Observed Signal · Sep 14, 2026 · Product Launch · Source: Retail Dive · Impact: 1/5 · Sentiment: Positive
Kohl's expands Babies R Us shops as Sephora sales dip
Kohl's is expanding its partnership with Babies R Us, adding shop-in-shops to 56 more stores and introducing an exclusive collection of baby essentials. The move comes as Sephora at Kohl's, previously a key traffic driver, experiences declining sales, down 4% in Q2 after a low-single-digit drop in Q1. The expansion includes new categories like gifting options under $25, Millie Moon diapers, and Hallmark gift sets. This strategic shift highlights Kohl's efforts to diversify its offerings and boost in-store traffic, which has been challenged but is showing signs of recovery.
Retail strategy shift, not directly AdTech/MarTech relevant.
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Key Takeaways & Evidence Grounding
- Kohl's is expanding Babies R Us shop-in-shops to 56 additional stores.
- Kohl's is launching an exclusive collection of bibs, blankets, and crib sheets under the Babies R Us brand.
- Sephora at Kohl's sales declined 4% in Q2 after a low-single-digit drop in Q1.
- Sephora at Kohl's contributes about 10% of Kohl's top line.
- Kohl's store traffic fell 7.7% in Q1 and 1.4% in Q2, but same-store visits grew in June and July for the first time in two years.
Connected Companies & Entities
3 Entities mapped“Sephora at Kohl's has seen sales decline this year.”
“Kohl's is expanding its tie-up with Babies R Us and adding exclusive collections.”
“Placer.ai data shows same-store visits to Kohl's were up in June and July.”
Ontology Mapping & Concepts
Related Market Signals & Shifts
Recent verified developments and strategic activity across this market segment.
Sephora Decline Pressures Kohl's Q2 Sales
Kohl’s reported Q2 fiscal 2026 results showing net sales of $3.3 billion, down less than 1% year-over-year, while Sephora shop-in-shop sales at Kohl’s fell 4% for a second consecutive quarter. Gross margin expanded 305 basis points to 43%, aided by about $150 million in tariff refunds; net income was $151 million (down just over 1%). Kohl’s raised its full-year guidance to expect net and comparable sales to be flat to down as much as 1.5% (previously flat to down 2%), and expects adjusted operating margin of 3.5%–4.0%. Kohl’s CEO Michael Bender attributed the Sephora softness to a lack of fresh SKUs and category weakness in skincare. Fitch Ratings and other research firms note Sephora at Kohl’s had contributed roughly 10% of Kohl’s topline, and Kohl’s and Sephora plan assortment and merchandising expansions for the holiday season.
Sephora Dragged Kohl’s Q1 Performance
Kohl’s reported modest improvement in Q1 fiscal 2026 but faced a surprise weakness at its Sephora shop‑in‑shops, where sales fell low single digits year-over-year. Kohl’s disclosed Q1 net sales declined 1.7% with comps down 1.1%; gross margin edged up 4 basis points and the company recorded a $14 million net loss, a $1 million improvement from 2025. Executives reiterated full-year guidance calling for net sales and comps to be down about 2% to flat. Analysts and industry researchers noted progress on assortment and expense control, but warned the Sephora softness may signal limits to Kohl’s recovery given the beauty format’s prior contribution to traffic and sales.
Kohl's launches another back-to-school deals promotion
Kohl’s launched a new set of back-to-school promotions on Aug. 19, 2026, cutting prices up to 50% across school supplies, apparel and beauty items and offering $10 in Kohl’s Cash for every $50 spent, plus a weekend giveaway of $5–$100 in Kohl’s Cash while supplies last. The retailer earlier promoted “thousands of products under $25” for the season. Placer.ai data cited in the story shows Q2 store visits fell 1.4% year-over-year (improving from a near-8% decline in Q1). Analysts and market research firms (Morgan Stanley, Circana, NRF) offer mixed outlooks for the back-to-school season, with NRF forecasting nearly 10% sales growth to $43.3 billion but some firms urging caution.
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