How Kohl's Corporation Makes Money

Kohl's generates revenue through three primary mechanisms that together produced $15.46 billion in FY2025. The first and dominant stream is Net Sales from merchandise, which totaled $14.78 billion in FY2025, down 4.0% from $15.39 billion in FY2024. This stream breaks down into six merchandise categories: Women's ($3.60 billion, 24.4% of net sales), Accessories including Sephora ($3.12 billion, 21.1%), Men's ($2.93 billion, 19.8%), Home ($2.21 billion, 15.0%), Children's ($1.70 billion, 11.5%), and Footwear ($1.21 billion, 8.2%). The Accessories category was the sole growth driver, increasing approximately 2% in FY2025, while all other categories declined — Women's down 5.7%, Men's down 4.8%, Home down 4.3%, Children's down 6.5%, and Footwear down 6.9%. The second revenue stream is Other Revenue, which generated $668 million in FY2025, down 10% from $742 million in FY2024. Other revenue includes credit card operations (finance charges, late fees, and other revenue less write-offs of uncollectible accounts), third-party advertising on Kohls.com, unused gift card breakage, and other non-merchandise revenue. The credit card program is a critical component: Kohl's has 28.5 million credit card accounts with a 45.3% penetration rate, and the average transaction value via Kohl's credit card is $127. Credit card revenue declined in FY2025 due to lower sales to Kohl's charge customers and a shift of certain credit-related expenses from SG&A against other revenue as account servicing moved to the third party that owns the accounts. The third revenue stream is the Sephora partnership, which operates as a shop-in-shop arrangement where Kohl's shares in operating profits. Sephora at Kohl's generated over $1.8 billion in sales in FY2024 and exceeded $3.1 billion in the Accessories category in FY2025. Kohl's business model is built on the 'off-price department store' positioning — carrying national brands at lower prices than traditional department stores through reduced overhead and perpetual promotional activity. The company operates 1,175 stores averaging approximately 80,000 square feet, with 69% located in suburban markets. Nine retail distribution centers and five e-commerce fulfillment centers support the omnichannel operation. Digital sales were approximately flat in FY2025 and represented 29% of net sales (28% in FY2024). The company's proprietary brands — Sonoma Goods for Life ($1.2 billion annual revenue), Apt. 9 ($890 million), and Simply Vera Vera Wang ($650 million) — generate higher margins than national brands and differentiate the assortment. Kohl's Cash, the company's loyalty program, drives repeat visits through dollar-off discounts earned on spending. The model's vulnerability is its dependence on middle-income consumers who are increasingly price-sensitive and shifting spending to discount retailers, off-price chains, and e-commerce. If the proprietary brand stream disappeared, Kohl's would lose approximately $2.7 billion in annual revenue and its primary margin advantage, as private label gross margins typically exceed national brand margins by 5-10 percentage points.

Kohl's growth strategy centers on three priorities: merchandise rationalization to reduce SKU count and improve inventory productivity, private label expansion targeting 25% of total sales from owned brands that carry 400-500 basis points higher gross margin than national brands, and digital acceleration through the Kohl's app which has driven 40% of online traffic. The company is testing a smaller-format store concept of 35,000 to 55,000 square feet versus the traditional 80,000 square foot box, targeting suburban strip centers adjacent to grocery anchors. The Sephora shop-in-shop partnership, now in over 900 locations, has underdelivered initial sales projections but continues to drive new customer acquisition among younger female shoppers aged 18 to 35 who represent the next generation of Kohl's core customer. Cost reduction initiatives targeting $150 million in annualized savings by 2026 support the path to margin restoration.