KOHLS Corp (KSS) Risk Factors

Item 1A. Risk Factors

This Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "anticipates," "plans," "may," "intends," "will," "should," "expects," and similar expressions are intended to identify forward-looking statements. Forward-looking statements include certain statements under Management's Discussion and Analysis and Financial and Capital Allocation Outlook and may include comments about our future sales or financial performance and our plans, performance and other objectives, expectations or intentions, such as statements regarding our liquidity, debt service requirements, planned capital expenditures, future store initiatives, adequacy of capital resources and reserves, and the impact of macroeconomic events, including inflation, consumer behavior, and changes in global trade policies, such as tariffs, and our response to such events. Forward-looking statements are based on management’s then current views and assumptions and, as a result, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. As such, forward-looking statements are qualified by those risk factors described below. Forward-looking statements relate to the date made, and we undertake no obligation to update them. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.

Our sales, revenues, gross margin, expenses, and operating results could be negatively impacted by a number of factors including, but not limited to, those described below. Many of these risk factors are outside of our control. If we are not successful in managing these risks, they could have a negative impact on our sales, revenues, gross margin, expenses, and/or operating results.

Macroeconomic, Regulatory, Legal, and External Risks

Our business is highly sensitive to general economic conditions, consumer spending levels, and/or other external conditions, which could decline.

Our business is sensitive to the growth of the U.S. economy and the strength of the U.S. consumer. Consumer spending habits, including demand for the merchandise we sell, are affected by various factors beyond our control, including prevailing economic conditions, inflation and measures taken to control it, consumer responses to recessionary concerns, levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy and fuel costs, income tax rates and policies, consumer perception of economic conditions, and the consumer’s disposable income, credit availability, and debt levels. Our core moderate-income customer is especially sensitive to these factors. When the cost of basic necessities, such as food, fuel, and healthcare, increases, these customers often reduce their discretionary spending, which may negatively impact our results of operations. A slowdown in the U.S. economy, an uncertain economic outlook, or a decline in consumer confidence could adversely affect consumer spending habits and result in lower traffic to our physical stores and digital platforms, increased markdowns, reduced sale conversion rates, and an adverse effect on our results of operations. Because all of our physical stores are located in the United States, we are especially susceptible to deteriorations in the U.S. economy compared to more geographically diversified competitors.

Geopolitical instability, hostilities, and public health events could adversely affect consumer behavior and our operations.

Consumer confidence and purchasing power are influenced by the domestic and international political environment. The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the United States or our global supply chain partners, could lead to decreased consumer spending or widespread operational disruptions. Future pandemics or other public health crises could have a material adverse impact on our business, financial condition, and results of operations. Such events can result in government-mandated closures, limited operating hours, labor shortages, and severe disruptions to the retail industry and global logistics network. We cannot predict the occurrence, duration, or severity of any future public health events or the effectiveness of our mitigation strategies in response to such major disruptions.

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Changes in global trade policies and the imposition of tariffs could increase our costs and disrupt our supply chain.

The majority of goods we source are manufactured outside of the United States, primarily in Asia. Consequently, our business is subject to risks associated with foreign trade, including changes in trade policy. Recent or potential impositions of new or increased tariffs on imported products, or the removal of de minimis thresholds for direct-to-consumer imports, could increase our merchandise costs and have a material adverse effect on our business, results of operations, and liquidity. On February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). While this ruling may lead to potential refunds, the availability, timing, and amount of such refunds remain uncertain and subject to further legal and administrative developments. Following this decision, the U.S. presidential administration announced the invocation of alternative authorities to impose new tariffs on imports from various countries. If we are unable to diversify our sourcing, divert production or sourcing away from specific countries to avoid tariffs, or successfully implement pricing actions to offset these costs, our gross margins, costs of merchandise sold, results of operations, and competitive position could be adversely affected. Furthermore, retaliatory trade measures by other countries could increase the costs of our operations or limit our access to critical raw materials or merchandise.

We are subject to income and other taxes in the United States and various local jurisdictions, and changes in tax laws or the interpretation of existing laws could increase our tax liabilities and impact our financial results.

