uncertain management responses outweigh potential positives, leading to a negative sentiment.
Kohl's Corporation (KSS) Q3 2025 Earnings Call Transcript
Positive11-25
Despite some vague responses in the Q&A, Kohl's earnings call indicates positive momentum. The improvement in guidance, successful inventory management, and strategic initiatives like Sephora's expansion and proprietary brand focus are promising. The market cap suggests moderate volatility, so a positive sentiment aligns with expected stock movement.
Kohl's Corporation (KSS) Q2 2025 Earnings Call Transcript
Unknown8-27
The earnings call summary presents a mixed picture with weak financial guidance, declining comparable sales, and a cautious outlook for the back half of the year. Despite some positive initiatives like proprietary brand growth and Sephora expansion, uncertainties around tariffs, credit revenue decline, and lack of clear guidance on achieving positive comps suggest negative sentiment. The market cap indicates moderate sensitivity, leading to a prediction of a negative stock price reaction in the range of -2% to -8% over the next two weeks.
KSS Slides
KSS Report
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
