Kohl’s ended fiscal 2025 in a stronger financial position than it started, even as sales remained under pressure. Fourth quarter net sales fell 3.9% to $5.0 billion, while comparable sales were down 2.8%. For the full year, net sales declined 4.0% to $14.8 billion, with comparable sales down 3.1%.
The topline remained soft, but profitability improved. Diluted EPS reached $1.07 in the fourth quarter, up from $0.43 a year earlier, while full-year diluted EPS rose to $2.38, and adjusted diluted EPS came in at $1.62.
Margin Gains Helped Offset Weak Demand
A large part of the earnings improvement came from better margins and tighter cost control. Fourth-quarter gross margin reached 33.1%, up 25 basis points, while full-year gross margin improved to 37.5%, up 34 basis points.
Selling, general, and administrative expenses also moved lower. Fourth-quarter SG&A fell 4.9% to $1.5 billion, while full year SG&A declined 4.1% to $5.1 billion. That helped push fourth-quarter operating income up to $212 million from $126 million, while full-year operating income rose to $624 million from $433 million.
A Settlement Lifted the Full Year Result
One factor boosted the annual result beyond day-to-day operations. Kohl’s recorded a $129 million gain tied to a credit card interchange fee lawsuit settlement, which lifted reported operating income and net income for the year.
That distinction matters. Reported net income rose to $272 million from $109 million, while adjusted net income came in at $186 million, up from $167 million. The fourth quarter was cleaner, with diluted EPS of $1.07 on both a reported and an adjusted basis.
Cash Flow and Inventory Improved
The balance sheet looked healthier at year’s end. Inventory closed the fourth quarter at $2.7 billion, down 7%, showing tighter control over stock as the company worked to protect margins.
Cash generation improved sharply. Operating cash flow reached $1.4 billion for the full year, up from $648 million, while cash and cash equivalents rose to $674 million from $134 million. Borrowings under the revolving credit facility dropped to $0, and the company repaid $353 million in notes due July 2025.
2026 Starts With a Cautious Tone
Michael J. Bender, Chief Executive Officer of Kohl’s, said, “We are ending 2025 in a stronger position than we started, with important work still ahead of us. Over the past year, our efforts have been focused on resetting our foundation. This focus is intended to stabilize the business and strengthen our operational ability to build for a stronger future. In 2025, we made meaningful progress, despite our Q4 topline coming in softer than our expectations. We were able to manage the business with discipline, deliver improved earnings, and generate meaningful cash flow, all of which helped us strengthen our balance sheet.”
He added, “In 2026, we are committed to further strengthening our foundation by addressing operational opportunities, building on our strengths, and modernizing our processes. We are confident that the work we are investing in now is essential for Kohl’s long-term benefit.” That framing makes 2026 look more like a rebuilding year than a rapid growth story.
The Outlook Stays Conservative
Guidance for fiscal 2026 reflects that cautious stance. Net sales and comparable sales are expected to range from a decline of 2% to flat, while adjusted operating margin is forecast at 2.8% to 3.4% and adjusted diluted EPS at $1.00 to $1.60. Capital expenditures are expected to land between $350 million and $400 million. Kohl’s also declared a quarterly cash dividend of $0.125 per share, payable on April 1, 2026, to shareholders of record on March 18, 2026.