We are subject to income and other taxes in the United States and various local jurisdictions. Our effective tax rate and profitability could be adversely affected by several factors, including changes in tax laws; the interpretation of existing laws; or the results of audits or reviews by taxing authorities. We are subject to regular reviews and ongoing audits by federal, state, and local tax authorities. While we believe our tax positions and estimates are reasonable, the ultimate resolution of tax matters is often uncertain. A determination by a taxing authority that is inconsistent with our reporting positions, or a significant change in the geographic mix of our domestic operations that triggers higher state tax nexus or apportionment, could materially increase our effective tax rate. Any significant increase in our overall tax liability would reduce our net earnings and could adversely affect our results of operations and financial condition.

Evolving regulations related to ESG, climate change, and sustainability could increase our costs and impose operational restrictions.

Increased governmental focus on climate change and other ESG matters has led to complex and conflicting regulatory requirements, such as increasing state-level regulations related to the use of per- and polyfluoroalkyl substances in merchandise, extended producer responsibility legislation related to packaging and waste, and climate risk and greenhouse gas reporting mandates (such as those in California, which is currently partially enjoined, and the SEC climate-related disclosure rule, which is currently under federal stay) require investment in data collection and compliance infrastructure. Failure to meet these standards, or the differing expectations of our stakeholders, may directly or indirectly have a significant impact on the costs of our operations, including energy, resources used to produce our products, and compliance costs; result in sales restrictions in certain jurisdictions or regulatory fines; lead to reputational damage; and result in increased scrutiny that could heighten all of the ESG-related risks to which we are subject. Additionally, many of our suppliers may be subject to similar regulations and expectations, which may exacerbate existing risks or create new ones, including risks that may not be known to us. Any of these developments may have a material adverse effect on our business and results of operations.

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Regulatory and legal matters could adversely affect our business operations and change financial performance.

Various aspects of our operations are subject to federal, state, or local laws, rules, and regulations, including consumer regulations, any of which may change from time to time. The costs and other effects of new or changed legal requirements cannot be determined with certainty. For example, new legislation or regulations may result in increased costs directly for our compliance or indirectly to the extent such requirements increase prices of goods and services, reduce the availability of raw materials, or further restrict our ability to extend credit to our customers.

We continually monitor the state and federal legal and regulatory environments for developments that may impact us. Failure to detect changes and comply with such laws and regulations may result in an erosion of our reputation, disruption of business, and/or loss of associate morale. Additionally, we are involved in various legal matters and regulatory proceedings that arise out of the conduct of our business. Litigation or regulatory developments could adversely affect our business operations and financial performance, given the expense, resources, and impact on our reputation that could result from involvement in these proceedings and compliance with regulatory developments and/or settlements or consent decrees resulting from these proceedings.

Weather conditions, natural disasters, and the potential impacts of climate change could adversely affect consumer shopping patterns and disrupt our operations.

As our business includes apparel, footwear, accessories, beauty, and home products, our business is subject to risks associated with weather conditions and natural disasters, which can occur with little warning. Severe weather—including unusually heavy snow, ice, or rainstorms, and natural disasters such as earthquakes, wildfires, floods, or hurricanes—has previously resulted, and could in the future result, in physical damage to or the closure of our stores, distribution centers, or other facilities. Such events can diminish consumer demand; disrupt our supply chain, making it difficult or impossible to timely deliver seasonally appropriate merchandise; threaten the safety of our workforce and customers; and cause other operational disruptions—all of which could adversely impact our operating results.

Furthermore, unseasonable weather conditions, including unusually warm weather in the fall or winter months or abnormally wet or cold weather in the spring or summer months, whether due to climate change or otherwise, could have a material adverse effect on our business, financial condition, and operating results, as such conditions may reduce demand for seasonal merchandise and create inventory imbalances. This inconsistency between consumer spending and our typical inventory purchasing cycle may necessitate higher markdowns to clear seasonal products, which adversely affects our gross margins and profitability.

