KOHLS Corp

1. Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for fiscal year end Consolidated Financial Statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the Consolidated Financial Statements and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 (Commission File No. 1-11084) as filed with the Securities and Exchange Commission ("SEC").

Due to the seasonality of the business of Kohl’s Corporation (the “Company,” “Kohl’s,” “we,” “our,” or “us”), results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

Reportable Segments

We are an omnichannel retailer that operates as asingle reportable segment. Our Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer. The net income (loss) presented in the Consolidated Statements of Operations is the financial information reviewed by the CODM. The CODM assesses the performance of the Company and decides how to allocate resources using net income (loss) that is reported on the Consolidated Statement of Operations. Net income (loss) is used to monitor budget versus actual results. The CODM regularly reviews information consistent with the Consolidated Statements of Operations.

Supplier Finance Programs

The Company has an agreement with a third-party financing provider to facilitate a supplier financing program. The program provides participating suppliers the option to receive outstanding payment obligations of the Company early at a discount. The Company’s obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by suppliers’ decisions to finance amounts under the program. All amounts payable to the financial institution relating to suppliers participating in the program are recorded in Accounts Payable in the Consolidated Balance Sheets and were $125 million as of May 3, 2025 and $97 million as of February 1, 2025.

Restructuring Reserve

The following table summarizes changes in the restructuring reserve during the quarter ended May 3, 2025:

Recent Accounting Pronouncements

Accounting Standards Issued but not yet Effective

In 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvement to Income Tax Disclosures (“ASU 2023-09”), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. ASU 2023-09 requires entities to consistently categorize and provide greater disaggregation of information within the income tax reconciliation to enable users of financial statements to understand the nature and magnitude of factors contributing to the difference between the effective and statutory tax rates. For public entities, the provisions within ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, and for interim periods of fiscal years beginning after December 15, 2025. We are currently evaluating the impact the adoption of ASU 2023-09 will have on our consolidated financial statement disclosures.

In 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. For public entities, the provisions within ASU 2024-03 are effective for the first annual reporting period beginning after December 15, 2026, and for interim reporting periods within annual reporting periods beginning after December 15, 2027. The provisions within ASU 2024-03 are required to be applied prospectively; however, they may be applied retrospectively for all comparative periods following the effective date. We are currently assessing the impact the adoption of ASU 2024-03 will have on our consolidated financial statement disclosures.

2. Revenue Recognition

The following table summarizes net sales by line of business:

Unredeemed gift cards and merchandise return card liabilities totaled $276 million as of May 3, 2025, $308 million as of February 1, 2025, and $294 million as of May 4, 2024. In the first quarter of 2025 and 2024, net sales of $54 million and $57 million, respectively, were recognized from gift cards redeemed in the current period and issued in prior years.

3. Debt

Outstanding borrowings under the $1.5 billion revolving credit facility, recorded as short-term debt, were $545 million as of May 3, 2025, $290 million as of February 1, 2025, and $355 million as of May 4, 2024.

Long-term debt, which excludes borrowings on the revolving credit facility, consists of the following unsecured debt:

Our estimated fair value of unsecured senior long-term debt is determined using Level 1 inputs, using financial instruments with unadjusted, quoted prices listed on active market exchanges. The estimated fair value of our unsecured senior debt was $1.0 billion at May 3, 2025, $1.2 billion at February 1, 2025, and $1.4 billion at May 4, 2024.

In December 2024, S&P downgraded our senior unsecured credit rating from BB to BB- and Moody’s downgraded our rating from Ba3 to B1. As a result of the downgrades, the interest rate on our 3.375% notes due May 2031 increased an additional 50 basis points in May 2025 due to the coupon adjustment provision within the notes. In total, the interest rate on the notes due May 2031 have increased 175 basis points since their issuance.

Our various debt agreements contain covenants including limitations on additional indebtedness and certain financial tests. As of May 3, 2025, we were in compliance with all covenants of the various debt agreements.

4. Leases

We lease certain property and equipment used in our operations. Some of our store leases include additional rental payments based on a percentage of sales over contractual levels or payments that are adjusted periodically for inflation. Our typical store lease has an initial term of 20 to 25 years andfour toeight five-year renewal options.

Lease assets represent our right to use an underlying asset for the lease term. Lease assets are recognized at commencement date based on the value of the lease liability and are adjusted for any lease payments made to the lessor at or before commencement date, minus any lease incentives received and any initial direct costs incurred by the lessee.

