Department store chain Kohl’s (NYSE:KSS) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 4.4% year on year to $3.23 billion. Its GAAP loss of $0.13 per share increased from -$0.24 in the same quarter last year.
Adjusted Operating Income: $60 million vs analyst estimates of $43.42 million (1.9% margin, 38.2% beat)
EPS (GAAP) guidance for the full year is $0.35 at the midpoint, missing analyst estimates by 47.4%
Operating Margin: 1.9%, in line with the same quarter last year
Same-Store Sales fell 3.9% year on year, in line with the same quarter last year
Market Capitalization: $901.7 million
StockStory’s Take
Kohl’s first quarter results reflected the early stages of a turnaround effort, with management emphasizing renewed focus on product assortment and customer needs. Interim CEO Michael Bender, newly appointed after a period of leadership change, stressed the importance of rebalancing the merchandise mix and restoring categories popular with core customers. CFO Jill Timm highlighted solid performance in reintroduced fine jewelry and petite apparel, attributing gains to reversing past decisions that alienated loyal shoppers. Management was candid that progress would be gradual, noting the turnaround is ongoing and that much of the required work still lies ahead. Timm acknowledged, “This is a turnaround and will continue to take time, and much of the work remains ahead of us.”
Looking forward, Kohl’s is focused on driving improved value for customers while navigating ongoing pressures, including tariffs and cautious consumer spending. Management discussed initiatives to enhance proprietary brand penetration and expand coupon eligibility, aiming to regain lost wallet share from core shoppers. Bender emphasized the company’s intention to “align the business to meet the needs of our customers,” especially as many consumers face budget constraints. Timm outlined efforts to mitigate tariff impacts through diversified sourcing and cost management, stating, “We believe we can achieve our financial guidance for the year…as we continue to work to reduce our exposure to high tariff countries.” The company expects the benefit of new assortments and promotional actions to build gradually through the year.
Key Insights from Management’s Remarks
Management traced first quarter performance to changes in merchandise strategy, efforts to restore lost customer segments, and continued operational discipline. Several key business updates shaped the quarter’s outcome.
Assortment rebalance underway: Kohl’s re-emphasized core categories such as fine jewelry and petites after previously deprioritizing them, resulting in double-digit growth in those segments. Management attributed this to listening to long-time customers and rectifying past assortment decisions.
Proprietary brands regaining traction: With renewed investment in value-oriented private label brands like Tek Gear and Lauren Conrad, Kohl’s began to reverse underperformance in these lines. Timm noted proprietary brands improved 400 basis points quarter-over-quarter, but acknowledged they remain below company averages and require further attention.
Sephora rollout completed: The chain finished adding Sephora shops to all locations, with beauty segment net sales up 6%. While growth rates have moderated as the rollout matures, management sees ongoing market share gains in beauty, especially in fragrance and hair categories.
Digital channel lags but improving: Online sales declined again, driven by weakness in home and among Kohl’s card customers. However, management pointed to early improvements as more brands became coupon-eligible online, with expectations of further gains as promotional changes expand.
Operational cost control: SG&A expenses fell 5% year over year, reflecting disciplined store and marketing expenditures. Management credited ongoing efficiency efforts and a shift in credit servicing to an external party for helping offset sales pressures.
Drivers of Future Performance
Kohl’s forward guidance is shaped by efforts to rebuild customer loyalty, manage external cost headwinds, and deliver value-focused merchandising.
Customer wallet share recovery: Management is prioritizing regaining spend from core Kohl’s card customers who reduced their shopping frequency and basket size after prior assortment changes. The company is expanding coupon eligibility and reintroducing favored proprietary brands to address this, aiming to increase both store and digital engagement.
Tariff mitigation and sourcing: The company is actively shifting product sourcing to a wider range of countries to limit exposure to tariffs, working closely with suppliers to manage price elasticity and inventory flow. Management believes most tariff-related cost pressures can be offset through these sourcing strategies and promotional adjustments.
Margin discipline amid investment: While investing in store layout improvements, digital upgrades, and fulfillment expansion, management plans to tightly control inventory and general expenses. They expect margin benefits as proprietary and impulse categories expand, but acknowledged ongoing gross margin pressure from value-focused pricing and cautious consumer behavior.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the effectiveness of efforts to win back core Kohl’s card customers and drive proprietary brand growth, (2) the impact of new coupon eligibility and promotional strategies on both in-store and digital channels, and (3) progress in offsetting tariff pressures through sourcing and inventory management. Store layout changes and the performance of new product categories will also be critical indicators of turnaround momentum.
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