Kohl’s(KSS) - 2026 Q1 - Quarterly Report

Financial Performance - Net sales decreased by 4.1% to $3.0 billion, with comparable sales down 3.9% in the first quarter of 2025[55] - Gross margin increased by 37 basis points to 39.9% of net sales, driven by merchandise mix and inventory management[65] - SG&A expenses decreased by 5.2% to $1.2 billion, representing 36.0% of total revenue, a decrease of 32 basis points year-over-year[55] - Operating income was $60 million, an increase from $43 million in the prior year, with an operating margin of 1.9%[55] - The company expects net sales to decrease between 5% and 7% for the full year 2025[59] - Digital sales decreased by 7.7%, with digital penetration at 24% of net sales compared to 25% in the first quarter of 2024[61] Cash Flow and Capital Expenditures - Operating activities used $92 million of cash in Q1 2025, a decrease of $85 million compared to $7 million used in Q1 2024[80] - Investing activities used $108 million in Q1 2025, down from $126 million in Q1 2024, primarily due to fewer Sephora shop openings[82] - Anticipated capital expenditures for 2025 are approximately $400 to $425 million, including investments in Sephora shops and e-fulfillment center expansion[83] - Capital expenditures are projected to be between $400 million and $425 million in 2025, including investments in Sephora shops and e-fulfillment centers[75] - Financing activities generated $219 million of cash in Q1 2025, an increase of $41 million compared to $178 million in Q1 2024[86] - Cash dividend payments were $14 million ($0.125 per share) in Q1 2025, down from $55 million ($0.50 per share) in Q1 2024[87] Inventory and Working Capital - Inventory increased by 2% year-over-year to $3.1 billion[55] - Working capital decreased to $300 million as of May 3, 2025, compared to $643 million previously[89] - Current ratio declined to 1.09 from 1.21 year-over-year, driven by increased borrowings and decreased cash[90] Tax and Credit Ratings - The effective tax rate for the first quarter was 10.4%, down from 32.5% in the prior year[70] - As of May 3, 2025, corporate credit ratings were downgraded to Ba3 (Moody's), BB- (S&P), and BB (Fitch) with a negative outlook[85] - Net borrowings on the $1.5 billion credit facility were $255 million in Q1 2025, compared to $263 million in Q1 2024[87] - The company was in compliance with all covenants of its senior secured revolving credit facility as of May 3, 2025[92]