KOHLS Corp

Previous wording

For purposes of the following discussion, unless noted, all references to "the quarter” and “the first quarter” are for the three fiscal months (13 weeks) ended May 3, 2025 or May 4, 2024.

Current wording

For purposes of the following discussion, unless noted, all references to "the quarter” and “the second quarter” are for the three fiscal months (13 weeks) ended August 2, 2025 or August 3, 2024. References to "year to date" and "first half" are for the six fiscal months (26 weeks) ended August 2, 2025 or August 3, 2024. References to "first quarter" are for the three fiscal months (13 weeks) ended May 3, 2025 or May 4, 2024.

Previous wording

This Form 10-Q contains “forward-looking statements” made within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "anticipates," "plans," "may," "intends," "will," "should," "expects," and similar expressions are intended to identify forward-looking statements. Forward-looking statements include the statements under Management's Discussion and Analysis, 2025 Financial and Capital Allocation Outlook and may include comments about our future sales or financial performance and our plans, performance and other objectives, expectations or intentions, such as statements regarding our liquidity, debt service requirements, planned capital expenditures, future store initiatives, adequacy of capital resources and reserves, and the impact of macroeconomic events, including inflation, consumer behavior, and changes in global trade policies, such as tariffs, and our response to such events. Forward-looking statements are based on management’s then-current views and assumptions and, as a result, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Any such forward-looking statements are qualified by the important risk factors, described in Part I Item 1A of our 2024 Form 10-K and in Part II Item 1A of this Form 10-Q, or disclosed from time to time in our filings with the SEC, which could cause actual results to differ materially from those predicted by the forward-looking statements. Forward-looking statements relate to the date initially made, and we undertake no obligation to update them.

Current wording

This Form 10-Q contains “forward-looking statements” made within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "anticipates," "plans," "may," "intends," "will," "should," "expects," and similar expressions are intended to identify forward-looking statements. Forward-looking statements include certain statements under Management's Discussion and Analysis and the statements under 2025 Financial and Capital Allocation Outlook and may include comments about our future sales or financial performance and our plans, performance and other objectives, expectations or intentions, such as statements regarding our liquidity, debt service requirements, planned capital expenditures, future store initiatives, adequacy of capital resources and reserves, and the impact of macroeconomic events, including inflation, consumer behavior, and changes in global trade policies, such as tariffs, and our response to such events. Forward-looking statements are based on management’s then-current views and assumptions and, as a result, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Any such forward-looking statements are qualified by the important risk factors, described in Part I Item 1A of our 2024 Form 10-K, in Part II Item 1A of our Quarterly Report on Form 10-Q for the first quarter of 2025, or disclosed from time to time in our filings with the SEC, which could cause actual results to differ materially from those predicted by the forward-looking statements. Forward-looking statements relate to the date initially made, and we undertake no obligation to update them. Certain amounts set forth below may not foot or crossfoot due to rounding.

Previous wording

Key financial results for the first quarter include:

Current wording

Key financial results for the second quarter include:

Previous wording

Net sales decreased 4.1%, to $3.0 billion, with comparable sales down 3.9%.

Current wording

Net sales decreased 5.1%, to $3.3 billion, with comparable sales down 4.2%.

Previous wording

Gross margin as a percentage of net sales was 39.9%, an increase of 37 basis points.

Current wording

Gross margin as a percentage of net sales was 39.9%, an increase of 28 basis points.

Previous wording

Selling, general, and administrative ("SG&A") expenses decreased 5.2%, to $1.2 billion. As a percentage of total revenue, SG&A expenses were 36.0%, a decrease of 32 basis points year-over-year.

Current wording

Selling, general, and administrative ("SG&A") expenses decreased 4.1%, to $1.2 billion. As a percentage of total revenue, SG&A expenses were 33.8%, an increase of 32 basis points year-over-year.

Previous wording

Operating income was $60 million compared to $43 million in the prior year. As a percentage of total revenue, operating income was 1.9%, an increase of 58 basis points year-over-year.

Current wording

Operating income was $279 million compared to $166 million in the prior year. As a percentage of total revenue, operating income was 7.9%, an increase of 343 basis points year-over-year.

Previous wording

Net loss was $15 million, or ($0.13) per diluted share. This compares to net loss of $27 million, or ($0.24) per diluted share in the prior year.

Current wording

Net income was $153 million, or $1.35 per diluted share. This compares to net income of $66 million, or $0.59 per diluted share, in the prior year.

