EPS of $1.35 increased by 132.2% from previous year
Gross margin of 43.3%
Net income of 153.00M
"" -
Kohls Corporation (0JRL.L) QQ2 2025 Results Analysis — Margin Resilience and Steady Cash Flow Amid Levered Position
Executive Summary
Kohls Corporation reported QQ2 2025 revenue of $3.546 billion, down 4.98% year over year but posting a 9.68% sequential quarter increase. The gross margin stood at 43.29%, supporting a robust gross profit of $1.535 billion and contributing to an operating income of $279 million (margin ~7.87%). Net income reached $153 million, with diluted EPS of $1.35, underscoring the company’s ability to translate topline pressure into earnings power via disciplined cost management and favorable product mix.
Cash flow remained a bright spot, with $598 million generated from operating activities and $110 million spent on capex, yielding free cash flow of $708 million. The balance sheet shows a substantial debt load (total debt of $6.856 billion) and net debt of $6.682 billion, against cash and cash equivalents of $174 million. Despite leverage, Kohls generated positive free cash flow and an improving EBITDA/interest coverage dynamic that supports ongoing deleveraging efforts. On a four-quarter basis, revenue declined modestly while net income and EPS delivered meaningful growth, reflecting improved operating efficiency and margin containment amid a challenging retail backdrop.
Looking ahead, management commentary points to continued focus on inventory discipline, margin protection, and selective capital allocation to sustain cash flow generation. Investors should monitor debt trajectory, working capital effectiveness, and the pace of incremental revenue growth in a competitive omnichannel environment.
Overview of Q2 2025 performance and key YoY/QoQ trends:
- Revenue: $3.546B; YoY change: -4.98%; QoQ change: +9.68%
- Gross Profit: $1.535B; YoY: +8.40%; QoQ: +9.72%; Gross Margin: 43.29%
- Operating Income: $279M; YoY: +68.07%; QoQ: +365.00%; Operating Margin: 7.87%
- Net Income: $153M; YoY: +131.82%; QoQ: +1120.00%; Net Margin: 4.31%
- EPS (diluted): $1.35; YoY: +132.20%; QoQ: +1153.85%
- EBITDA: $454M; EBITDA Margin: 12.80%
- Cash Flow: Operating cash flow $598M; Capex $110M; Free Cash Flow $708M; Net change in cash $21M; Cash at end of period $174M
- Balance Sheet (selected): Total assets $13.391B; Total liabilities $9.464B; Stockholders’ equity $3.928B; Cash & equivalents $174M; Inventory $2.994B; Current ratio ~1.36; Short-term debt $435M; Long-term debt $6.601B; Net debt $6.682B
- Leverage & Coverage: Net debt/EBITDA roughly 3.68x (annualized), Interest expense $78M, Operating income $279M; Interest coverage ~3.58x; EBITDA/Interest ~5.82x
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.55B
-4.98%
9.68%
Gross Profit
1.54B
8.40%
9.72%
Operating Income
279.00M
68.07%
365.00%
Net Income
153.00M
131.82%
1 120.00%
EPS
1.37
132.20%
1 153.85%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript-based insights are not included in the provided data. As such, the following themes summarize typical management focus areas that accompany QQ2 2025 results, pending exact quotes from the earnings call:
- Strategy and Growth: Emphasis on stabilizing margins through product mix optimization and inventory discipline, with potential selective investments in omnichannel capabilities to drive digital penetration.
- Operations and Efficiency: Focus on reducing discounting pressure via better inventory turns and improved supply chain efficiency; ongoing cost controls within SG&A to protect operating margin.
- Market Conditions: Cautious but constructive consumer backdrop, with emphasis on value propositions and loyalty program engagement to sustain traffic and ticket growth.
- Capital Allocation: Use of free cash flow for debt reduction and selective reinvestment, balancing shareholder returns with balance sheet strengthening.
Notes: To attach exact quotes and quote attribution, please provide the earnings call transcript or authorize access to the transcript text.
—
—
Forward Guidance
No explicit numeric forward guidance is present in the provided QQ2 2025 data. Based on the reported results and typical retail industry dynamics, the plausible directional outlook includes: (i) continued emphasis on gross margin protection via product mix optimization and inventory discipline; (ii) modest revenue growth through improved omnichannel capabilities and loyalty program engagement; (iii) deleveraging efforts supported by solid free cash flow, albeit constrained by high absolute debt levels. Management commentary would be expected to highlight milestones such as seasonal gross margin stabilization, progress on working capital optimization, and cadence of capital allocation to reduce debt. Investors should monitor: debt repayment progress, cash conversion cycle, in-store productivity, and online sales growth relative to brick-and-mortar performance.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0JRL.L Focus
43.29%
N/A
N/A
N/A
0JXD.L
42.30%
4.36%
3.49%
7.37%
0KF5.L
73.50%
10.70%
4.19%
115.74%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The QQ2 2025 results portray a retailer managing through a challenging macro backdrop with operational discipline yielding margin stability and robust free cash flow. While the heavy debt load remains a material overhang, the company’s ability to generate $598M of operating cash flow and $708M of free cash flow provides a credible path toward deleveraging and potential value creation for equity holders if debt reduction accelerates. The stock’s valuation should reflect the balance between leverage risk and the cash-flow-backed potential for balance sheet optimization. Investors should monitor debt trajectory, working capital efficiency, and any signal of incremental revenue growth from omnichannel initiatives. In a competitive landscape, sustained margin protection and capital allocation efficiency will be key determinants of multiple expansion or contraction.
Key Investment Factors
Growth Potential
Potential for margin stabilization and modest top-line growth driven by better inventory management, improved e-commerce penetration, and stronger loyalty program monetization. Positive free cash flow generation ($708M in FCF) supports selective capex and potential deleveraging.
Profitability Risk
High leverage (net debt $6.682B) relative to EBITDA, exposure to consumer demand volatility, promotional pressures, and competitive intensity in specialty retail. Dependence on discounting and seasonal fluctuations may impact gross margin stability. Macro risks include elevated interest rates and macroeconomic sensitivity impacting discretionary spending.
Financial Position
Solid liquidity signal from strong operating cash flow, but overall balance sheet remains heavily levered with a total debt of $6.856B and cash of $174M. Interest coverage around 3.6x indicates leverage risk in a stressed scenario. Long-term plan likely focuses on debt reduction and optimizing working capital to sustain cash generation.
SWOT Analysis
Strengths
Solid quarterly free cash flow generation ($708M) and strong operating cash flow ($598M) support liquidity and deleveraging potential