Kohl's Corporation (NYSE:KSS) shares climbed about 3.8% on Tuesday after the department store chain reported fourth-quarter earnings that topped Wall Street expectations, even as comparable store sales lagged estimates.

The company posted Q4 net income of $125 million, or $1.07 per share, beating analysts’ average forecast of $0.86.

Revenue fell 3.9% year-over-year to $4.97 billion, slightly below the $5.02 billion consensus. Comparable store sales declined 2.8%, missing the 1.5% drop analysts had predicted.

Kohl’s gross margin improved 25 basis points from a year earlier to 33.1%, aided by better inventory management despite rising shipping costs. Operating income rose 5% to $212 million, while operating cash flow came in at $750 million. Inventory declined 7% year-over-year to $2.7 billion.

“Despite missing top-line and comp expectations, the earnings beat underscores the company’s continued focus on margin management and operational efficiency,” Jefferies analysts wrote in a note.

For fiscal 2026, Kohl’s expects adjusted EPS between $1 and $1.60, below the $1.37 consensus midpoint. The company anticipates comparable sales will range from a 2% decline to flat, also below Street expectations.

Adjusted operating margin is projected at 2.8% to 3.4%, with capital expenditures of $350 million to $400 million. The retailer will maintain a quarterly dividend of $0.125 per share.

Kohl’s faces challenges during peak holiday periods as competitors boost value offerings and consumers continue shifting toward e-commerce, the company said. Management flagged that it lost market share during Black Friday, Cyber Monday, and the week following Christmas and plans to adjust promotions to better align with value-conscious shoppers.

Looking ahead, Jefferies analysts are focused on monthly performance trends, holiday sales insights, tariff impacts on pricing and margins, and category-specific results, particularly fashion versus basics and private-label versus branded products.