Previous wording

Kohl's remains committed to driving long-term shareholder value by providing our customers with great product, great value, and a great experience. To achieve this, we will offer a curated balanced assortment, reestablish Kohl’s to be a leader in value and quality, and enhance our omnichannel platform to deliver a frictionless experience to customers.

Current wording

Kohl's remains committed to driving long-term shareholder value by providing our customers with great product, great value, and a great experience. To achieve this, we will offer a curated balanced assortment, reestablish Kohl’s to be a leader in value and quality, and deliver a frictionless experience to customers across our omnichannel platforms.

Previous wording

For the full year 2025, the Company continues to expect the following, excluding the impact of potential items not representative of our core operating performance:

Current wording

For the full year 2025, the Company expects the following:

Previous wording

Net sales: A decrease of (5%) to a decrease of (7%)

Current wording

Net sales: A decrease of (5%) to a decrease of (6%)

Previous wording

Comparable sales: A decrease of (4%) to a decrease of (6%)

Current wording

Comparable sales: A decrease of (4%) to a decrease of (5%)

Previous wording

Operating margin: In the range of 2.2% to 2.6%

Current wording

Adjusted operating margin: In the range of 2.5% to 2.7%(a)

Previous wording

In the first quarter, sales decreased across all lines of business, except for Accessories, which increased approximately 5%.

Current wording

In both the second quarter and year to date, sales decreased across all lines of business, except for Accessories, which increased approximately 1% in the second quarter and 3% year to date.

Previous wording

Comparable sales decreased 3.9%. Comparable sales is a measure that highlights the performance of our stores and digital channel by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales includes all store and digital sales, except sales from stores open less than twelve months, stores that have been closed, and stores that have been relocated where square footage has changed by more than 10%.

Current wording

Comparable sales decreased 4.2% in the second quarter of 2025 and 4.0% year to date 2025. Comparable sales is a measure that highlights the performance of our stores and digital channel by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales includes all store and digital sales, except sales from stores open less than twelve months, stores that have been closed, and stores that have been relocated where square footage has changed by more than 10%.

Previous wording

Digital sales decreased 7.7% and digital penetration represented 24% of net sales compared to 25% in the first quarter of 2024. We measure the change in digital sales by including all sales initiated online or through mobile applications, including omnichannel transactions which are fulfilled through our stores. We measure digital penetration as digital sales over net sales. These amounts do not take into consideration fulfillment node, digital returns processed in stores, and coupon behaviors.

Current wording

Digital sales decreased 2.9% in the second quarter of 2025 and 5.2% year to date 2025. Digital penetration represented 26% of net sales in the second quarter of 2025 and 25% year to date 2025, compared to 25% in the second quarter and first half of 2024. We measure the change in digital sales by including all sales initiated online or through mobile applications, including omnichannel transactions which are fulfilled through our stores. We measure digital penetration as digital sales over net sales. These amounts do not take into consideration fulfillment node, digital returns processed in stores, and coupon behaviors.

Previous wording

Other revenue decreased $20 million driven by certain credit expenses shifting against other revenue as we moved part of our account servicing to the third party that owns the accounts.

Current wording

Other revenue decreased $8 million in the second quarter of 2025 and $28 million year to date 2025. The decreases in both periods is driven by certain credit card expenses shifting against other revenue as we moved part of our account servicing to the third party that owns the accounts.

Previous wording

Gross margin is calculated as net sales less cost of merchandise sold. For the first quarter of 2025, gross margin was 39.9% of net sales, an increase of 37 basis points to last year. The increase was driven by merchandise mix, inventory management of receipts down 8% in the quarter, and moderating shrink levels.

Current wording

Gross margin is calculated as net sales less cost of merchandise sold. Gross Margin was 39.9% of net sales for both the first quarter and first half of 2025, an increase of 28 and 33 basis points to last year, respectively. The increase in both periods was driven by merchandise mix, inventory management of receipts down 16% in the quarter and 12% year to date, and moderating shrink levels.

Previous wording

SG&A expenses decreased $64 million, or 5.2%, to $1.2 billion driven by lower marketing, store payroll, and fulfillment costs, as well as a shift of certain corporate credit expenses to other revenue due to moving part of our account servicing to the third party that owns the accounts. Without the shift of certain corporate credit expenses, SG&A expenses would have decreased 3.7% to last year. As a percentage of revenue, SG&A leveraged by 32 basis points. The decrease was driven by disciplined expense management across the organization.