Climate change also presents widespread transition risks and long-term physical risks that are difficult to predict, including increased energy costs, greenhouse gas regulation, and threats to the habitability of specific geographic regions where we operate. Climate change may impact the frequency and/or intensity of major disruption events, as well as contribute to various changes in the physical environment. Although we maintain crisis management and disaster response plans and may take various actions to mitigate our business risks associated with such events and climate change, our mitigation strategies may be inadequate to address such a major disruption event or environmental shifts caused by climate change.

Strategic, Competitive, and Operational Risks

We may be unable to successfully execute our omnichannel strategy.

Customer expectations regarding how they purchase and receive products are continuously evolving, with increasing use of technology and mobile devices to rapidly compare products, check prices, make purchases, and seek alternate delivery options. To stay competitive, we must continually anticipate and adapt to these changes in consumer behavior. The success of our omnichannel strategy depends on the seamless integration of our physical and digital channels to deliver a frictionless shopping experience, both in-store and online. This requires maintaining

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uninterrupted availability of our website and supporting applications, adequate and accurate inventory levels across our stores and digital platforms, timely fulfillment of customer orders, and accurate shipping of undamaged products. Our physical stores play a crucial role in attracting customers, driving traffic to digital channels, and supporting fulfillment, returns, and other omnichannel functions. Any inability to maintain or increase store traffic or to improve sales conversion rates across both physical and digital channels could adversely affect our results of operations.

Our ability to compete with other retailers and to meet our customers' expectations may suffer if we are unable to provide relevant customer-facing technology and a compelling omnichannel value proposition. As consumer behavior shifts toward a value-seeking mindset, our ability to differentiate our value proposition through personalization and loyalty remains critical. Our efforts to refine our omnichannel value strategy may negatively impact the loyalty of certain customers and our efforts to mitigate this impact may not be successful. Additionally, declining store traffic or shifting sales from physical stores to digital platforms could lead to store closures, restructuring and other costs, and adverse effects on our financial performance.

Furthermore, our ability to compete may also suffer if Kohl’s, our suppliers, or our third-party shipping and delivery vendors are unable to effectively and efficiently fulfill and deliver orders, especially during the holiday season when sales volumes are especially high. Any disruptions in these areas could adversely affect our results of operations.

We may be unable to offer merchandise that resonates with existing customers and attracts new customers while successfully managing our inventory levels.

Our business is dependent on our ability to anticipate fluctuations in consumer demand for a wide variety of merchandise. Failure to accurately predict constantly changing consumer tastes, preferences, spending patterns, and other lifestyle decisions, or to successfully execute our inventory allocation strategy, could result in inventory distortions that are often characterized by simultaneous lack of available stock in high-demand categories and excess inventory in others, which could create inventory imbalances and adversely affect our performance, operating results, and long-term relationships with our customers. Additionally, these distortions can lead to lost sales, additional markdowns, damaged brand reputation, and increased costs for storage and transportation.

Negative publicity surrounding us, our activities, or the products we offer, including consumer perception of our response to political and social issues, and campaigns by political activists promoting certain causes, could adversely impact our brand image and may decrease demand for our products, thereby adversely affecting our business, results of operations, cash flows or financial condition.

As with most retailers, we also experience inventory shrinkage due to theft or damage, and we have observed an increase in external theft incidents and organized retail crime. Higher rates of inventory shrinkage or increased security or other costs to combat inventory shrinkage could adversely affect our results of operations and financial condition. Our efforts to contain or reduce inventory shrinkage may not be successful, and certain theft-deterrence measures could negatively impact the guest shopping experience, potentially reducing store traffic and conversion.

Our competitors could make changes to their pricing and other practices.

The retail industry is highly competitive. We compete for customers, associates, locations, merchandise, services, and other important aspects of our business with many other local, regional, and national retailers. Those competitors include online retailers, off-price retailers, warehouse clubs, mass merchandisers, specialty stores, traditional department stores, and other forms of retail commerce.

