0001193125-25-306677
SEC filingKohl's Q3 net sales fell 2.8% with comparable sales down 1.7%, gross margins improved 51 bps, but operating income declined to $73M.
In the third quarter of fiscal 2025, Kohl's reported net sales of $3.407 billion, a decrease of 2.8% compared to the prior year. Comparable sales fell 1.7%, driven by a 3% decline in transaction volume, while average transaction value remained flat. Gross margin improved 51 basis points to 39.6% of net sales, benefiting from strong inventory management, favorable merchandise mix, and moderating shrink levels. SG&A expenses declined 2.1% to $1.263 billion but deleveraged 55 basis points as a percentage of total revenue due to lower sales volume and a shift of certain credit card expenses. Operating income fell to $73 million (2.1% of revenue) from $98 million (2.6% of revenue) in the prior year. Net income was $8 million, or $0.07 per diluted share, compared to $22 million, or $0.20 per diluted share, last year. On an adjusted non-GAAP basis, operating income was $77 million and net income was $11 million, or $0.10 per diluted share.
All merchandise categories except Accessories experienced sales declines. Accessories (including Sephora) grew 2.9% to $669 million, driven by strength in beauty and accessory categories. Women's decreased 2.9%, Men's down 3.4%, Home down 1.9%, Children's down 6.8%, and Footwear down 8.5%. Digital sales increased 2.4% in the quarter and represented 28% of net sales, up from 26% last year, reflecting continued omnichannel engagement. The company's Sephora shop-in-shops now total over 1,100 stores, supporting accessories growth.
For the full year 2025, Kohl's expects net sales to decline 3.5% to 4%, comparable sales to decline 2.5% to 3%, adjusted operating margin between 3.1% and 3.2%, and adjusted diluted EPS of $1.25 to $1.45. Capital expenditures are planned at approximately $400 million, including investments to complete Sephora rollouts and expand the Etna E-commerce Fulfillment Center. Management remains focused on inventory discipline and managing tariff exposure through supplier diversification. However, the company faces headwinds from macroeconomic pressures, including inflation and tariffs, and notes that further trade policy actions could impact results. The quarterly dividend was set at $0.125 per share, and no share repurchases are planned for the fiscal year.
As of November 1, 2025, Kohl's held $144M in cash and cash equivalents, up from $134M at fiscal year-end. Total assets stood at $14.1B, with merchandise inventories of $3.9B (a 32% increase from $2.9B at February 1, 2025, reflecting seasonal build). Total debt (including current portion of long-term debt, borrowings under the revolving credit facility, and finance leases/financing obligations) was $4.0B, of which $1.6B is secured/unsecured senior debt and revolver borrowings. Shareholders' equity was $3.9B, slightly up from $3.8B at year-end. The company's current ratio (current assets/current liabilities) was 1.30x, compared to 1.08x at year-end, driven by the inventory increase and lower accounts payable.
Kohl's has significant lease and financing obligation commitments. Total future lease payments (operating and finance) amount to $8.4B, with $2.8B in operating lease liabilities and $2.0B in finance lease liabilities on the balance sheet. Financing obligations total $1.4B in future payments, with a $457M liability recorded. The weighted-average remaining term for both operating and finance leases is 18 years, though the contractually obligated term is only 4-5 years, indicating substantial renewal optionality. The company also has a supplier finance program with $255M in accounts payable as of November 1, 2025.
Kohl's paid $42M in dividends during the first nine months of 2025 ($0.375 per share), down from $167M ($1.50 per share) in the prior year period. The quarterly dividend was reduced to $0.125 per share. No share repurchases were executed. Capital expenditures totaled $308M, down from $367M in the prior year period. Debt activity was significant: the company issued $360M of 10.000% senior secured notes due 2030 (net proceeds $357M) and repaid $353M of 4.25% notes at maturity. Net borrowings under the revolving credit facility decreased by $245M. The effective interest rate on total debt rose to 6.13% from 4.73% at year-end, reflecting the higher-cost issuance.
Kohl's operates as a single reportable segment. However, Note 2 provides net sales by line of business for the three and nine months ended November 1, 2025. For the third quarter, Women's was the largest category at $844M (24.8% of net sales), followed by Accessories (including Sephora) at $669M (19.6%), Men's at $677M (19.9%), Home at $464M (13.6%), Children's at $453M (13.3%), and Footwear at $300M (8.8%). Year-over-year, all categories declined except Accessories, which grew 2.9%. The largest declines were in Footwear (-8.5%) and Children's (-6.8%). No geographic mix is disclosed.