Kohl’s Corporation ((KSS)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Kohl’s Corporation’s recent earnings call presented a mixed sentiment, with some positive developments counterbalanced by ongoing challenges. The company showed progress in proprietary brand growth and inventory management, but it continues to face sales declines and uncertainties related to global trade policies, which are affecting its core customer base.
Positive End to Q2
Kohl’s ended the second quarter on a positive note, with July’s comparable sales remaining flat compared to the previous year. This marks an improvement from earlier in the quarter, suggesting some stabilization in sales performance.
Proprietary Brand Growth
The company’s proprietary brands experienced a notable upswing, with sales rising by 500 basis points from the first quarter. July was particularly strong, with growth in the low single digits, highlighting the potential of these brands to drive future sales.
Gross Margin Improvement
Kohl’s reported a 30 basis point increase in gross margin for the quarter. This improvement was attributed to benefits from category mix and effective inventory management, which helped offset some of the sales pressures.
SG&A Expense Reduction
The company demonstrated disciplined cost management, reducing SG&A expenses by 4.1%. This reduction reflects Kohl’s commitment to maintaining operational efficiency amid challenging market conditions.
Inventory Management
Kohl’s successfully reduced its inventory levels by 5% compared to the previous year. This strategic move is part of the company’s efforts to optimize stock levels and improve cash flow.
Impulse and Sephora Expansion
Impulse sales saw a significant increase of 30% in Q2, while the Sephora at Kohl’s initiative grew by 3% year-over-year. These expansions are part of Kohl’s strategy to enhance its product offerings and attract more customers.
Successful Refinancing
Kohl’s completed a successful refinancing of its July 2025 maturities by issuing $360 million of 10% senior secured notes due in 2030. This move strengthens the company’s financial position and provides greater flexibility for future investments.
Sales Decline
Despite some positive trends, Kohl’s faced a 5.1% decline in net sales for Q2, with comparable sales down 4.2%. This decline underscores the challenges the company faces in a competitive retail environment.
Pressure on Core Customers
The lower to middle-income customer segment remains under pressure, significantly impacting Kohl’s overall sales performance. The company acknowledges this challenge and is working on strategies to better serve this demographic.
Kohl’s Card Customer Decline
Sales from Kohl’s Card customers continued to underperform, with a decline in the low teens for the quarter. This segment’s performance is a concern that the company aims to address through targeted initiatives.
Men’s and Kids Categories Lagging
The men’s and kids’ categories were the weakest performers in the quarter, indicating areas where Kohl’s may need to focus on improving product offerings and marketing strategies.
Tariffs and Trade Policy Uncertainty
Uncertainties in global trade policy continue to pose challenges for Kohl’s, impacting cost structures and necessitating flexible pricing strategies to maintain competitiveness.
Forward-Looking Guidance
Looking ahead, Kohl’s revised its full-year 2025 guidance, anticipating a net sales decline of 5% to 6% and a gross margin expansion of approximately 30 basis points. Adjusted diluted earnings per share are projected to be between $0.50 and $0.80. Despite macroeconomic challenges, Kohl’s remains confident in its strategic initiatives aimed at driving long-term growth, particularly through its digital business and proprietary brands.
In conclusion, Kohl’s earnings call highlighted a mix of positive momentum in certain areas and ongoing challenges in others. While proprietary brands and inventory management showed promise, sales declines and pressures on core customers remain significant hurdles. The company’s forward-looking guidance reflects cautious optimism, with strategic initiatives poised to support future growth.