Department store chain Kohl’s (NYSE:KSS) reported Q3 CY2025 results exceeding the market’s revenue expectations, but sales fell by 3.6% year on year to $3.58 billion. Its non-GAAP profit of $0.10 per share was significantly above analysts’ consensus estimates.
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Kohl's (KSS) Q3 CY2025 Highlights:
- Revenue: $3.58 billion vs analyst estimates of $3.49 billion (3.6% year-on-year decline, 2.5% beat)
- Adjusted EPS: $0.10 vs analyst estimates of -$0.17 (significant beat)
- Adjusted EBITDA: $258 million vs analyst estimates of $223.7 million (7.2% margin, 15.3% beat)
- Management raised its full-year Adjusted EPS guidance to $1.35 at the midpoint, a 108% increase
- Operating Margin: 2%, in line with the same quarter last year
- Free Cash Flow was $16 million, up from -$323 million in the same quarter last year
- Same-Store Sales fell 1.7% year on year (-9.3% in the same quarter last year)
- Market Capitalization: $1.76 billion
Michael J. Bender, Kohl’s Chief Executive Officer, said, “We are pleased with Kohl’s third quarter results, marking a third consecutive quarter of delivering top-line and bottom-line performance ahead of our expectations. These results are a direct reflection of the progress we are making against our 2025 initiatives, reinforcing our confidence as we continue to move in the right direction. We are focused on building on this momentum, as we remain committed to delivering quality products, great value, and a frictionless experience to our customers in an uncertain macroeconomic environment.”
Company Overview
Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE:KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $15.75 billion in revenue over the past 12 months, Kohl's is one of the larger companies in the consumer retail industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. For Kohl's to boost its sales, it likely needs to adjust its prices or lean into foreign markets.
As you can see below, Kohl's struggled to generate demand over the last three years (we compare to 2019 to normalize for COVID-19 impacts). Its sales dropped by 5.4% annually as it didn’t open many new stores and observed lower sales at existing, established locations.
This quarter, Kohl’s revenue fell by 3.6% year on year to $3.58 billion but beat Wall Street’s estimates by 2.5%.
Looking ahead, sell-side analysts expect revenue to decline by 3.5% over the next 12 months. it’s tough to feel optimistic about a company facing demand difficulties.
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Store Performance
Number of Stores
A retailer’s store count often determines how much revenue it can generate.
Over the last two years, Kohl's has kept its store count flat while other consumer retail businesses have opted for growth.
When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.
Note that Kohl's reports its store count intermittently, so some data points are missing in the chart below.
Same-Store Sales
A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.
Kohl’s demand has been shrinking over the last two years as its same-store sales have averaged 5% annual declines. This performance isn’t ideal, and we’d be concerned if Kohl's starts opening new stores to artificially boost revenue growth.
In the latest quarter, Kohl’s same-store sales fell by 1.7% year on year. This decrease was an improvement from its historical levels. It’s always great to see a business’s demand trends improve.
Key Takeaways from Kohl’s Q3 Results
It was good to see Kohl's beat analysts’ EPS expectations this quarter. We were also excited its gross margin outperformed Wall Street’s estimates by a wide margin. Icing on the cake was a big guidance raise. Zooming out, we think this was a solid print. The stock traded up 21.5% to $19.51 immediately after reporting.
Kohl's put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.