We consider product and value to be the most significant competitive factors in our industry. The continuing migration and evolution of retailing to digital channels has increased our challenges in differentiating ourselves from other retailers especially as it relates to national brands. In particular, consumers can quickly and conveniently comparison shop with digital tools, which can lead to decisions based solely on price. Unanticipated changes in the pricing and

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other practices of our competitors may adversely affect our performance and lead to loss of market share in one or more categories.

Our marketing and loyalty programs may be ineffective at building personalized connections with customers.

We believe that differentiating Kohl's in the marketplace is critical to our success. We design our marketing and loyalty programs to increase brand awareness, build personalized connections with new and existing customers, and drive traffic and conversion. We believe these programs will strengthen customer loyalty, increase the number and frequency of customers that shop our stores and website, and increase our sales. If our marketing and loyalty programs are not successful or efficient, we may fail to strengthen customer loyalty or increase shopping frequency, which could adversely affect our sales and operating results.

Our business is seasonal in nature, which could negatively affect our sales, revenues, operating results, and cash requirements.

Our business is subject to seasonal influences, with a major portion of sales and income historically realized during the second half of the fiscal year, which includes the back-to-school and holiday seasons.

If we do not adequately stock or restock popular products, particularly during the back-to-school and holiday seasons, we may fail to meet customer demand, which could affect our revenue and our future growth. If we overstock products, we may be required to take significant inventory markdowns or write-offs, which could reduce profitability. Underestimating customer demand, or failing to timely receive merchandise to meet demand, can lead to inventory shortages and missed sales opportunities, as well as negative customer experiences.

We have and may continue to experience an increase in costs associated with shipping digital orders due to promotional shipping offers, split shipments, freight surcharges due to peak capacity constraints, and additional long-zone shipments necessary to ensure timely delivery for the holiday season. If too many customers access our website within a short period of time, particularly during peak selling periods, we may experience system interruptions that make our website unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we sell and the attractiveness of our products and services. Also, third-party delivery and direct ship vendors may be unable to deliver merchandise on a timely basis.

This seasonality causes our operating results and cash needs to vary considerably from quarter to quarter. Additionally, any decrease in sales or profitability during the second half of the fiscal year could have a disproportionately adverse effect on our results of operations.

The reputation and brand image of Kohl’s and the brands and products we sell could be damaged.

The Kohl's brand and many of our private brands are powerful sales and marketing tools that depend on positive consumer and stakeholder perceptions. We devote significant resources to develop, promote, and protect private brands that generate national recognition. In some cases, the private brands or the marketing of such brands are tied to or affiliated with well-known individuals. We also associate the Kohl’s brand with third-party national brands that we sell in our store and through our partnerships with companies in pursuit of strategic initiatives. Damage to the reputation or brand image, whether or not justified, of the Kohl’s brand, our private brands, or any affiliated individuals or companies with which we have partnered can arise from various factors, including: (a) operational and product issues, such as product failures, quality issues, safety concerns, perceived deficiencies in our pricing or return policies, or litigation resulting from our business operations; (b) supply chain and social practices, including concerns regarding human rights and working conditions associated with our own operations or our vendors’ operations and perceptions of our inclusion and belonging efforts; (c) ESG and public policy perceptions, including our position, or lack of position, on environmental, social, and geopolitical or similar matters, the impact of, and perception associated with, executing and/or realizing our ESG efforts, whether positive or negative, perceptions of our management of ESG

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risks and opportunities, and our failure, or perceived failure, to meet evolving investor and other stakeholder expectations; and (d) various other forms of adverse publicity, especially in social media outlets.

Our ESG profile is a component of our strategy, and we have and may at times continue to engage in voluntary initiatives (such as voluntary disclosures, certifications, or goals, among others) to improve the ESG profile of our company and/or products. However, these disclosures reflect goals and assumptions that are inherently uncertain and which may not be realized. These initiatives may be costly, fail to achieve intended results, or lead to litigation or regulatory or stakeholder scrutiny. Furthermore, statements based on current assumptions or third-party data may subsequently prove to be inaccurate or be subject to misinterpretation. Stakeholder expectations and regulatory standards on ESG continue to evolve and are not uniform, and there are divergent views regarding ESG principles in the U.S., particularly among certain activist stakeholders and state-level regulators. To the extent ESG matters negatively impact our brand and reputation, they may also impede our ability to compete as effectively to attract and retain associates or customers, which may adversely impact our operations, business, financial condition, results of operations, cash flow and prospects.

