Department stores reported mixed results for Q2 on tariff concerns and a challenged consumer. Kohl’s stumbled as shoppers sought value, while Macy’s apparel picked up a fresh assortment.
The Q2 earnings from department store retailers in the U.S., ending August 2, 2025, provide insight into the advantages these stores have in terms of scale and breadth of product. Even so, all reported keeping a sharp eye on costs as they attempt to hold the line on price and value. The result could lead to potential changes in supply chain partners and regions.
The department stores reported consumers are under pressure and more selective, particularly among lower to mid income shoppers. Higher income consumers proved to be more resilient.
Unlike competitors across the apparel space, department stores reported leaner inventory positions, suggesting they did not front-loaded as a tariff mitigation strategy.
Kohl’s Q2 2025 Earnings Overview
| Revenue | Y0Y % Revenue | YoY % Comparable Sales | Gross Margin | Earnings Per Share/ YoY | YoY Inventory levels | |
| Kohl’s | $3.35B | (5.1)% | (4.2)% | +28 bps | $0.56 / (5.1)% | -5% |
- Guidance: Acknowledging the pressure its core consumer is facing, Kohl’s raised its guidance but offered a “prudent” outlook for the balance of the year.
Net sales are expected to see a decrease of 5% to 6%, up from earlier guidance of -5% to -7%. Comp sales are now expected to be down 4% to 5%, up from earlier expectations of 4% to 6%. The company updated adjusted diluted EPS to be between $0.50 to $0.80, compared to diluted earnings per share to $0.10 to $0.60 previously. - Kohl’s recently appointed Arianne Parisi as chief digital officer and Steven Dee as chief technology officer.
Of the quarter’s performance, Jill Timm, Kohl’s CFO, said “Our core customer remains under pressure, becoming increasingly selective with their spending.”
Kohl’s reported revenue was down for the quarter by 5.1% YoY, and comp sales were down 4.2% YoY. The company’s proprietary brands and Sephora partnerships were standouts.
Kohl’s reintroduced petites in all of its stores; this business was up 40% in the quarter.
Inventory
Kohl’s reported inventory declined 5% YoY, reflecting disciplined inventory management with receipts managed down in the mid teens. Looking ahead, Kohl’s expects to end the year with inventory levels down in the mid single digits.
To mitigate tariff impacts, the company is leaning into its diversified production country matrix and its flexibility to move goods, as needed. Kohl’s said it continues to work with its vendor and supplier community, negotiate and get clarity on tariffs to continue to provide value. It is also implementing value engineering for its proprietary brands. Last, Kohl’s is adjusting its buys based on an internal model that shows sales impact when and if prices increase.
Pricing
Kohl’s is leaning into proprietary brands and promotions to keep prices affordable and deliver on value, according to interim CEO, Michael Bender.
Heading into Q2, the company expanded the number of brands eligible for coupons. Additional in store signage and marketing in Q2, drove in-store performance improvement. This resulted in over 800 basis point increase in sales for coupon-eligible goods compared to the prior year. Given this success digitally and in store, the company will be launching a second wave of brand coupon inclusions of smaller, digitally native brands.
Consumer behavior
Kohl’s has found that lower to middle income customers remain the most challenged, while higher income customers have proven to be more resilient. These lower to middle income customers continue to prioritize value and are trading down into lower opening price point products.
“We know our core customer hasn’t left us, they’ve just given us less of their wallet,” Timm noted.
Dillard’s Q2 2025 Earnings Overview
| Revenue | Y0Y % Revenue | YoY % Comparable Sales | Gross Margin | EPEarnings Per Share/ YoY | YoY Inventory levels | |
| Dillard’s | $1.5B | 1.6% | 1% | 38.1%-100 bps | $4.66 / 1.5% | 2% |
- Dillard’s did not provide financial guidance.
“We were happy to achieve a sales increase for the first time in a while and encouraged by strengthening sales trends in July,” said Dillard’s CEO, William T. Dillard, II.
Inventory
The company focused on controlling inventory, ending the quarter up 2% YoY, compared to up 6% YoY in Q1 of 2025.
Consumer behavior
The number of sales transactions decreased 2% YoY, while the average dollars per sales transaction increased 3% YoY.
Stronger performing categories were juniors’ and children’s apparel, ladies’ accessories and lingerie. Home and furniture was the weakest performing category.
Macy’s Inc Q2 2025 Earnings Overview
| Revenue | Y0Y % Revenue | YoY % Comparable Sales | Gross Margin | Earnings Per Share/ YoY | YoY Inventory levels | |
| Macy’s Inc | $4.8B | (2.5)% | 1.9% | 39.7%-80 bps | $0.41 / (22.4)% | (0.8)% |
| Bloomingdale’s | 4.6% | 5.7% | ||||
| Blue Mercury | 3.3% | 1.2% | ||||
| Macy’s | (3.8)% | 1.2% |
- Macy’s Inc emphasized its “Bold New Chapter” strategy, which it outlined in 2024 which includes strengthening the Macy’s brand, accelerating growth in Bloomingdale’s and Blue Mercury, and simplifying and modernizing operations.
- Guidance: Macy’s Inc full year guidance for net sales is $21.15B to $21.45B, adjusted up from $21.0B to $21.4B. Comparable sales are now expected to be -1.5% to -0.5%, up from a -2.0% to -0.5%. Adjusted diluted EPS is expected to be $1.70 to $2.05, up from a previously projected $1.60 to $2.00.
Macy’s Inc reported YoY revenue was down 2.5%, with comp sales increasing 1.9%.
“Our second quarter results highlight the benefit of being a portfolio of nameplates that are multi brand, multi category and multi channel. This model provides sourcing optionality, economies of scale and negotiations and product and price diversification,” noted Tony Spring, chairman and CEO, Macy’s Inc.
Inventory
Macy’s Inc inventory was down 0.8% at the end of the quarter. The company reported this clean inventory position means it has ample open-to-buy for the remainder of the year.
Pricing
Tom Edwards, COO and CFO, said the consumer is more selective so the company is working with partners to analyze prices on a “granular level.” Any adjustments to prices will be made carefully rather than taking “a broad based approach.”
Consumer behavior
Thus far, Macy’s Inc reports the customer has remained resilient across the company’s brands throughout the first half of the year. Over 50% of the customer base at the Macy’s banner has a household income of over $100,000. The Bloomingdales customer is more affluent. Spring said, “We feel good about our customer. She’s buying newness. He’s buying fashion. They’re interested in the new brands and the changes in the assortment. And we’re seeing it across each of our nameplates… And I think as you go by income level, you certainly see a healthier performance in the higher tiers of income.”
At Bloomingdales, there was strength in ready to wear apparel, fine jewelry, fragrance, tabletop items and home entertainment items. At the Macy’s banner, standout categories include women’s contemporary apparel, women’s career, men’s tailored clothing, watches and mattresses.
