Kohl's Shows Life: Comps Improve, Tariff Refund Could Add Upside

Q1 2026 comps best in four years; guidance unchanged but potential $190M tariff refund not included.

KSS · Earnings Call · 2026-05-28

The Best Quarter in Four Years

Kohl's reported comparable sales down just 1.1% in Q1, its best performance in over four years. CEO Michael Bender opened the call: “we are pleased with our start to 2026 as our comparable sales ran down 1.1% to last year, marking the best quarterly performance in over 4 years.” — Michael J. Bender, Chief Executive Officer · 2026-05-28 That marks a striking improvement from Q4, when comps fell 2.8%, as CFO Jill Timm noted on the prior call: “Comparable sales declined 2.8% in Q4 and declined 3.1% for the year.” — Jill Timm, CFO · 2026-03-10 The driver? A renewed push behind proprietary brand offering – they ran up 6% in the quarter – and a stabilization of the core Kohl's charge customer, which comped flat after several quarters of decline. This isn't just a blip; proprietary brands are now the centerpiece of the strategy, with spring seasonal merchandise up mid-teens as a result of operational fixes. Bender said: “Proprietary brands were another bright spot in the quarter, running up 6% on a comparable sales basis.” — Michael J. Bender, Chief Executive Officer · 2026-05-28 The improvement is broad-based, spanning women's, kids, and accessories, and the company is leaning further into these higher-margin, opening-price-point brands.

The Tariff Refund Opportunity

The most notable new development is the potential tariff refund. In Q1, Kohl's submitted $140 million in claims related to Phase 1 China tariffs, and management says it's eligible for up to $190 million. However, no refunds have been received yet, and guidance does not include any benefit. CFO Jill Timm laid it out:

our guidance currently does not include any impact from potential AFA tariff refunds. In the first quarter, we submitted $140 million of claims related to the Phase 1 China tariffs we paid as importer of record. The total tariff refunds we are eligible to receive is $190 million. We did not receive any tariff refunds within the first quarter.
Jill Timm, Chief Financial Officer · 2026-05-28

If those refunds materialize, they would be pure upside to the P&L, potentially adding $1.00+ to EPS versus the current $1.00–$1.60 guidance. This is a company-specific catalyst, distinct from the broader tariff noise that has dominated macro commentary.

Digital and AI initiatives

Digital sales grew 4% in the quarter, fueled by better traffic and a growing marketplace. CFO Jill Timm: “Digital sales grew 4% this quarter, fueled by increased traffic.” — Jill Timm, Chief Financial Officer · 2026-05-28 The company is also experimenting with AI, having launched a gift finder powered by Google Gemini. While early, this signals an investment in modernizing the omnichannel experience, alongside plans to more than double marketplace items.

What It Means

The market has taken notice: the stock is up 32.5% over the last 90 days, a sharp reversal from a multi-year downtrend. Fundamentals remain challenged but are stabilizing: Total revenue fell 2% YoY to $3.2B, but the comp trajectory is clearly improving. The balance sheet has also strengthened, with cash of $429M and no ABL borrowings, and inventory down 8% while receipts rose 1%. Kohl's is not out of the woods – the macro consumer remains pressured – but the combination of a proprietary-brand-led recovery and a potential tariff refund windfall gives investors a concrete reason to be more constructive.