Current wording

During the second quarter, SG&A expenses decreased $51 million, or 4.1%, to $1.2 billion. As a percentage of revenue, SG&A deleveraged by 32 basis points. Year to date 2025, SG&A expenses decreased $115 million, or 4.7%, to $2.4 billion. As a percentage of revenue, SG&A deleveraged by 2 basis points. The decreases for both periods are driven by lower store payroll, marketing, and distribution costs, as well as a shift of certain corporate credit card expenses to other revenue due to moving part of our account servicing to the third party that owns the accounts. Without the shift of certain corporate credit expenses, SG&A expenses would have decreased to last year 2.4% for the second quarter and 3.1% for the first half of 2025.

Previous wording

The decrease in depreciation and amortization was primarily driven by lower capital spend and closed locations.

Current wording

The decrease in depreciation and amortization in the second quarter and first half of 2025 was primarily driven by lower capital spend and closed locations.

Previous wording

Net interest expense decreased in the first quarter of 2025 due to reductions in lease payments for stores closed within the quarter and reduced outstanding unsecured senior debt offset by higher average outstanding balances on the revolver.

Current wording

Net interest expense decreased in the first half of 2025 due to reductions in lease payments for stores closed earlier this year and a loss on extinguishment of debt in 2024 that was not repeated in 2025, partially offset by interest on our newly issued 2030 notes.

Previous wording

We expect that our operations will continue to be influenced by general economic conditions, including food, fuel and energy prices, higher unemployment, wage inflation, and costs to source our merchandise, including tariffs. During the first quarter of 2025, the U.S. government announced additional tariffs on a broad range of imports, including certain consumer goods. While these actions did not have a material impact on our first quarter results, the global trade environment remains fluid and further actions may increase merchandise costs, affect merchandise availability, and impact our operational results. We have taken proactive measures to reduce our exposure to tariffs by leveraging our diverse factory network to move production, adjusting orders based on pricing elasticity analysis, and working closely with our supplier and vendor base to proactively manage any impacts with the goal of continuing to drive value to our customers. There can be no assurances that such factors will not impact our business in the future.

Current wording

We expect that our operations will continue to be influenced by general economic conditions, including food, fuel and energy prices, higher unemployment, wage inflation, and costs to source our merchandise, including tariffs. During the first half of 2025, the U.S. government announced additional tariffs on a broad range of imports, including certain consumer goods. While these actions did not have a material impact on our year to date results, the global trade environment remains fluid and further actions may increase merchandise costs, affect merchandise availability, and impact our operational results. We have taken proactive measures to reduce our exposure to tariffs by leveraging our diverse factory network to move production, adjusting orders based on pricing elasticity analysis, and working closely with our supplier and vendor base to proactively manage any impacts, with the goal of continuing to drive value to our customers. There can be no assurances that such factors will not impact our business in the future.

Previous wording

We will continue to invest in the business, as we plan to invest approximately $400 to $425 million in 2025, which includes the investments to complete the roll out of Sephora shops, expansion of impulse queuing lines to nearly all stores, and expansion of our e-fulfillment center in Indiana. On May 14, 2025, our Board of Directors 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 May 30, 2025, we issued $360 million aggregate principal of 10.000% senior secured notes due 2030, which 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 outstanding 4.25% notes due in July 2025. We are not planning any share repurchases during the current year.

Current wording

We will continue to invest in the business, as we plan to invest approximately $400 million in 2025, which includes the investments to complete the roll out of Sephora shops, expansion of impulse queuing lines to nearly all stores, and expansion of our E-commerce Fulfillment Center in Etna, Ohio. On August 12, 2025, our Board of Directors declared a quarterly cash dividend of $0.125 per share. The dividend will be paid on September 24, 2025 to all shareholders of record at the close of business on September 10, 2025. In May, we issued $360 million in aggregate principal amount of 10.000% senior secured notes due 2030; in July, $353 million in aggregate principal amount of our 4.25% notes matured and were repaid. We are not planning any share repurchases during the current year.

Previous wording

Our period-end Cash and cash equivalents balance decreased to $153 million from $228 million in the first quarter of 2024. Our Cash and cash equivalents balance includes short-term investments of $7 million and $9 million as of May 3, 2025, and May 4, 2024, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments. We also place dollar limits on our investments in individual funds or instruments.

Current wording

Our period-end Cash and cash equivalents balance decreased to $174 million from $231 million in the second quarter of 2024. Our Cash and cash equivalents balance includes short-term investments of $17 million and $10 million as of August 2, 2025, and August 3, 2024, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments. We also place dollar limits on our investments in individual funds or instruments.

