The news: Kohl’s reported a better-than-expected Q2 profit as it controlled expenses and reintroduced phased-out product assortments, hinting at early signs of traction despite sales declines.

• Net sales fell 5% to $3.35 billion, compared with $3.32 billion expected.
• Comparable sales dropped 4.2%, also beating expectations.
• Selling, general, and administrative expenses fell 4% in the quarter.
• Net income more than doubled to $153 million. Adjusted per-share profit came to 56 cents, above the 29 cents analyst estimate.

Kohl’s said it now expects full-year sales to fall 4% to 5%, slightly better than its prior view of a 4% to 6% drop.

Product shifts: The retailer attributed its results to reintroducing jewelry, proprietary brands, and petite clothing—categories it had scaled back to attract new shoppers. The shift helped bring back loyal customers who had drifted away. Interim CEO Michael Bender noted, however, that lower- to middle-income consumers remain under pressure and “are being choiceful” with their purchases.

Bender, a Kohl’s director who took over the top job in May after the ouster of Ashley Buchanan, said the company will add more coupon-friendly brands and revamp store layouts to win back shoppers. Kohl’s, which has logged quarterly sales declines for more than three years, is “focused on showing progressive improvement each quarter,” he said.

Our take: Kohl’s is taking steps to stabilize, but it faces a mammoth challenge to move sales to growth—not just lessen the declines.

As shoppers scrutinize every dollar they spend, Kohl’s needs to show it can deliver the right products at the right price—and find ways to stand out in an increasingly crowded field by bolstering loyalty perks, leaning more on personalized offerings to consumers, and communicate clearly what it wants to be known for. That won’t be easy for a retailer whose core shoppers remain heavily reliant on coupons and discounts.

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