Kohl's slows sales decline as inventory reductions continue
The department store operator reported a 1.7% year-over-year decrease in net sales for the first quarter ended May 2026.
Kohl's Corp. (KSS) saw its top-line contraction narrow in the first quarter of 2026, reflecting a sequential improvement in consumer traffic and spending patterns. The department store operator reported that net sales declined 1.7% year-over-year. This represented a deceleration in the downward trend compared to the fourth quarter of 2025, when net sales fell 3.9% year-over-year.
Comparable sales performance followed a similar trajectory. Sales at existing stores decreased 1.1% in the first quarter of 2026, an improvement over the 2.8% decrease recorded in the previous quarter. The company attributed these shifts to a stabilizing base of comparable store performance.
Profitability metrics showed a divergence between gross margins and operating efficiency. Gross margin expanded 4 basis points year-over-year to 39.9%. This followed a 25-basis-point increase in the fourth quarter of 2025, which had brought the margin to 33.1%.
However, operating income as a percentage of revenue compressed to 1.4% in the first quarter, a 41-basis-point decrease year-over-year. This decline followed a stronger fourth quarter of 2025, when operating income as a percentage of revenue had reached 4.1% after a 176-basis-point year-over-year increase.
Kohl's continued to reduce its stock of merchandise to align with demand. Inventory levels fell 8% year-over-year to $2.9 billion in the first quarter. This followed a 7% year-over-year decrease to $2.7 billion in the fourth quarter of 2025.
The company maintained its quarterly dividend at $0.125 a share in August 2026, consistent with the dividend declared in May 2026.