Kohl's Corporation
Department Store RetailFounded 1962- Updated July 2025
Reviewed by Swet Parvadiya
Last reviewed: July 2025
CorpDigest
Kohl's Corporation
Business Model Analysis
Annual Revenue: $15.46B
Last reviewed: 2025-07-15 · By Swet Parvadiya
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. Kohl's single unreplicable moat is its 1,175-store national footprint combined with a credit card program that captures 45.3% of transactions and generates high-margin revenue through finance charges and late fees. 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 stock trades at $16.22, down from an all-time high near $80 in 2021, with a P/E ratio of 6.82 that reflects deep investor skepticism. 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 third revenue stream is the Sephora partnership, which operates as a shop-in-shop arrangement where Kohl's shares in operating profits. Kohl's defense is its suburban footprint (stores are typically located in strip malls and power centers rather than enclosed malls, which have higher vacancy rates), its credit card loyalty program, and its Sephora partnership. However, Morningstar analyst David Swartz characterized Kohl's partnership strategy as 'an admission by Kohl's that the brand isn't strong enough on its own, that they need to partner with others to draw in shoppers. This churn has prevented coherent strategy execution. The fourth challenge is the Amazon returns partnership, launched in 2019 as the 'single biggest initiative of the year' by then-CEO Michelle Gass, which was supposed to drive foot traffic and new customer acquisition. The sixth challenge is the proprietary brand strategy reversal. The second moat is the Sephora partnership, which has become the company's most successful strategic initiative. The company completed a new e-commerce fulfillment center in Etna, Ohio in 2025, expanding capacity for digital growth. 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 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. Kohl's faces a critical turnaround window under CEO Ashley Buchanan, who took office in January 2025 with a mandate to reverse three consecutive years of comparable sales declines and address the structural weaknesses exposed by the failed Sephora partnership and failed acquisition attempts. The company has announced plans to close 27 underperforming stores in 2025, rationalize its vendor base, and refocus the merchandise assortment on its core customer — the value-oriented suburban family shopper aged 35 to 55 with household income between $50,000 and $100,000. In 1986, a group of management executives and investors led by William Kellogg purchased the 40-store retail chain from British American Tobacco. The company expanded aggressively, acquiring Federated's Main Street stores in 1988 to enter the Chicago, Detroit, and Minneapolis-St.
Kohl's earns Other Revenue of $668 million in FY2025 largely from its Kohl's Charge card, which spans 28.5 million accounts and reaches 45.3% of transactions through finance charges and late fees. This income carries far higher margins than merchandise, though it fell about 10% in FY2025 as charge-customer sales softened and servicing shifted to a third party. The card doubles as a merchandising lever because charge customers over-index toward higher-margin proprietary brands.
Kohl's sells national brands below traditional department-store prices by running lower overhead, perpetual coupons, and Kohl's Cash promotions across roughly 1,175 stores that average about 80,000 square feet. Locating in suburban strip centers rather than enclosed malls keeps rent lower and accessibility higher for value-focused shoppers. Merchandise sales of $14.78 billion made up about 95.6% of the $15.46 billion in total FY2025 revenue.
The Sephora at Kohl's partnership operates as a profit-sharing shop-in-shop rather than a wholesale purchase, which limits Kohl's inventory risk while capturing prestige beauty spending. It reached more than 1,100 stores and generated over $3.1 billion in Accessories-category sales in FY2025. Accessories grew roughly 2% that year, making it the only merchandise category to expand while all others declined.
Digital commerce accounted for 29% of Kohl's net sales in FY2025, fulfilled through nine distribution centers and five dedicated e-commerce fulfillment centers. The company completed a new e-commerce fulfillment center in Etna, Ohio in 2025 to add capacity. Stores double as fulfillment and pickup points, letting the 1,175-location footprint support the online channel.
Owned labels such as Sonoma Goods for Life and Apt. 9 carry roughly 400 to 500 basis points higher gross margin than comparable national brands, and Kohl's targets owned brands reaching about 25% of total sales. Reviving proprietary brands and coupons in FY2025 drove a 120-basis-point improvement in charge-customer comparable sales from Q3 to Q4. That mix shift is central to protecting margins as overall sales decline.