0001193125-26-115982
SEC filingNet sales fell 4.0% to $14.8B; operating income rose to $624M on a $129M legal settlement gain.
Kohl's Corporation is a Wisconsin corporation organized in 1988. As of January 31, 2026, the company operated 1,153 Kohl's stores and a website (www.Kohls.com). Its stores and website sell moderately-priced proprietary and national brand apparel, footwear, accessories, beauty, and home products. Stores generally carry a consistent merchandise assortment with some differences due to local preferences and store size. The website includes both in-store merchandise and items available only online.
Kohl's merchandise mix includes national brands and proprietary brands available only at Kohl's. The proprietary portfolio includes well-known established brands such as Apt. 9, Croft & Barrow, FLX, Jumping Beans, SO, Sonoma Goods for Life, and Tek Gear. Exclusive brands developed through agreements with nationally-recognized brands include LC Lauren Conrad, Nine West, and Simply Vera Vera Wang. Proprietary brands generally have lower selling prices but higher gross margins compared to national brands.
Substantially all merchandise is received at nine retail distribution centers and four e-commerce fulfillment centers strategically located throughout the United States. A small amount is delivered directly to stores by vendors. Digital sales may be picked up in stores or shipped from fulfillment centers, stores, or directly by third-party vendors. No vendor individually accounted for more than 10% of net purchases in 2025, and the company has no significant long-term purchase commitments. No specific customer concentration is disclosed.
The retail industry is highly competitive. Product and value are considered the most significant competitive factors, with merchandise mix, brands, service, loyalty programs, credit availability, and customer experience also key. Primary competitors include online retailers, off-price retailers, warehouse clubs, mass merchandisers, specialty stores, traditional department stores, and other retail forms. Competitors vary by market.
In 2025, Kohl's employed an average of approximately 84,000 associates, including about 29,000 full-time and 55,000 part-time. Headcount peaks during back-to-school and holiday seasons. None are represented by a collective bargaining unit. The company emphasizes health, safety, and wellness initiatives, including 24/7 access to medical professionals after work accidents. Inclusion and belonging are supported by eight Business Resource Groups with over 8,500 members. Compensation includes a 401(k) match (100% up to 5% of pay after one year), medical/dental/vision for full-time associates, and a primary care plan for part-time associates, plus paid time off, merchandise discount, paid parental leave, and education benefits. Training and development programs range from onboarding to leadership development, with an annual ethics training requirement.
In fiscal 2025 (ended January 31, 2026), Kohl's net sales declined 4.0% to $14.8 billion, driven by an approximately 4% decrease in transaction volume. Comparable sales fell 3.1%. Gross margin improved 34 basis points to 37.5%, supported by strong inventory management (inventory down 7%), favorable merchandise mix, and moderating shrink levels.
SG&A expenses decreased 4.1% to $5.1 billion but deleveraged 5 bps as a percentage of total revenue (32.8%). Operating income rose sharply to $624 million from $433 million in the prior year, primarily due to a $129 million gain on a credit card interchange fee lawsuit settlement. On an adjusted non-GAAP basis, operating income was essentially flat at $510 million ($509 million prior year). Net income jumped to $272 million ($2.38 per diluted share) from $109 million ($0.98), while adjusted net income was $186 million ($1.62 per adjusted diluted share) versus $167 million ($1.50).
All merchandise categories except Accessories posted year-over-year sales declines. Accessories (including Sephora) grew 2.0% to $3.122 billion, reflecting the continued expansion of Sephora shop-in-shops (1,149 total at year-end). Women's, the largest category at $3.601 billion, fell 5.7%. Men's dropped 4.8% to $2.930 billion, Home declined 4.3% to $2.212 billion, Children's fell 6.5% to $1.700 billion, and Footwear decreased 6.9% to $1.210 billion. Digital penetration increased to 29% of net sales (from 28%), though digital sales were approximately flat year-over-year.
