Kohl's Earnings Show Profit Lift From Tariff Refunds

Kohl's Corporation (KSS) reported second-quarter earnings for the 13-week period ended Aug. 1, 2026, showing stronger profit and wider margins after receiving tariff refunds, even as net and comparable sales declined. The company raised its full-year profit guidance and restarted share repurchases.

Quarter Results and Sales Trends

Kohl’s total revenue for the quarter was about $3.5 billion, down roughly 0.9% year over year. Net sales fell 0.9%, with comparable (same-store) sales declining by the same percentage. Proprietary brands, Kohl’s Card sales, Home, Toys, and digital channels showed relative strength. Store sales dropped about 2%, while digital sales rose approximately 2.8%. Other revenue tied to the credit business declined about 1% in the quarter and roughly 5% year to date, contributing to revenue missing expectations.

Margins, Profit, and Tariff Refunds

Gross margin expanded to 43.0%, up 305 basis points from the prior-year quarter, driven by approximately $150 million in IEEPA tariff refunds. About $100 million of this amount benefited cost of merchandise sold, directly boosting gross margin, while the remainder was allocated to inventory adjustments, vendor sharing, and customer-value investments. Management said excluding the tariff refund, gross margin would have risen only about 5 basis points. Michael Bender, chief executive, said, “We are confident that [we] are making ongoing progress against our initiatives.”

Kohl’s reported net income of $151 million and diluted earnings per share (EPS) of $1.28 for the quarter, while operating income declined to $261 million from $279 million a year earlier. Selling, general, and administrative (SG&A) expenses fell about 0.9% to roughly $1.2 billion, or 33.8% of revenue. Adjusted operating margin improved, and year-to-date gross margin widened about 162 basis points. The quarter’s EPS significantly exceeded Wall Street consensus near $0.57–$0.58, implying an earnings surprise of roughly $0.70 per share.

Guidance and Capital Returns

Kohl’s raised its full-year adjusted diluted EPS guidance to a range of $1.80 to $2.40, up from $1.00 to $1.60, and now expects net and comparable sales to be flat to down 1.5% versus 2025. Adjusted operating margin guidance is 3.5% to 4.0%. The company said the EPS range includes about $0.65 per share of tariff-refund benefit. It projects capital expenditures of $350 million to $400 million for the year.

The company restarted share repurchases, planning up to $100 million in buybacks during 2026 under an existing $3 billion authorization. The board declared a quarterly dividend of $0.125 per share, payable Sept. 23, 2026, to shareholders of record Sept. 9, 2026.

On the balance sheet, cash and cash equivalents rose to about $821 million from roughly $174 million a year earlier, while long-term debt declined to about $1.3 billion. Adjusted leverage stood near 1.8 times net debt plus leases to EBITDAR (earnings before interest, taxes, depreciation, amortization, and rent). Inventory at quarter-end was about $2.9 billion, down roughly 3% year over year. Operating cash flow for the first six months of fiscal 2026 ranged between $478 million and $552 million, compared with $506 million to $598 million in the prior year. Year-to-date net income was $137 million, or $1.18 diluted EPS.

The tariff-refund windfall produced an outsized margin gain that underpinned the quarter’s earnings beat. It gave management room to raise EPS guidance and resume buybacks, moves that support near-term shareholder returns even as core same-store sales remain weak.