Dive Brief:
- Sephora was a rare drag at Kohl’s in an otherwise better-performing quarter, with sales at those shop-in-shops down low-single-digits compared to last year, Kohl’s executives said Thursday.
- The beauty retailer tends to boost Kohl’s Q1 sales, which have plunged more than 27% since 2019, with volumes down “an eyewatering amount,” according to a GlobalData report Thursday.
- Kohl’s on Thursday also reported that Q1 net sales fell 1.7%, with comps down 1.1%. Gross margin expanded by 4 basis points, and the $14 million net loss was a $1 million improvement from 2025.
Dive Insight:
After years of stumbles, Kohl’s boasted a relatively strong balance sheet and improving trajectory in Q1, but the performance at its Sephora shops is a bad sign.
David Silverman, senior director at Fitch Ratings, took note of “well controlled expenses and inventory” in a quarter that demonstrated “measured progress continues at Kohl’s.”
“The company is seeing some momentum from its initiatives to improve its assortment, value positioning, and the shopping experience,” he said in emailed comments. “The company’s affirmed guidance suggests comps could remain near current levels for the remainder of the year.”
The retailer reiterated that it expects net sales and comps to range from a 2% decline to flat. Kohl’s debt was down about $45 million compared to Q4, and interest expense was $10 million less than Evercore ISI analysts expected, according to a Thursday client note.
But those analysts, led by Michael Binetti, were disappointed that the higher mix of private labels — executives reported a 6% comp increase in the quarter — didn’t lead to more margin improvement.
Still, Kohl’s stores, merchandising and assortment are noticeably improved, according to Evercore and others. Yet the progress at Kohl’s is fairly meager, given its chronic declines, according to GlobalData Managing Director Neil Saunders. With tax refunds providing many households with extra funds in Q1, consumers in Kohl’s customer base spent about 3.4% more on discretionary goods compared to the period last year, which should have translated to higher sales gains at Kohl’s, per GlobalData research.
The Q1 dip at the Sephora shops is not that surprising, in light of stronger prior numbers, Saunders said. It’s possible that Sephora at Kohl’s has peaked. But, rather than helping to mask Kohl’s weakness, Sephora may have suffered from it.
“The deterioration of Sephora is concerning, mostly because it has been the savior of Kohl’s for quite some time,” he said. “It is also the case that Sephora is suffering from the wider malaise at Kohl’s. If traffic is under pressure, the gains the beauty business can make will be limited. But overall, it’s a worrying trend as the beauty market is still growing nicely overall, so Kohl’s is underperforming in the space.”
