KOHLS Corp

Previous 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.

Current wording

For purposes of the following discussion, unless noted, all references to "the quarter” and “the third quarter” are for the three fiscal months (13 weeks) ended November 1, 2025 or November 2, 2024. References to "the second quarter" are for the three fiscal months (13 weeks) ended August 2, 2025 or August 3, 2024. References to "the first quarter" are for the three fiscal months (13 weeks) ended May 3, 2025 or May 4, 2024. References to "year to date" are for the nine fiscal months (39 weeks) ended November 1, 2025 or November 2, 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 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.

Current wording

This Form 10-Q contains “forward-looking statements” 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 second quarter include:

Current wording

Key financial results for the third quarter include:

Previous wording

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

Current wording

Net sales decreased 2.8%, to $3.4 billion, with comparable sales down 1.7%.

Previous wording

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

Current wording

Gross margin as a percentage of net sales was 39.6%, an increase of 51 basis points.

Previous 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.

Current wording

Selling, general, and administrative ("SG&A") expenses decreased 2.1%, to $1.3 billion. As a percentage of total revenue, SG&A expenses were 35.3%, an increase of 55 basis points year-over-year.

Previous 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.

Current wording

Operating income was $73 million compared to $98 million in the prior year. As a percentage of total revenue, operating income was 2.1%, a decrease of 61 basis points year-over-year.

Previous wording

On an adjusted non-GAAP basis, our adjusted operating income was $161 million.(a)

Current wording

On an adjusted non-GAAP basis, our adjusted operating income was $77 million.(a)

Previous 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.

Current wording

Net income was $8 million, or $0.07 per diluted share. This compares to net income of $22 million, or $0.20 per diluted share, in the prior year.

Previous wording

On an adjusted non-GAAP basis, our adjusted net income was $64 million, or $0.56 per adjusted diluted share.(a)

Current wording

On an adjusted non-GAAP basis, our adjusted net income was $11 million, or $0.10 per adjusted diluted share.(a)

Previous wording

Non-GAAP financial measures. Please see the “GAAP to Non-GAAP Reconciliation” for a reconciliation of operating income to adjusted operating income, net income to adjusted net income, and diluted earnings per share to adjusted diluted earnings per share.

Current wording

Non-GAAP financial measures. Please see the “GAAP to Non-GAAP Reconciliation” for a reconciliation of adjusted operating income to operating income, adjusted net income to net income, and adjusted diluted earnings per share to diluted earnings per share.

Previous wording

Inventory was $3.0 billion, a decrease of 5% year-over-year.

Current wording

Inventory was $3.9 billion, a decrease of 5% year-over-year.

Previous wording

Borrowings under revolving credit facility were $75 million, a decrease of $335 million year-over-year.

Current wording

Borrowings under revolving credit facility were $45 million, a decrease of $704 million year-over-year.

Previous wording

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

Current wording

Net sales: A decrease of (3.5%) to (4%)

Previous wording

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

Current wording

Comparable sales: A decrease of (2.5%) to (3%)

Previous wording

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

Current wording

Adjusted operating margin: In the range of 3.1% to 3.2%(a)

Previous wording

Adjusted diluted earnings per share: In the range of $0.50 to $0.80(a)

Current wording

Adjusted diluted earnings per share: In the range of $1.25 to $1.45(a)

Previous wording

The decreases in the second quarter and year to date were driven by decreases in average transaction value of approximately 1% for both periods, and decreases in transaction volume of approximately 4% for both periods.

Current wording

The decreases in the third quarter and year to date were driven by decreases in transaction volume of approximately 3% for both periods, while average transaction value was flat in the third quarter and down approximately 1% year to date.

Previous 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.

Current wording

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

Previous 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%.

Current wording

Comparable sales decreased 1.7% in the third quarter of 2025 and 3.2% 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 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.

Current wording

Digital sales increased 2.4% in the third quarter of 2025 and decreased 2.5% year to date 2025. Digital penetration represented 28% of net sales in the third quarter of 2025 and 26% year to date 2025, compared to 26% in the third quarter and year to date 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 $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.

Current wording

Other revenue decreased $35 million in the third quarter of 2025 and $63 million year to date 2025. The decreases in both periods were driven by lower sales to our Kohl's credit card customer and 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. 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.