Furthermore, the use of online media by us, our influencer network, and our consumers and other stakeholders has increased the risk that our reputation and brand could be damaged, as the dissemination of information via online and social media is immediate and damage could arise quickly without affording us an opportunity for redress or correction. This risk is exacerbated by the rise of generative artificial intelligence and deepfake technologies, which can be used to create fictitious media content, spread misinformation, or impersonate company leadership. It may be difficult to address such negative publicity or sensationalism across media channels regardless of its accuracy, potentially causing immediate and significant harm to customer, associate, and stakeholder perceptions of our reputation and brands. This type of reputational damage may result in deterioration in our relationships with stakeholders and/or a reduction in sales, operating results, and shareholder value.

We are subject to payment-related risks, including in our credit card operations, that could adversely affect our sales, revenues, and/or profitability, increase our operating costs, expose us to fraud or theft, and subject us to potential liability.

We accept payments using a variety of methods, including our private label and co-branded Kohl’s credit card, credit and debit cards, gift cards, mobile payments, cash, and checks. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult, costly, or uncertain.

Our credit card operations facilitate merchandise sales and generate additional revenue from fees related to extending credit. The profitability of our credit card program is sensitive to the economic health of our core moderate-income customer. The private label and co-branded Kohl's credit card accounts are owned by an unrelated third-party, but we share in the net risk-adjusted revenue of the portfolio, which is defined as the sum of finance charges, late fees, and other revenue less write-offs of uncollectible accounts. Changes in funding costs related to interest rate fluctuations are shared similar to the revenue when interest rates exceed defined amounts. Although management currently believes that increases in funding costs will be largely offset by increases in finance charge revenue, increases in funding costs, including significant or rapid interest rate fluctuations, could adversely impact the profitability of our credit card operations. Further deterioration in macroeconomic conditions, including persistent inflation or rising unemployment, could increase credit losses and write-offs, reducing the net revenue we receive from our credit card program. Additionally, consumer preference is shifting toward alternative payment methods, including “buy now, pay later” and other digital payment methods. A shift away from our branded credit products could reduce customer loyalty and the higher-margin transactions often associated with use of our credit card.

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The regulatory framework governing our private label and co-branded Kohl’s credit card program remains subject to regulatory scrutiny, and our results are sensitive to legislative or executive actions that impact credit card services. Although the Consumer Financial Protection Bureau’s (CFPB) rule limiting credit card late fees was vacated, new or re-proposed rules, including potential federal limits on credit card interest rates, could adversely affect our program’s profitability. Furthermore, new consumer protection laws or changing interpretations of existing laws may restrict our ability to extend credit to core customer segments or require us to reconfigure our credit offerings. Such developments could not only reduce program revenue but also increase the costs of our compliance and operational practices and impact our loyalty program, adversely affecting our results of operations.

The payment and payment process methods that we accept subject us to potential fraud and theft by threat actors, including increased credit fraud risks associated with self check out, self pick up, and digital payment methods which could negatively impact our revenue and profitability. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by third parties or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs, adversely affecting our business and operating results.

Changes in credit card use and applications, payment patterns, credit fraud, and default rates may also result from a variety of economic, legal, social, and other factors that we cannot control or predict with certainty. Changes that adversely impact our ability to extend credit and collect payments could negatively affect our results.

We may be unable to attract, develop, and retain quality associates while controlling costs, which could adversely affect our operating results.

Our performance is dependent on attracting and retaining a large number of quality associates, including our senior management team and other key associates, and successfully executing organizational changes, such as leadership transitions. Leadership transitions can be disruptive and may result in the loss of key personnel, changes in business direction, or difficulties in maintaining operational focus and consistency. While we have succession plans for our senior management team, they may not be adequate to replace members of our senior management, including our Chief Executive Officer, or may not be successfully executed.

