Kohl's (KSS) Q1 2026 Earnings Report

The call presented a mix of constructive operational progress and remaining near‑term challenges. Positives include stabilization of the core Kohl's card customer (flat comps, ~600 bps improvement vs. Q4), strong private‑brand performance (+6% comps) and spring seasonal strength (mid‑teens), digital growth (+4%), meaningful balance sheet improvement (cash up, ABL cleared) and inventory/turn improvements (~8% lower inventory and turns +8%). Headwinds remain: Q1 produced a small net loss (‑$14M), overall comps still declined (‑1.1%), store transactions are down, Sephora/makeup and certain categories (men's, footwear) underperformed, and margin pressure from increased digital/shipping and embedded fuel costs is expected. Management reaffirmed full‑year guidance and outlined a clear plan (assortment curation, proprietary brand investment, omnichannel/trip assurance, marketplace expansion), so while near‑term sales and margin pressure persist, the directional operational and financial improvements give the company a cautiously optimistic outlook.

Kohl’s reaffirmed its FY26 guidance with comparable sales to be down 2% to flat vs. 2025, operating margin targeted at 2.8%–3.4% and diluted EPS of $1.00–$1.60; full‑year capital expenditures are expected to be $350–$400M, inventory down low‑ to middle‑single‑digits, and fuel costs are embedded at current rates. Management expects roughly $900M of operating cash flow and about $500–$600M of free cash flow (guidance excludes any AFA tariff refunds — the company submitted $140M of claims and is eligible for $190M), and will prioritize investing in the business, the $0.125 quarterly dividend (Q2), opportunistic debt repurchases and potential future buybacks. For context, Q1 results (which drove the reaffirmation) included net sales -1.7% and comps -1.1% (would have been -0.6% including marketplace GMV), proprietary brands +6%, spring seasonal up mid‑teens, digital +4% while stores were down low‑single‑digits, cash of $429M with no ABL borrowings (vs. $153M cash and $545M ABL borrowings LY, >$800M net cash improvement), inventory -8% with receipts +1% and an 8% turn improvement, SG&A down ~$20M, depreciation $174M, interest $63M, tax rate 15% and a Q1 net loss of $14M (loss per diluted share $0.13).