Current wording

Gross margin is calculated as net sales less cost of merchandise sold. Gross Margin was 39.6% of net sales for the third quarter and 39.8% of net sales year to date 2025, an increase of 51 and 39 basis points to last year, respectively. In both the third quarter and year to date 2025, the increase was driven by strong inventory management, merchandise mix, and moderating shrink levels. Strong inventory management was driven by fewer clearance markdowns, as our inventory decreased 5% to last year at the end of the third quarter, and receipts year to date were down 6%.

Previous 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.

Current wording

During the third quarter, SG&A expenses decreased $28 million, or 2.1%, to $1.3 billion. As a percentage of revenue, SG&A deleveraged by 55 basis points. Year to date 2025, SG&A expenses decreased $143 million, or 3.8%, to $3.6 billion. As a percentage of revenue, SG&A deleveraged by 20 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, partially offset by an increase in other corporate expenses. Without the shift of certain corporate credit expenses, SG&A expenses would have decreased to last year 0.9% for the third quarter and 2.3% for year to date 2025.

Previous 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.

Current wording

The decrease in depreciation and amortization in the third quarter and year to date 2025 was primarily driven by lower capital spend and closed locations.

Previous wording

We recognized $11 million of Impairments, store closing, and other costs in the second quarter. Included in this amount was $11 million of non-cash charges related to asset impairments, $7 million of severance, and $4 million of other costs primarily related to the closure of our Monroe, Ohio E-commerce Fulfillment Center. We also reversed $11 million of other exit costs initially recognized in the fourth quarter of 2024, related to the closure of our San Bernardino, California E-commerce Fulfillment Center and 27 underperforming stores due to favorable landlord negotiations.

Current wording

We recognized $4 million of Impairments, store closing, and other costs in the third quarter and $15 million year to date 2025. Included in this third quarter amount was $3 million of severance and $2 million of other costs, offset by a $1 million reversal of other exit costs initially recognized in the fourth quarter of 2024 related to the closure of underperforming stores. Included in the year to date amount was $11 million of non-cash charges related to asset impairments, $10 million of severance, and $6 million of other costs primarily related to the closure of our Monroe, Ohio E-commerce Fulfillment Center. Year to date, we also reversed $12 million of other exit costs initially recognized in the fourth quarter of 2024, related to the closure of our San Bernardino, California E-commerce Fulfillment Center and 27 underperforming stores due to favorable landlord negotiations.

Previous 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.

Current wording

Net interest expense decreased year to date 2025 due to reductions in lease payments for stores closed earlier this year, a lower average outstanding balance on the revolving credit facility, and a loss on extinguishment of debt in 2024 that was not repeated in 2025. The reductions were partially offset by interest on our newly issued 2030 notes.

Previous wording

In addition to reporting our financial results in accordance with generally accepted accounting principles (GAAP) for the first half of 2025, this Quarterly Report on Form 10-Q contains certain non-GAAP financial results, including adjusted operating income, adjusted net income, and adjusted diluted earnings per share. These adjusted results exclude the gains, impairments, and other costs associated with the closing of 27 underperforming stores, our San Bernardino, California and Monroe, Ohio E-commerce Fulfillment Centers and settlement of a credit card interchange fee lawsuit, as we believe such items are not representative of our normal business activity. We believe these non-GAAP measures are useful, as they are more representative of our core business, enhance comparability across reporting periods and to industry peers, and align with the measures used by management to evaluate the Company’s performance. The adjusted, non-GAAP results are provided and should be evaluated in addition to, and not as an alternative for, our results reported in accordance with GAAP. Shown in the following table is a reconciliation of each non-GAAP measure referenced throughout this report to the most comparable GAAP measure. No adjustments were made to our results for the first half of fiscal 2024 and therefore these results are not included in the following table. Operating income was $166 million and $209 million in the second quarter and first half of 2024. Net income was $66 million, or $0.59 per diluted share, and $39 million, or $0.35 per diluted share, in the second quarter and first half of 2024.

