Kohl's Q2FY26 Results: Adjusted EPS beats at $1.28, sales fall 0.9%

2 min read | Published on 27 Aug 2026, 12:45 AM |Updated on 27 Aug 2026, 12:45 AM

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Key Highlights

Adjusted EPS of $1.28 beat consensus of 57 cents, driven by tariff refunds
Net sales fell 0.9% YoY to $3.32 billion; total revenue hit $3.52 billion
Gross margin expanded 305 bps to 43%, aided by $100 million in tariff benefits
Full-year adj. EPS guidance raised to $1.80-$2.40 from $1-$1.60
Operating income contracted 45 bps to $261 million despite margin gains

*this image is generated using AI for illustrative purposes only.

Kohl's Corporation (NYSE: KSS) reported second-quarter adjusted earnings of $1.28 per share, significantly beating the consensus estimate of 57 cents. Despite the profit beat, net sales declined 0.9% year-over-year to $3.32 billion, reflecting persistent pressure from inflation on core customers.

The retailer raised its full-year fiscal 2026 adjusted earnings outlook to a range of $1.80 to $2.40 per share, up from the previous guidance of $1 to $1.60. CEO Michael Bender noted that low- and middle-income customers remain "choiceful" about discretionary purchases amid ongoing financial pressures.

Financial Performance

Net sales for the quarter totaled $3.52 billion, outperforming Wall Street expectations of $3.35 billion. Gross margin expanded by 305 basis points to 43%. This expansion was partly supported by approximately $100 million in benefits to the cost of merchandise sold, derived from refunds tied to tariffs imposed under the International Emergency Economic Powers Act.

Operating income reached $261 million, representing a 7.4% margin on total revenue. This marks a contraction of 45 basis points compared to $279 million in the prior-year period. Operating cash flow fell to $552 million from $598 million a year earlier.

Metric	Current Quarter	Prior Year	Change
Net Sales	$3.32 billion	-	-0.9%
Total Revenue	$3.52 billion	-	Beat est.
Adj. EPS	$1.28	-	Beat est.
Gross Margin	43%	-	+305 bps
Operating Income	$261 million	$279 million	-45 bps

What the Numbers Show

The significant beat in adjusted earnings was heavily influenced by non-recurring items rather than pure operational leverage. CFO Jill Timm disclosed that approximately $150 million in tariff refunds contributed roughly 65 cents to the raised full-year EPS forecast. With operating income actually contracting by 45 basis points despite gross margin expansion, the top-line growth and profit beat appear structurally dependent on these external refund benefits and credit revenue improvements, rather than core retail margin expansion.

Inventory and Balance Sheet

Inventory levels declined 3% year-over-year to $2.9 billion. Kohl's ended the quarter with $821 million in cash and cash equivalents. The company plans to reinvest a portion of the tariff refunds to offer greater value to customers, while sharing some benefits with vendor partners and recording part as an inventory reduction.

Outlook and Strategy

Kohl's expects fall margins to turn negative as it prepares for heavier promotional activity during the holiday season. To capture demand early, the retailer plans to introduce holiday merchandise sooner and emphasize value. Sephora at Kohl's faced headwinds, with sales declining 4% during the second quarter.

The company raised its sales outlook to a range of $15.29 billion to $15.53 billion, compared to analysts' expectations of $14.89 billion. Management stated that improved comparable-sales guidance, revised from a 1.5% decline to flat, reflects stronger business trends and turnaround initiatives, independent of the tariff refunds.

Capital Returns

The board declared a regular quarterly dividend of 12.5 cents per share, payable on Sept. 23, 2026, to shareholders of record as of Sept. 9, 2026. Kohl's also plans to resume share repurchases of up to $100 million in 2026 under its existing $3 billion authorization.

KSS shares were up 1.72% at $17.98 in premarket trading on Wednesday.