Can Kohl's Accelerate Gross Margin Growth Through Proprietary Brands?
Kohl’s Corporation KSS is sharpening its focus on proprietary brands as a core element of its value proposition, with the category supporting merchandise margin in the first quarter of fiscal 2026.
Proprietary brands delivered a 6% comparable sales increase in the quarter, supported by customer demand for value-oriented offerings across categories. Kohl’s positions these brands as quality products offered at affordable opening price points, making them an important part of its merchandise mix.
The strength was visible across several businesses. Women’s, Kids, Home and Accessories posted flat to slightly positive comparable sales trends, while key proprietary labels such as FLX and Tek Gear showed strength across categories. Juniors was a standout, rising 10%, led by the So brand. Kohl’s is also expanding its proprietary brand presence, including the rollout of FLX to Kids in all stores by June.
The higher contribution from these brands showed up in profitability metrics. Gross margin expanded 4 basis points year over year to 39.9% in the first quarter, driven by higher proprietary brand penetration. However, the benefit was largely offset by increased shipping costs tied to higher digital penetration.
The key takeaway is that proprietary brands are giving Kohl’s a clearer margin-supporting lever while reinforcing its value and quality positioning. The first-quarter gain was limited by shipping pressure, but the 6% comparable sales increase shows that these brands are gaining traction where Kohl’s is leaning hardest.
How Are Target and Walmart Driving Margin Expansion?
Target Corporation (TGT) is benefiting from a favorable sales and revenue mix. In first-quarter 2026, TGT’s gross margin rate expanded 80 basis points year over year to 29%, driven by supply-chain productivity improvements, growth in higher-margin revenue streams such as Roundel and Target Plus, and lower markdown rates, partly offset by higher product costs.
Walmart Inc. (WMT) is pursuing margin expansion through business and merchandise mix improvements. WMT’s gross profit rate rose 6 basis points to 24.3% in first-quarter fiscal 2027, led by Walmart U.S. Within Walmart U.S., the gross profit increased 29 basis points, supported by improved business mix and merchandise mix, partly offset by higher fuel costs. Walmart also continues to scale higher-margin areas such as advertising, marketplace and membership.
KSS Stock Price Performance, Valuation & Estimates
Shares of Kohl’s have surged 114.1% over the past year compared with the industry’s growth of 69%.
KSS Price Performance Versus Industry
Image Source: Zacks Investment Research
From a valuation standpoint, KSS trades at a forward price-to-earnings ratio of 13, lower than the industry’s average of 13.32.
KSS’ Valuation Compared to Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for KSS’ current fiscal-year earnings per share implies a year-over-year decline of 18.5%, while the consensus mark for the next fiscal year’s EPS suggests growth of 6.2%.
Kohl’s currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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