Current wording

In addition to reporting our financial results in accordance with generally accepted accounting principles (GAAP), this Quarterly Report on Form 10-Q contains certain non-GAAP financial results, including adjusted operating income, adjusted net income, and adjusted diluted earnings per share. These adjusted results exclude the gains, impairments, and other costs associated with the closing of 27 underperforming stores, our San Bernardino, California and Monroe, Ohio E-commerce Fulfillment Centers and settlement of a credit card interchange fee lawsuit, as we believe such items are not representative of our normal business activity. We believe these non-GAAP measures are useful, as they are more representative of our core business, enhance comparability across reporting periods and to industry peers, and align with the measures used by management to evaluate the Company’s performance. The adjusted, non-GAAP results are provided and should be evaluated in addition to, and not as an alternative for, our results reported in accordance with GAAP. Shown in the following table is a reconciliation of each non-GAAP measure referenced throughout this report to the most comparable GAAP measure. No adjustments were made to our results for year to date 2024 and therefore these results are not included in the following table. For fiscal 2024, operating income was $98 million and $307 million in the third quarter and year to date, respectively. Net income was $22 million, or $0.20 per diluted share, and $61 million, or $0.55 per diluted share, in the third quarter and year to date 2024.

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 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.

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 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 analyses, 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 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.

Current wording

We will continue to invest in the business, as we plan to invest approximately $400 million in capital expenditures 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 November 12, 2025, our Board of Directors declared a quarterly cash dividend of $0.125 per share. The dividend will be paid on December 24, 2025 to all shareholders of record at the close of business on December 10, 2025. In May 2025, 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 fiscal year.

Previous 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.

Current wording

Our period-end Cash and cash equivalents balance decreased to $144 million from $174 million in the third quarter of 2024. Our Cash and cash equivalents balance includes short-term investments of $8 million and $7 million as of November 1, 2025, and November 2, 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

Operating activities generated $506 million of cash in the first half of 2025 compared to $247 million in the first half of 2024. Operating cash flow increased primarily due to inventory management, resulting in managing year to date receipts down 12% versus the prior year. Additionally, the increase was driven by a higher net income, due in part to a $129 million gain recognized during the quarter with respect to settlement of a credit card interchange fee lawsuit.

Current wording

Operating activities generated $630 million of cash year to date 2025 compared to $52 million year to date 2024. Operating cash flow increased primarily due to inventory management, resulting in managing year to date receipts down 6% versus the prior year. Additionally, the increase was driven by a higher net income, due in part to a $129 million gain recognized during the year with respect to settlement of a credit card interchange fee lawsuit.

Previous 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.

Current wording

Investing activities used $269 million year to date 2025 compared to $363 million year to date 2024. The decrease in cash used in investing activities was primarily driven by our reduced capital expenditure plans for fiscal 2025, including lower capital spend on the expansion of our E-commerce Fulfillment Center in Etna, Ohio, which was completed in the third quarter. Additionally, we received $37 million in proceeds from sale of real estate primarily due to the sale of corporate and other properties.

Previous wording

During the second quarter, Moody's downgraded our corporate credit rating from Ba3 to B2, and revised their outlook to stable.

Current wording

During the third quarter, S&P downgraded our corporate credit rating from BB- to B+, and maintained their outlook as negative.

Previous wording

The majority of our financing activities generally include proceeds and/or repayments of borrowings under our revolving credit facility and long-term debt, dividend payments, and repurchases of common stock. Financing cash outflows also include payments to our landlords for leases classified as finance leases and financing obligations.

Current wording

The majority of our financing activities generally include proceeds from and/or repayments of borrowings under our revolving credit facility and long-term debt, dividend payments, and repurchases of common stock. Financing cash outflows also include payments to our landlords for leases classified as finance leases and financing obligations.

Previous 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.

Current wording

Year to date 2025, we had net repayments of $245 million on our $1.5 billion credit facility, compared to net borrowings of $657 million year to date 2024. Borrowings outstanding under the revolving credit facility, recorded as short-term debt, were $45 million as of November 1, 2025, and $749 million as of November 2, 2024.

Previous 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.

Current wording

There was no cash used for treasury stock purchases year to date 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

The increases in our working capital and current ratio are driven by the repayment of $353 million of our 4.25% notes that matured during the quarter and decreased borrowings under the revolving credit facility.

Current wording

The increases in our working capital and current ratio are driven by the repayment of $353 million of our 4.25% notes that matured during the year and decreased borrowings under the revolving credit facility.

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.

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. As of November 1, 2025, we were in compliance with all covenants.