Kohl’s is expanding a key partnership in its stores as its customers tighten their budgets and gravitate toward other retailers.
In the second quarter of this year, the department store chain’s comparable sales dipped 0.9% year over year, while its operating income decreased 6.5%, according to its latest earnings report. Recent Placer.ai data also revealed that overall customer visits in its stores dropped by 1.4% year over year.
On an earnings call in August, Kohl’s executives revealed that low- to middle-income customers are making trade-offs in their discretionary spending by increasingly opting for lower-priced brands.
“Our customers remain under financial pressure, and they are becoming increasingly choiceful, actively seeking value in every purchase,” said Kohl’s CEO Michael Bender.
Kohl’s brings Babies”R”Us to more stores
In an effort to win over customers, Kohl’s is expanding its Babies”R”Us partnership, which first launched in March 2024.
The department store chain is adding Babies“R”Us shops to an additional 56 existing stores this month, featuring new brands and products, according to a new press release.
This includes 25 Kohl’s locations in California, 20 in Texas, two in New York, two in Illinois, and one location each in Arizona, Colorado, Idaho, Nebraska, New Jersey, Oregon, and Pennsylvania.
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Kohl’s states in the press release that the new shops will “feature a thoughtful lineup of go-to products from popular brands, including strollers, car seats, feeding supplies, toys, and nursery decor.”
This includes the addition of Hallmark gift sets, Millie Moon diapers, and seasonal books and stroller toys.
The company also said that it is rolling out a Babies“R”Us gifting assortment in all of its stores this fall, with more baby gift options under $25.
The move from Kohl’s comes after CEO Michael Bender said on last month’s earnings call that the company will be building its infant and baby apparel business after seeing “solid” second-quarter sales growth in baby gifts and accessories.
The partnership expansion also takes a page from Target’s playbook. In March, Target launched “Baby Boutiques,” which offer almost 2,000 new baby products, in roughly 200 of its stores.
After the rollout, Target revealed in its latest earnings report that its comparable sales rose 3.8% year over year during the second quarter, citing sustained growth in its baby category.
Kohl’s faces growing competition from off-price retailers
Kohl’s latest move to boost customer demand comes at a time when off-price retailers are gaining popularity.
As consumers look to savings amid economic uncertainty, more are shying away from shopping at department store chains and are instead flocking to Ross Dress for Less, dd’s Discounts, Marshalls, and TJ Maxx.
For instance, a recent Placer.ai report revealed that traditional apparel retailers saw a 3.5% year-over-year decline in customer visits in the second quarter of 2026.
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However, visits to Ross Dress for Less increased 16.4%, and dd’s Discounts spiked by 8.4%, while TJ Maxx and Marshalls saw visits hover around last year’s levels, still outpacing traditional apparel.
“Off-price apparel has spent the past four years gaining traffic share from department stores as shoppers have cut back on discretionary spending and looked for more ways to stretch their dollars,” said Ephraim Fruchter, insights content writer at Placer.ai, in the report.
“In the first half of 2026, that growth became increasingly concentrated at the value end of the segment, with Ross leading the way,” he continued.
Amid this shift in consumer behavior, Neil Saunders, a retail analyst and managing director at GlobalData Retail, said in a Reuters report in August that Kohl’s continues to lose market share across major categories, a trend that is raising concerns.
“The fact that comparable sales remain in decline — the eighteenth consecutive quarter when they have dipped — does not convince us that Kohl’s is a business in full recovery,” said Saunders.
Related: Ross Stores customers will soon feel a notable change in stores