Lease liabilities represent our contractual obligation to make lease payments and include renewal options that are reasonably assured of being exercised. At the commencement date, the lease liabilities equal the present value of minimum lease payments over the accounting lease term. As the implicit interest rate is not readily identifiable in our leases, we estimate our collateralized incremental borrowing rate to calculate the present value of lease payments.

Leases with a term of 12 months or less are excluded from the balance; we recognize lease expense for these leases on a straight-line basis over the lease term. We combine lease and non-lease components for new and modified leases.

The following tables summarize our operating and finance leases, which are predominately store related, and where they are presented in our Consolidated Financial Statements:

The following table summarizes future lease payments by fiscal year:

Total lease payments include $3.8 billion related to options to extend operating lease terms that are reasonably certain of being exercised and $2.7 billion related to options to extend finance lease terms that are reasonably certain of being exercised. Additionally, total lease payments exclude $9 million of legally binding lease payments for leases signed but not yet commenced.

The following table summarizes weighted-average remaining lease term, weighted-average remaining contractually obligated lease term, and discount rate:

The remaining contractually obligated term represents only the remaining noncancelable portion of the leases.

Other lease information is as follows:

Financing Obligations

Historical failed sale-leasebacks that did not qualify for sale-leaseback accounting upon adoption of ASC 842 continue to be accounted for as financing obligations.

The following tables summarize our financing obligations, which are all store related, and where they are presented in our Consolidated Financial Statements:

The following table summarizes future financing obligation payments by fiscal year:

Total financing obligation payments include $1.1 billion related to options to extend terms that are reasonably certain of being exercised.

The following table summarizes the weighted-average remaining term, weighted-average remaining contractually obligated term, and discount rate for financing obligations:

The remaining contractually obligated term represents only the remaining noncancelable portion of the financing obligations.

5. Share-Based Awards

The following table summarizes our share-based awards activity for thequarter ended May 3, 2025:

In 2019, we issued 1,747,441 stock warrants. All 1,747,441 warrants were vested and unexercised as of May 3, 2025, February 1, 2025, and May 4, 2024. The warrants will expire on April 18, 2026.

6. Contingencies

We are subject to certain legal proceedings and claims arising out of the ordinary conduct of our business. In the opinion of management, the outcome of these proceedings and claims will not have a material adverse effect on our Consolidated Financial Statements.

7. Income Taxes

The effective income tax rate for the first quarter of 2025 was 10.4%, compared to 32.5% for the first quarter of 2024. The impact of the 2025 net unfavorable tax items, when compared to a pre-tax loss, results in decreasing the tax rate from the statutory rate. The impact of the 2024 net favorable tax items, when compared to a pre-tax loss, results in increasing the tax rate from the statutory rate.

8. Net Loss Per Share

Basic net loss per share is net loss divided by the average number of common shares outstanding during the period. Potentially dilutive shares outstanding were excluded from the calculations as their effect would be anti-dilutive. Potentially dilutive shares include unvested restricted stock units, unvested restricted stock awards, and warrants, which utilize the treasury stock method, as well as unvested performance share units that utilize the contingently issuable share method.

The information required to compute basic and diluted net loss per share is as follows:

The following potential shares of common stock were excluded from the diluted net loss per share calculation because their effect would have been anti-dilutive:

9. Subsequent Events

On May 9, 2025, we entered into an amendment to the Credit Agreement with Wells Fargo Bank originally dated as of January 19, 2023 in order to facilitate issuance of $360 million aggregate principal of 10.000% senior secured notes due 2030 ("the Notes"). On May 30, 2025, we issued $360 million aggregate principal of 10.000% senior secured notes due 2030. The Notes are secured by 11 distribution centers and e-fulfillment centers, as well as other collateral. We intend to use the net proceeds from the sale of the Notes in a series of transactions resulting in the repayment of borrowings under the revolving credit facility. We intend to borrow under the revolving credit facility to repay the remaining $353 million outstanding 4.25% notes due in July 2025.

On May 14, 2025, the Board of Directors of Kohl's Corporation declared a quarterly cash dividend of $0.125 per share. The dividend will be paid on June 25, 2025, to all shareholders of record at the close of business on June 11, 2025.

On June 5, 2025, we announced the closing of our Monroe, Ohio e-fulfillment center. We estimate that we will recognize cumulative pre-tax charges of approximately $25 million to $30 million, including approximately $10 million of non-cash charges in real estate and other asset-related charges, costs, and impairments and $15 million to $20 million of cash expenditures related to associate severance, benefits, and other exit costs. We expect that substantially all of these charges will be incurred in the second and third quarters of 2025.