How KSS (Kohl's) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a retail department store like Kohl's (KSS) makes money is essential for investors and anyone interested in the business of retail. In this post, we break down Kohl's's quarterly income statement (Q4 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Kohl's Overview

Kohl's operates as a major U.S. department store chain, offering apparel, footwear, accessories, beauty products, home goods, and seasonal merchandise through physical stores and e-commerce. Revenue comes primarily from net sales of merchandise across its retail network. The company focuses on value-oriented shopping experiences, partnerships like Amazon returns, and loyalty programs to drive customer traffic.

Revenue Breakdown

• Total Revenue (Q4 2025): $3.575B (-3.6% YoY)
  • Merchandise sales dominate as the core stream, with no detailed segment breakdowns reported in the quarter.
  • Growth is powered by store traffic initiatives and e-commerce, though offset by macroeconomic pressures and a challenging retail environment.

Gross Profit and Margins

• Gross Profit: $39.6M (1.1% gross margin)
  • Cost of Revenue: $3.535B (+65.4% YoY)
  • Kohl's maintains moderate margins due to high inventory costs and supply chain pressures, with razor-thin profitability reflecting promotional pricing and clearance efforts.
• Most costs come from cost of goods sold (merchandise procurement, freight, and inventory markdowns).

Operating Income and Expenses

• Operating Income: $73.0M (-25.5% YoY, 2.0% margin)
• Operating Expenses: $1.263B (-14.4% YoY)
  • R&D: N/A
  • SG&A: $1.263B (-2.2% YoY, 35.3% of revenue) — covers store operations, marketing, corporate overhead, and distribution
  • Kohl's continues to control costs while maintaining efficiency through store optimizations and reduced overhead.

Net Income

• Pre-Tax Income: $2.0M (0.0% YoY, 0.1% margin)
• Income Tax: N/A (tax rate N/A)
• Net Income: $8.0M (-63.6% YoY, 0.2% net margin)
• Kohl's converts a moderate portion of sales into profit due to operational efficiencies amid high costs and interest expenses.

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What Drives Kohl's Money Machine?

• Merchandise sales: 100% of revenue from retail sales of apparel, home, and beauty products
• Store and digital sales metric: Physical stores remain primary, supplemented by online growth
• Cost control initiatives: Reductions in SG&A through workforce adjustments and supply chain tweaks
• Future growth areas: Sephora partnerships and loyalty program expansions, though not yet profitable amid investments

Visualizing Kohl's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant costs, 0.2% of revenue drops to the bottom line.

Key Takeaways

• Kohl's's money comes overwhelmingly from merchandise sales
• High gross and net margins illustrate the power of Kohl's's value retail model
• Heavy investment in store operations, balanced by efficiency in operating costs
• Ongoing growth is driven by loyalty programs and partnerships

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FAQ About Kohl's Income Statement

1. What is the main source of Kohl's revenue in 2025?

Kohl's generates over 100% of its revenue from merchandise sales. Additional revenue sources include minor other income, but retail sales dominate.

2. How profitable is Kohl's in Q4 2025?

Kohl's reported net income of $8.0M in Q4 2025, with a net margin of approximately 0.2%, reflecting moderate profitability driven by cost controls amid revenue declines.

3. What are the largest expense categories for Kohl's?

The biggest expenses on Kohl's's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs. SG&A investment reached $1.263B in Q4 2025, as Kohl's prioritizes store operations and marketing.

4. Why does [segment/division] operate at a loss?

No specific loss-making segments reported; overall operations show thin margins due to Kohl's aggressively investing in inventory management and promotions, believing these will drive long-term growth—even if profitability is pressured today.

5. How does Kohl's effective tax rate compare to previous years?

Kohl's's effective tax rate in Q4 2025 was N/A, [consistent with/higher than/lower than] previous years. This [low/high/moderate] rate is primarily due to N/A.