Kohl’s is choosing reinvention over retreat.
Despite another disappointing quarter and several years of declining sales, the U.S. department store chain says it has no plans for sweeping store closures. Instead, leadership is betting on a mix of pricing adjustments, simplified merchandising, and stronger private-label offerings to win back shoppers.
Whether that strategy is bold discipline—or insufficient reform—may determine the retailer’s fate in an increasingly competitive retail landscape.
Sales Decline Continues, But Profitability Improves
Kohl’s latest financial results paint a mixed picture.
For the fourth quarter, the company reported:
•Net sales of $5 billion, down nearly 4% year over year
•Comparable store sales declining nearly 3%
Despite the drop in revenue, the company managed to improve profitability. Gross margin rose 25 basis points to 33.1%, while net income surged 160% to $125 million.
For the full year, the pattern remained similar:
•Net sales fell 4% to $14.8 billion
•Comparable sales declined 3.1%
•Gross margin improved to 37.5%
•Net income increased to $272 million
The takeaway: Kohl’s is becoming more efficient—but not yet growing again.
CEO Michael Bender acknowledged that the results reveal “clear opportunities,” signaling that leadership views the current moment as a restructuring phase rather than a crisis point.
Still, the company’s outlook for 2026 remains cautious. Kohl’s expects both total sales and comparable sales to range from a 2% decline to flat growth.
Why Kohl’s Is Avoiding Large-Scale Store Closures
Many struggling retailers have responded to declining sales with aggressive store shutdowns. Kohl’s, however, is taking a different approach.
After closing nearly 30 stores last year, the company says it is now focused on improving the performance of its remaining locations rather than shrinking the footprint further.
According to Bender, more than 90% of Kohl’s stores are still profitable, which reduces the urgency for widespread closures.
Instead, management wants to increase productivity within existing locations—essentially squeezing more revenue from the stores it already operates.
From an operational standpoint, that logic makes sense. Department stores rely heavily on physical locations not only for sales but also for fulfillment, returns, and omnichannel services like buy-online-pickup-in-store.
Credit analysts also note that Kohl’s still has significant structural advantages. Fitch Ratings points to the company’s large store network, established supply chain, vendor relationships, and strong liquidity.
In 2025 alone, Kohl’s generated roughly $1 billion in cash flow after nearly $400 million in capital expenditures—a financial cushion that gives management time to attempt a turnaround.
Inside the Store: Fewer Choices, Lower Prices
The company’s operational reset is happening primarily inside the store environment.
Executives say Kohl’s is simplifying product assortments—reducing the number of options shoppers must navigate while improving pricing competitiveness.
One visible example is the retailer’s new “Deal Bar,” a merchandising concept designed to highlight value-priced products.
The apparel strategy is also evolving. Kohl’s is focusing more heavily on categories that tend to generate reliable demand:
•basic apparel staples
•dresses
•activewear
At the same time, the retailer is expanding its private label lineup, which typically carries higher profit margins.
Two brands receiving particular attention include:
•Jumping Beans, a baby and toddler apparel line
•FLX Kids, an activewear brand for children
Both are expected to reach all Kohl’s stores by the second quarter.
Chief Financial Officer Jill Timm told analysts the focus is straightforward: deliver stronger value to price-sensitive shoppers.
Kohl’s core customer base—primarily middle- and lower-income households—has become far more selective about discretionary spending amid inflation and economic uncertainty.
The Real Challenge: Relevance
However, analysts say the retailer’s challenges run deeper than pricing alone.
Research from GlobalData suggests many consumers simply find Kohl’s stores difficult to shop, with product assortments that feel uninspiring and prices that don’t justify the value.
In other words, the issue may be brand relevance rather than operational efficiency.
Neil Saunders, managing director at GlobalData, argues that Kohl’s has struggled to present a compelling identity in a retail environment where shoppers increasingly expect clear positioning.
Retailers today generally succeed by dominating one of three categories:
•price leadership (e.g., Walmart)
•trend-driven merchandising (e.g., Zara)
•experience or brand strength (e.g., Apple or Lululemon)
Kohl’s sits awkwardly between those strategies.
Competitors Are Not Standing Still
The timing also complicates Kohl’s recovery.
Major rivals such as Target continue to sharpen their product strategies, strengthen private brands, and improve store experiences.
In a retail market defined by convenience and differentiation, incremental improvements may not be enough.
eMarketer analyst Zak Stambor believes the company’s guidance—predicting sales from down 2% to flat—suggests the worst declines may be slowing.
But stabilization alone does not equal recovery.
Turning around a legacy department store requires consistent execution across merchandising, pricing, marketing, and store operations, a transformation that typically takes years.
A Critical Year for Kohl’s
For Kohl’s, 2026 could become a decisive year.
Management says it has spent the past year “resetting the foundation” of the business—streamlining operations, refining product strategy, and strengthening proprietary brands.
But the gap between internal improvements and consumer perception remains wide.
Retail turnarounds rarely fail because companies lack resources. More often, they fail because the brand stops resonating with customers.
If Kohl’s can reconnect with its core shopper—offering clear value and a simpler, more appealing store experience—it may still stabilize.
If not, the retailer risks drifting further behind faster-moving competitors in a rapidly evolving retail market.
Source: Based on reporting from Retail Dive