Previous wording

Investing activities used $108 million of cash in the first quarter of 2025 and $126 million in the first quarter of 2024. The decrease in cash used in investing activities was primarily driven by fewer Sephora shop openings and other investments, consistent with our reduced capital expenditure plans for fiscal 2025.

Current wording

Investing activities used $179 million of cash in the first half of 2025 compared to $237 million in the first half of 2024. The decrease in cash used in investing activities was primarily driven by our reduced capital expenditure plans for fiscal 2025 which includes lower capital spend on the expansion of our E-commerce Fulfillment Center in Etna, Ohio, which will be completed in the third quarter. Additionally, we received $21 million in proceeds from sale of real estate primarily due to the sale of a corporate property.

Previous wording

At the end of the quarter, we had a Sephora presence in over 1,100 of our stores, including 855 full size 2,500 square foot shops and 292 small format 750 square foot shops. In 2025, we anticipate capital expenditures of approximately $400 to $425 million, which includes the investments to complete the roll out of Sephora shops, expansion of impulse queuing lines to nearly all stores, and expansion of our e-fulfillment center in Indiana.

Current wording

At the end of the quarter, we had a Sephora presence in over 1,100 of our stores, including 855 full size 2,500 square foot shops and 294 small format 750 square foot shops. In 2025, we anticipate capital expenditures of approximately $400 million, which includes the investments to complete the roll out of Sephora shops, expansion of impulse queuing lines to nearly all stores, and expansion of our E-commerce Fulfillment Center in Etna, Ohio.

Previous wording

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. Additionally on May 13, 2025, Moody's downgraded our corporate credit rating from Ba3 to B2, and revised their outlook to stable.

Current wording

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. During the second quarter 2025, Moody's downgraded our senior unsecured credit rating from B1 to B3, however, further downgrades by Moody's do not trigger incremental interest rate increases. In total, the interest rate on the notes due May 2031 have increased 175 basis points since their issuance.

Previous wording

Cash dividend payments were $14 million ($0.125 per share) in the first quarter of 2025 compared to $55 million ($0.50 per share) in the first quarter of 2024.

Current wording

Cash dividend payments were $28 million ($0.25 per share) in the first half of 2025 compared to $111 million ($1.00 per share) in the first half of 2024.

Previous wording

During the quarter, we had net borrowings of $255 million on our $1.5 billion credit facility compared to net borrowings of $263 million in the first quarter of 2024. Borrowings under the revolving credit facility, recorded as short-term debt, had $545 million outstanding as of May 3, 2025, and had $355 million outstanding as of May 4, 2024.

Current wording

During the first half of 2025, we had net repayments of $215 million on our $1.5 billion credit facility, compared to net borrowings of $318 million in the first half of 2024. Borrowings outstanding under the revolving credit facility, recorded as short-term debt, were $75 million as of August 2, 2025, and $410 million as of August 3, 2024.

Previous wording

There was no cash used for treasury stock purchases in the first quarter of 2025 or 2024. Share repurchases are discretionary in nature. The timing and amount of repurchases are based upon available cash balances, our stock price, and other factors. As previously noted, while we are not currently planning for share repurchases, we expect to resume share repurchases over the long-term following improvement in overall leverage.

Current wording

There was no cash used for treasury stock purchases in the first half of 2025 or 2024. Share repurchases are discretionary in nature. The timing and amount of repurchases are based upon available cash balances, our stock price, and other factors. As previously noted, while we are not currently planning for share repurchases, we expect to resume share repurchases over the long-term following improvement in overall leverage.

Previous wording

Our senior secured, asset based revolving credit facility contains customary events of default and financial, affirmative and negative covenants, including but not limited to, a springing financial covenant relating to our fixed charge coverage ratio and restrictions on indebtedness, liens, investments, asset dispositions, and restricted payments. As of May 3, 2025, we were in compliance with all covenants.

Current wording

Our senior secured, asset based revolving credit facility contains customary events of default and financial, affirmative and negative covenants, including but not limited to, a springing financial covenant relating to our fixed charge coverage ratio and restrictions on indebtedness, liens, investments, asset dispositions, and restricted payments.

Previous wording

There have been no significant changes in the contractual obligations disclosed in our 2024 Form 10-K.

Current wording

Aside from the issuance of $360 million aggregate principal amount of 10.000% senior secured notes due 2030, the repayment of $353 million of our 4.25% notes due 2025 at maturity, and the change in borrowings under our revolving credit facility, which have all been disclosed in Note 3 of the Consolidated Financial Statements, there have been no significant changes in the contractual obligations disclosed in our 2024 Form 10-K.