Menomonee Falls, Wis. – Although Kohl’s sales haven’t yet rebounded, they progressively improved through the second quarter, and bottom-line gains beat Kohl’s expectations.
Private label brands outperformed the company in Q2, showing 500 basis points of progressive improvement from the first quarter. The digital business also drove sales during the quarter.
While Kohl’s higher-income customers have proven to be fairly resilient, its lower- to middle-income customers continue to trade down into lower opening price point products, interim CEO Michael Bender told investors during this morning’s quarterly call.
“Several of our initiatives are focused on delivering greater value to these customers through investing in our proprietary brands and adding more coupon-eligible brands,” he said.
Net sales for the quarter ended Aug. 2 fell 5.1%, with comps down 4.2%. Inventory was $3.0 billion, down 5.0% year-over-year.
Gross margin increased 28 basis points and operating income jumped 68% to $279 million. Adjusted operating income was $161 million, or 4.6% of total revenue. Adjusted net income was $64 million, or $0.56 per diluted share compared to $66 million or $0.59 per diluted share in last year’s Q2.
“Kohl’s second quarter performance is a testament to the progress we are making against our 2025 initiatives. This resulted in sales performance that came in ahead of our expectations,” said Bender. “While it is clear that these initiatives are beginning to resonate with our customers, our team remains focused on delivering progressive improvement throughout the remainder of the year against a challenging economic backdrop.”
For the first half of the fiscal year, net sales declined 4.6% to $6.4 billion, with comps down 4.0%. Gross margin as a percentage of sales was 39.9%, up 33 basis points.
Operating income was $339 million compared to $209 million in the prior year. Adjusted operating income was $221 million. Adjusted net income was $50 million, or $0.44 per adjusted diluted share, compared to net income of $39 million, or $0.35 per diluted share, in the prior-year period.
Looking ahead, Kohl’s still expects sales to decline for the full fiscal year, although it narrowed its outlook toward the high end of its previous guidance. It now forecasts a net sales decline between 5% and 6%. The earlier outlook set the decline in the range of 5% to 7%.
Kohl’s also updated its full-year earnings per share guidance. It now expects earnings to be in the range of 50 cents to 80 cents per share adjusted.
