Kohl’s ‘surprised’ Wall Street with a big earnings beat in the aftermath of its CEO drama—possibly thanks to tariffs

Sydney Lake is an associate editor at Fortune, where she writes and edits news for the publication's global news desk.

Kohl’s has had a rocky year, so it was due for at least a little bit of good news. 

On Wednesday, the discount retail chain reported an earnings beat, shocking Wall Street analysts. The company reported adjusted earnings per share of $0.56, significantly beating the consensus estimate of just $0.30 per share. And markets rejoiced on the news: Kohl’s share prices are up nearly 20% on Wednesday.

“We’re surprised and encouraged

The stronger than expected Q2 earnings report comes on the heels of a tumultuous year for Kohl’s. After just 100 days on the job, CEO Ashley Buchanan was fired from his post for violating Kohl’s policies

While Kohl’s beat Wall Street expectations, the discount retailer still reported a 5.1% decrease in net sales and a 4.2% drop in comparable sales. Still, it’s a brighter

“Although we are encouraged

Still, discount retailers like Kohl’s are tending to perform at least a little better than other retailers during this current period of uncertainty marked

While lower- to middle-income customers remain the most challenged, higher-income customers have been more resilient, Bender said. 

“Several of our key initiatives are focused on delivering greater value to these customers through investing in our proprietary brands and adding more coupon-eligible brands,” Bender said.

Toward the end of Q1, Kohl’s made more in-store brands eligible for coupons, which “generated an immediate positive response in our digital channel, where pricing transparency plays a significant role in customer decision-making,” Bender said. “As the quarter progressed, we saw the performance improve in our stores as we increased investment in in store signage and marketing.”

That could be a telling sign customers are continuing to chase deals as they watch other stores raise prices owing to inflation and tariffs. To be sure, many middle-income customers have also “traded down” to more value-focused brands, so Kohl’s will need to continue offering coupon-friendly brands and items to stay afloat. Baird says potential risks for Kohl’s include “choppy” consumer-spending trends, a highly competitive promotional space, weather, and other economic factors.

Kohl’s comeback may also be the result of continued growth in its jewelry business, further investment in women’s clothing, and its partnership with Sephora. Bender said more than one-third of Sephora shoppers are exploring other areas of Kohl’s stores.

Jewelry and women’s clothing had been a sore spot for Kohl’s after Buchanan’s predecessor, Tom Kingsbury, had opted for Kohl’s to carry less inventory (like fine jewelry and women’s petite sizing), which ultimately hurt business. Kingsbury even admitted his choice to do so was “shortsighted.”