Honestly, if you've walked into a Kohl’s lately, you’ve probably noticed the vibe is... different. It’s not just the Sephora stands or the Babies R Us gear popping up near the back. Behind the scenes, the math is changing fast. The Kohl's payment strategy amid turnaround effort has become the company's silent engine, and frankly, its most desperate lifeline.
For years, this place lived and breathed on its credit card. But in 2025 and 2026, the game is no longer just about getting you to swipe a piece of plastic. It’s about surviving a massive debt pile while trying to keep the lights on.
The Vendor Squeeze and the Cash Hunt
Retail is brutal. It’s even more brutal when you’re asking your suppliers to wait a little longer for their checks. By late 2025, reports started surfacing that Kohl’s was actively seeking longer payment terms from its vendors. Basically, they were saying, "Hey, we need to keep this cash in our bank account for another 30 or 60 days."
This isn't just "good business." It’s a classic move by a retailer trying to manage a "working capital swing." When sales are down—and Kohl’s net sales dropped about 3-4% through the end of 2025—you have to find money somewhere.
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The Debt Wall
Let’s talk numbers for a second. In mid-2025, the company had to issue $360 million in "junk bonds" just to pay off old debt that was coming due. The kicker? Those new notes have a 10% interest rate.
- Old debt: 4.25% interest.
- New debt: 10% interest.
That is a massive jump in cost. It's why Michael Bender, who stepped in as CEO after Ashley Buchanan’s abrupt exit, has been obsessed with "rebuilding the cash balance." They aren't just trying to sell sweaters; they are trying to outrun their own interest payments.
Why the Kohl's Card is Still King (and a Problem)
You can’t talk about the Kohl's payment strategy amid turnaround effort without mentioning that blue and white card. It’s the heart of their loyalty system. But the demographic that shops at Kohl’s—mostly middle-to-lower income—has been getting squeezed by inflation.
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When customers struggle, they stop using high-interest store cards. To fix this, Kohl’s did something interesting:
- The Co-Branded Shift: They expanded their co-branded card (Visa/Mastercard) to reach people who might not want a store-only card.
- The Interchange Win: In 2025, they netted a cool $129 million from a credit card interchange fee lawsuit settlement. That basically saved their Q3 earnings report from looking like a total disaster.
- Coupon Simplification: Former leadership admitted they made the "exclusion list" too long. You know the feeling—you have a 30% off coupon, but it doesn't work on 80% of the store. They’ve been reversing that to make the "payment experience" feel like a reward again rather than a math test.
Sephora: The "Payment" Halo
The Sephora partnership is doing the heavy lifting right now. It's on track to hit $2 billion in sales by the end of 2026. But here’s the nuanced part: Sephora customers tend to be younger and have a bit more "disposable" cash.
The payment strategy here is cross-shopping. If they can get you to buy a $40 lipstick at Sephora, they hope you’ll use your Kohl’s Rewards (housed in that digital wallet with 20 million users) to buy a pair of Sonoma jeans on the way out. It’s about increasing the "basket size" through integrated payments.
The Management Merry-Go-Round
It’s been a revolving door at the top.
- Michelle Gass (the Sephora architect).
- Tom Kingsbury (the inventory hawk).
- Ashley Buchanan (the "private label" guy who left after a few months).
- Michael Bender (the current leader trying to stabilize the ship).
Each one has tinkered with how the company handles its money. S&P Global actually downgraded Kohl's debt to "B+" in late 2025 because of this "management instability." When the bosses change every year, the payment strategy gets whiplash.
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The Move Toward "Private Label"
Bender and the team are doubling down on brands like Sonoma, Lauren Conrad, and Flex. Why? Because the "payment" from Kohl’s to a third-party brand like Nike or Under Armour is expensive. When they sell their own stuff, the profit margin is much higher.
In Q2 2025, their proprietary brands actually outperformed the rest of the store by 500 basis points. That’s huge. It means more cash stays in the building to pay down those 10% interest bonds.
What This Means for You
If you’re a shopper or an investor, the next 12 months are the "make or break" period. The turnaround is "laying the groundwork," but the room for error is basically zero.
Actionable Insights for the Future:
- Watch the Inventory: If you see the shelves getting sparse, it’s a sign the "vendor squeeze" is hurting their ability to get product.
- Digital Wallet is Key: The Kohl's app is where they are hiding the best deals. If you aren't using the digital wallet, you’re likely overpaying.
- The Dividend Danger: They are still paying a quarterly dividend ($0.125 per share). If they cut that, it's a major signal that the debt repayment strategy is failing.
- Sephora Maturity: We are reaching the point where almost every Kohl's has a Sephora. The "new store" boost is over; now they have to prove they can keep those customers coming back without a shiny new opening.
The Kohl's payment strategy amid turnaround effort is a high-stakes balancing act between keeping vendors happy, paying down expensive debt, and making sure loyal customers still feel like they’re getting a deal. It's a lot more than just "Kohl's Cash" these days.
To keep a pulse on this, keep an eye on the company's Q4 2025 holiday results—that's when we'll see if the "coupon simplification" actually brought the crowds back. Check the quarterly debt-to-equity ratio in their SEC filings to see if they're actually chipping away at that 2030 bond. Stay focused on the "Other Revenue" line in their earnings reports; that's where the credit card income hides, and it tells the real story of their financial health.