Many associates are in entry-level or part-time positions with historically high rates of turnover. Many of our strategic initiatives require that we hire and/or develop associates with appropriate experience. Our staffing needs are especially high during the holiday season. Competition for these associates is intense. We cannot be sure that we will be able to attract and retain a sufficient number of qualified personnel in future periods.

Our ability to meet our labor needs while controlling costs is subject to external factors such as government benefits, unemployment levels and labor participation rates, prevailing wage rates, minimum wage legislation, actions by our competitors in compensation levels, perceptions of our employee experience, potential labor organizing efforts, and changing demographics. Competitive and regulatory pressures have already significantly increased our labor costs. Further changes that adversely impact our ability to attract and retain quality associates or manage leadership transitions could adversely affect our performance, ability to effectively execute our strategy, our customer experience, and/or profitability. In addition, changes in federal and state laws relating to employee benefits, including, but not limited to, sick time, paid time off, leave of absence, minimum wage, wage-and-hour, overtime, meal-and-break time, and joint/co-employment could cause us to incur additional costs, which could negatively impact our profitability.

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Information Systems, Cybersecurity, Data Management, and Privacy Risks

We may be unable to adequately maintain and/or update our information systems.

The efficient operation of our business is dependent on our information systems. In particular, we rely on our information systems to effectively manage sales, distribution, and merchandise planning and allocation functions. We also generate sales through the operations of our Kohls.com website and the Kohl’s app. We frequently make investments that will help maintain and update our existing information systems. We also depend on third parties as it relates to our information systems. Although we and our third-party vendors seek to maintain our respective systems and address the risk of compromise of integrity, security, and consistent operation of these systems, such efforts are not always successful, and we or our third-party vendors could experience interruptions, delays, or cessation of service. The potential problems and interruptions associated with implementing technology initiatives, the failure of our information systems to perform as designed, or the failure to successfully partner with our third-party service providers, such as our cloud platform providers, could disrupt our operations, harm our sales and profitability, impair data security, and be time-consuming, costly and/or resource intensive to remedy. Additionally, certain of our business operations rely on proprietary legacy platforms that may be difficult to support, modernize, or rebuild if catastrophic issues occur. Dependence on such systems could lead to prolonged business disruptions or security vulnerabilities, which could adversely affect our results of operations and increase costs.

Our efforts to protect the privacy and security of sensitive or confidential customer, associate, or company information could be unsuccessful, which could severely damage our reputation, expose us to risks of litigation and liability, disrupt our operations, and harm our business.

As part of our normal course of business, we collect, retain, process, and transmit sensitive and confidential customer, associate, and company information. We also engage third-party vendors that provide technology, systems, and services to facilitate our collection, retention, processing, and transmission of this information. We face risk that our facilities and systems and those of our third-party vendors are vulnerable to cybersecurity threats, security breaches, system failures, acts of vandalism, fraud, misappropriation, malware, ransomware, and other malicious or harmful code, misplaced or lost data, programming and/or human errors, insider threats, or other similar events. The ever-evolving and increasingly sophisticated methods of cyber-attack may be difficult or impossible to anticipate and/or detect. Our ability to monitor our vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, acquisition, disclosure, loss, alteration, or destruction of our and our customers’ and associates’ data, including confidential, sensitive, and other information about individuals. Any data security incident involving the breach, misappropriation, loss, or other unauthorized disclosure of sensitive and/or confidential information, whether by us or our vendors, the failure or unavailability of technology systems, or ineffectiveness of business continuity or disaster recovery plans in the event of the foregoing events could disrupt our operations, damage our reputation and customers' willingness to shop in our stores or on our website or app, violate applicable laws, regulations, orders and agreements, and subject us to additional costs and liabilities which could be material. While we maintain insurance coverage designed to address certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise. In addition, the regulatory environment related to data privacy and cybersecurity is constantly changing, with new and increasingly demanding requirements applicable to our business. Maintaining our compliance with those requirements, including state-specific consumer privacy laws, may increase our compliance costs, require changes to our business practices, limit our ability to use and collect data, impact our customers’ shopping experience, reduce our business efficiency, and subject us to additional regulatory scrutiny, fines, data breach litigation, or reputational damage.

