Kohl’s Tightens Forecast as Cost Cuts Pay Off, Challenges Linger

MENOMONEE FALLS, Wis., Aug. 27, 2025 — Kohl’s (NYSE: KSS) raised its annual profit forecast on Wednesday, following a second consecutive quarter of better-than-expected sales, sending its shares up nearly 20% in premarket trading. The results underscore progress in the retailer’s years-long turnaround, as cost reductions and a refreshed product mix work to bring customers back to its stores and online channels. The improvement signals that, despite persistent headwinds, the company is beginning to regain traction in a highly competitive U.S. retail market.

The Wisconsin-based department store now expects annual earnings per share of 50 to 80 cents, compared with its previous guidance range of 10 to 60 cents. The adjustment reflects stronger-than-anticipated performance across key segments. Adjusted earnings for the latest quarter came in at 56 cents per share, nearly double Wall Street expectations of 29 cents, according to LSEG data. Both net sales and comparable sales topped estimates, with same-store sales falling 4.2% — a smaller decline than the 5% drop forecast. These figures suggest that efforts to optimize inventory and refresh the product assortment are beginning to resonate with shoppers.

Cost Discipline Boosts Margins

Interim CEO Michael Bender attributed the positive results to disciplined expense management and operational efficiency. “We were able to expand our gross margins, reduce our inventory, and lower our expenses, leading to solid second-quarter earnings,” Bender said in a statement. Selling, general, and administrative costs fell 4.1% from a year earlier, following a 5.2% decline in the first quarter, highlighting the company’s ongoing commitment to cost control.

Ongoing Structural Challenges

Despite these encouraging signs, Kohl’s continues to face significant structural pressures. The company has cycled through three CEOs in as many years, with the latest executive departing after just 100 days. Leadership instability has compounded broader strategic challenges, particularly around brand positioning and long-term growth planning. In addition, the company recently reworked its vendor payment terms, signaling liquidity pressures that have drawn scrutiny from industry observers and market analysts.

Industry experts caution that while Kohl’s short-term results offer a reprieve, the company remains in a difficult position within the broader retail landscape. “The topline beat gives management some breathing room, but Kohl’s is still stuck in the squeezed middle of retail — forced to discount heavily to move product while struggling to articulate a clear brand identity,” said Suzy Davidkhanian, an analyst at eMarketer. Her comments reflect concerns that the chain, while improving operationally, has yet to fully define its place between high-end and discount competitors.

Operational Adjustments Amid Market Headwinds

To adapt, Kohl’s has taken decisive steps to streamline its operations and focus on higher-margin areas. Earlier this year, the company closed an e-fulfillment center in Ohio amid slowing online demand, particularly in home décor. It has also reduced its in-store jewelry business and pruned private-label product lines, replacing them with fresher, branded merchandise aimed at boosting appeal to its core customers. Coupons and promotional offers have also become a key tool to engage lower- and middle-income shoppers, whose spending power has been affected by inflation and tariffs over the past year.

The company’s stock performance over the past five years highlights the challenges facing mid-tier department stores. Kohl’s shares have fallen roughly 32% over this period, while the S&P 500 Consumer Discretionary index has risen approximately 66%. Even with Wednesday’s significant premarket gains, the retailer remains under pressure from discount chains, online marketplaces, and shifting consumer preferences. Analysts note that sustained growth will require more than temporary cost-cutting; Kohl’s must continue to refine its brand identity, optimize store layouts, and enhance the customer experience both online and offline.

The company has not only tightened its annual and comparable sales forecasts but also raised its operating margin target for 2025. This move reflects continued emphasis on expense discipline and operational efficiency, but questions remain about long-term growth prospects. Investors and industry observers will be closely watching whether Kohl’s can leverage these gains into a sustained turnaround or if it remains caught in the challenging middle tier of U.S. retail.

While the path ahead is uncertain, Kohl’s latest results demonstrate that focused cost management, product refreshes, and targeted promotions can yield tangible financial benefits. The challenge now lies in translating these short-term wins into a coherent long-term strategy capable of restoring market confidence and stabilizing the brand in an increasingly crowded and competitive retail environment.

We were able to expand our gross margins, reduce our inventory, and lower our expenses, leading to solid second-quarter earnings.

Inputs from Diana Chou

Editing by David Ryder