For fiscal 2026, Kohl's guided for net sales and comparable sales to decline 2% to flat. Adjusted operating margin is expected in the range of 2.8% to 3.4%, and adjusted diluted EPS between $1.00 and $1.60. Capital expenditures are planned at approximately $350 million to $400 million. The company declared a quarterly dividend of $0.125 per share, payable April 1, 2026. Kohl's continues to focus on delivering a curated, balanced assortment and frictionless omnichannel experience, while managing tariff and macroeconomic headwinds.
Kohl's ended fiscal 2025 with $674M cash, up from $134M a year earlier, primarily due to positive operating cash flow of $1.38B. Total debt stood at $3.9B (including finance leases and financing obligations), with shareholders' equity of $4.0B. Inventory decreased $200M to $2.75B, reflecting improved working capital management. The company has $1.5B revolving credit facility with no outstanding borrowings at year-end.
No material purchase commitments were disclosed in the Notes. The company's primary contractual obligations are lease-related: total undiscounted future payments for operating, finance, and financing obligations amount to $8.3B, with $452M due in 2026. The weighted-average remaining lease term is 18 years for both operating and finance leases.
Kohl's significantly reduced shareholder returns in 2025. Dividends dropped to $0.50 per share from $2.00, reflecting a 75% cut, with a new quarterly rate of $0.125 declared post year-end. No share buybacks occurred; only shares withheld for taxes. On the debt side, the company issued $360M of 10% senior secured notes due 2030 and repaid $440M (including $353M matured and $87M open market repurchases), resulting in a net $80M debt reduction. Capital expenditures totaled $372M, down from $466M in 2024, with a focus on store and digital investments.
Kohl's operates as a single reportable segment. The Notes provide a breakdown of net sales by line of business: Women's ($3.60B, -5.7%), Accessories including Sephora ($3.12B, +2.0%), Men's ($2.93B, -4.9%), Home ($2.21B, -4.3%), Children's ($1.70B, -6.5%), and Footwear ($1.21B, -6.8%). No geographic or channel (store vs. e-commerce) detail is provided in the Notes.
Kohl's explicitly highlights its vulnerability to U.S. economic conditions, given its 100% domestic store base. The core moderate-income customer is particularly sensitive to inflation in necessities (food, fuel, healthcare), which directly reduces discretionary spending. The filing also details significant tariff exposure: the majority of goods are sourced from Asia, and the recent Supreme Court ruling striking down prior IEEPA tariffs has been followed by new tariffs under alternative authority. This creates near-term cost and supply chain uncertainty, with potential margin compression if pricing actions cannot fully offset.
Credit rating downgrades are a key theme: S&P downgraded to BB- and Moody's to B3 in 2025. Further S&P downgrades would increase borrowing costs, and the ABL facility contains restrictive covenants that could trigger cross-defaults. The company's capital allocation strategy is under scrutiny, with a focus on debt management and shareholder returns.
Omnichannel execution is critical: failure to integrate physical and digital channels could reduce traffic and conversion. Inventory management is challenged by demand volatility, with organized retail crime increasing shrinkage. The filing notes that theft-deterrence measures may negatively impact the guest experience. Seasonal and weather risks are also emphasized, with H2 sales concentration and unseasonable weather forcing markdowns.
Cybersecurity is a major focus, with reliance on third-party vendors and legacy systems. The filing explicitly calls out generative AI risks, including deepfakes, misinformation, and IP infringement. AI initiatives may not yield intended productivity gains, and competitors may adapt faster.
State-level PFAS bans, extended producer responsibility laws, and climate disclosure mandates (California, SEC) increase compliance costs and may restrict product sales. The evolving ESG landscape creates reputational and operational risks, especially given divergent stakeholder expectations.
The profitability of the co-branded and private label credit card program is sensitive to the core customer's economic health. Rising unemployment or inflation could increase write-offs. Regulatory actions, such as potential limits on late fees or interest rates, could reduce program revenue.
The provided text does not contain the cash flow statement. Only the audit report and notes are present. No cash flow figures can be extracted.