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Our information technology projects may not yield their intended results, and our use of artificial intelligence and machine learning technology presents evolving operational and legal risks.

We regularly have internal information technology projects in process. Although the technology is intended to increase productivity and operating efficiencies, these projects may not yield their intended results or may deliver an adverse user or customer experience. We may incur significant costs in connection with the implementation, ongoing use, or discontinuation of technology projects, or fail to successfully implement these technology initiatives, or achieve the anticipated efficiencies from such projects, any of which could adversely affect our operations, liquidity, and financial condition.

We continue to incorporate artificial intelligence, including generative AI and machine learning technology, into our business operations and customer experiences. Challenges with properly managing the use of AI and machine learning technology could result in reputational harm, competitive disadvantage, and legal liability. The legal, regulatory, and ethical landscape around the use of AI is rapidly evolving, and our ability to timely adopt and adapt to this emerging technology in an effective and ethical manner may impact our reputation and competitiveness. The use of AI could produce results that are false, biased, or inconsistent with our values and strategies. Further, the use of generative AI tools may compromise confidential or sensitive information, jeopardize our intellectual property, or subject us to claims of intellectual property infringement, all of which could damage our reputation. Implementing AI responsibly requires significant resources to minimize unintended harmful impacts, and there can be no assurance that AI initiatives will yield intended productivity gains or beneficial results. If our AI initiatives do not yield the anticipated productivity gains or intended results, our reputation, financial condition, and results of operations could be adversely affected. In addition, we may not be able to adapt or adapt quickly enough to technological change, including that brought about by the use of artificial intelligence. If our competitors are more successful in adapting to such changes or otherwise incorporating such changes into their business or operations, this could have a material adverse impact on our business and results of operations.

Supply Chain, Third Party, and Product-Related Risks

We may be unable to source merchandise in a timely and cost-effective manner.

Our ability to find qualified vendors and access to brands or products in a timely and efficient manner is a significant challenge. Our merchandise is sourced from a wide variety of domestic and international vendors. Substantially all goods sourced outside the U.S. are shipped by ocean to ports in the United States, making us vulnerable to port strikes, port congestion and delays, transport capacity constraints, and rising freight costs. Political or financial instability, trade restrictions, tariffs, currency exchange rates, pandemic outbreaks, military conflicts, work stoppages, information technology challenges, and other factors relating to foreign trade are beyond our control and have impacted or could continue to adversely impact our performance and cause us to pay more to obtain inventory or result in having the wrong inventory at the wrong time. In addition, certain laws and regulations impose import restrictions for goods, which may induce greater supply chain compliance costs and may result in delays to us or adversely impact our inventory. Where we are the importer of record, we may be subject to additional regulatory and other requirements, resulting in additional costs to us.

Increases in the price of merchandise, raw materials, fuel, and labor, or their reduced availability, increase our cost of merchandise sold. The price and availability of raw materials may fluctuate substantially, depending on a variety of factors, including demand, weather, supply conditions, transportation costs, energy prices, work stoppages, government regulation and policy, economic climates, market speculation, and other unpredictable factors. An inability to mitigate these cost increases, unless sufficiently offset with our pricing actions, might cause a decrease in our operating results. Any related pricing actions might cause a decline in our sales volume. Additionally, a reduction in the availability of raw materials could impair the ability to meet production or purchasing requirements in a timely

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manner. Both the increased cost and lower availability of merchandise, raw materials, fuel, and labor may also have an adverse impact on our cash and working capital needs as well as those of our suppliers.

If any of our significant vendors were to become subject to bankruptcy, receivership, or similar proceedings, we may be unable to arrange for alternate or replacement contracts, transactions, or business relationships on terms as favorable as current terms, which could adversely affect our sales and operating results.

Our vendors may not adhere to our Terms of Engagement or to applicable laws.

