Kohl’s Corporation (NYSE:KSS) shares fell more than 8% in premarket trading on Wednesday, reversing an earlier gain even after the retailer delivered second-quarter earnings well above expectations and raised its full-year profit forecast.
Adjusted earnings reached $1.28 per share, beating the analyst consensus of $0.57 by $0.71. Revenue was less impressive, however, coming in at $3.32 billion versus expectations of $3.4 billion and declining 0.9% from a year earlier.
Comparable sales decline as gross margin improves
Comparable sales fell 0.9% during the quarter, highlighting continued pressure on Kohl’s underlying sales performance.
Profitability benefited from a significant improvement in gross margin, which expanded by 305 basis points to 43.0%. Approximately $100 million of tariff refunds flowed through gross margin during the period and contributed to the increase.
Kohl’s received approximately $150 million in total tariff refunds during the quarter.
“We are confident that the work we are executing is leading us in the right direction. Our second quarter results reflect the ongoing progress against our initiatives, leading to another improvement in our comparable sales trend,” said Michael Bender, Chief Executive Officer.
Kohl’s raises 2026 earnings outlook
Following the stronger quarterly performance, Kohl’s increased its adjusted earnings guidance for fiscal 2026 to between $1.80 and $2.40 per share.
The midpoint of $2.10 is substantially above the current analyst consensus estimate of $1.43.
For the full year, Kohl’s expects both net sales and comparable sales to range from a decline of 1.5% to broadly flat, indicating that management continues to anticipate a challenging revenue environment despite improving profitability.
The retailer also announced plans to restart its share repurchase programme, with up to $100 million allocated to buybacks during 2026.
Inventory falls as operating income remains under pressure
Second-quarter operating income was $261 million, down from $279 million in the corresponding period last year, while net income totalled $151 million.
Inventory declined 3% year-over-year to $2.9 billion, reflecting continued efforts to manage stock levels as the retailer navigates subdued consumer demand.
For the first six months of fiscal 2026, net sales declined 1.2% to $6.3 billion. Adjusted earnings improved substantially to $1.18 per share from $0.44 during the same period a year earlier.
Operating cash flow for the six-month period reached $478 million, compared with $506 million in the prior year.
Although Kohl’s delivered a sizeable earnings beat, raised its annual profit outlook and resumed share repurchases, the negative share-price reaction suggests investors remain focused on declining sales, the contribution of tariff refunds to quarterly profitability and uncertainty surrounding the retailer’s underlying growth trajectory.
Kohl’s Corporation stock price
