Kohl's sold less and earned more on it, and the refund it names is larger than the whole of the gross profit gain
One bullet near the bottom of the results release explains the line that leads it.
Kohl's told the Securities and Exchange Commission at 07:00 on Wednesday that gross margin in the quarter to 1 August reached 43.0 percent of net sales, an improvement of 305 basis points. Four bullets further down it says that tariff refunds of approximately $150m were received in the quarter, of which approximately $100m flowed through gross margin. The outlook section names them as refunds of duties collected under the International Emergency Economic Powers Act.
Set that against what the accounts show. Net sales fell 0.9 percent to $3,318m and comparable sales fell 0.9 percent. Cost of merchandise sold fell $118m, to $1,893m from $2,011m, on sales that fell $29m. Gross profit computed from those two lines rose $89m. The refund the company reports through gross margin is larger than the whole of that gain.
The comparison the release invites
Reported operating income fell, from $279m to $261m, and as a share of total revenue it fell 45 basis points to 7.4 percent. The favourable comparison is with the prior year on an adjusted basis, which the release also gives, at $161m and 4.6 percent.
The reconciliation table shows what the adjustment was. Last year's quarter carried a gain on a legal settlement of $129m, offset by $11m of impairments and store closing costs, and taking the gain out is what turns $279m into $161m. This quarter carries no adjustments at all, so reported and adjusted are the same number.
That leaves two figures of the same size sitting a page apart. Reported operating income is $100m above last year's adjusted operating income. The refund through gross margin was approximately $100m. Kohl's does not attribute the difference to the refund, and neither does this item.
Guidance, buybacks, dividend
The company raised its full-year outlook and said plainly that the raise includes the benefit of the second quarter refunds. Net sales and comparable sales are now guided to a decrease of 1.5 percent to flat, adjusted operating margin to 3.5 to 4.0 percent, and adjusted diluted earnings per share to $1.80 to $2.40. Capital expenditure is $350m to $400m. Kohl's says it will not reconcile forward guidance to the comparable measures under generally accepted accounting principles, citing the difficulty of forecasting the items involved.
Share repurchases restart, at up to $100m this year under an existing $3bn authorisation. Inventory was $2.9bn, down 3 percent. Long-term debt is $195m below a year ago, after the company bought back $113m of its own debt at a $15m discount in 2026. Operating cash flow for the quarter was $552m against $598m.
Michael Bender, the chief executive, said the results "reflect the ongoing progress against our initiatives" and that there is critical work ahead.
A separate item in the same filing records that the board declared a quarterly dividend of $0.125 a share on 18 August. It is payable on 23 September to holders of record on 9 September.
Over six months the shape is the same and smaller. Net sales fell 1.2 percent to $6,316m, gross margin rose 162 basis points to 41.5 percent, and operating income fell to $307m from $339m.