A substantial portion of our merchandise is received from vendors and factories outside of the United States. We require all of our suppliers to comply with all applicable local and national laws and regulations and our Terms of Engagement for Kohl's Business Partners. These Terms of Engagement include provisions regarding laws and regulations, employment practices, ethical standards, environmental and legal requirements, communication, monitoring/compliance, record keeping, subcontracting, and corrective action. From time to time, suppliers may not be in compliance with these standards or applicable laws. Significant or continuing noncompliance with such standards and laws by one or more suppliers may delay or preclude delivery of merchandise to us and could have a negative impact on our reputation and our results of operations.

There may be concerns about the safety of products that we sell.

If our merchandise offerings do not meet applicable safety standards or our customers' expectations regarding safety, we could experience lost sales, experience increased costs, and/or be exposed to legal and reputational risk. Events that give rise to actual, potential, or perceived product safety concerns could expose us to government enforcement action and/or private litigation. Reputational damage caused by real or perceived product safety concerns could have a negative impact on our sales and operating results.

Capital Risks

We may be unable to raise additional capital or maintain credit on favorable terms, which could constrain our operational flexibility and increase our cost of doing business.

We have historically relied on the public debt markets and lines of credit with financial institutions to raise capital and to partially fund our operations, growth, seasonal working capital needs, and strategic initiatives. In January 2023, we upsized and replaced our unsecured credit facility with a $1.5 billion senior secured, asset based revolving credit facility. Changes in the credit and capital markets, including market disruptions, limited liquidity, and interest rate fluctuations may increase the cost of financing or restrict our access to these potential sources of future liquidity. Our continued access to these liquidity sources on favorable terms depends on multiple factors, including our operating performance and credit ratings.

During 2024, S&P downgraded our senior unsecured credit rating from BB to BB- and Moody's downgraded our rating from Ba3 to B1. These downgrades have caused our cost of borrowing to increase. During 2025, Moody's further downgraded our senior unsecured credit rating from B1 to B3; however, further downgrades by Moody's do not trigger incremental interest rate increases on our existing debt. Further downgrades by S&P would cause our cost of borrowing to further increase. Declines in our credit ratings may also adversely affect our ability to access the debt markets and the terms and our cost of funds for new debt issuances. In addition, multiple further downgrades in our corporate credit rating could trigger less favorable terms under certain commercial arrangements, which could negatively impact our profitability and increase our costs. If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our credit rating levels, our industry, or our Company, our access to capital and the cost of debt financing may be negatively impacted. Additionally, if unfavorable capital market conditions exist if and when we were to seek additional financing, we may not be able to raise sufficient capital on

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favorable terms and on a timely basis (if at all). The terms of current and future debt agreements could restrict our business operations or cause future financing to be unavailable due to our covenant restrictions then in effect.

Our existing debt agreements, particularly our revolving credit facility, contain restrictive covenants. Any failure to comply with these covenants could result in an event of default, allowing lenders to terminate their commitments thereunder and declare the outstanding loans thereunder to be immediately due and payable. A default under our revolving credit facility could trigger a cross-default, acceleration, or other consequences under other indebtedness or financial instruments to which we are a party. If our access to capital were to become significantly constrained or our cost of capital were to increase significantly, our financial condition, results of operations, and cash flows could be adversely affected.

Our capital allocation strategy may be inefficient, may not yield the anticipated returns, or may not effectively support our long-term growth.

Our goal is to invest capital in a manner that maximizes long-term returns and shareholder value. This includes prioritizing spending on inventory, capital projects and expenses; managing debt levels; and periodically returning value to our shareholders through dividends and, longer term, share repurchases. To a large degree, capital efficiency reflects how well we manage our other key risks. The actions taken to address other specific risks may affect how well we manage the more general risk of capital efficiency. If we do not properly allocate our capital to maximize returns, or if our investments do not deliver the expected returns within anticipated timeframes, we may fail to produce optimal financial results. Additionally, a misallocation of resources toward defensive measures could limit our ability to fund future growth-oriented projects, resulting in a reduction in our competitive position and shareholder value.