Kohl's (KSS) 23 Aug 232023 Q2 Earnings call transcript

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kohl's Corporation Second Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

Vice conference. Relations Senior may Treasury, begin your President, Rupe, and Investor you Mark

Certain made are statements. such you. and to and statements Thank differ statements subject uncertainties, the financial including are those Kohl's company's results, which projected materially could future actual certain from forward-looking initiatives to forward-looking cause Such on statements. risks this results call, in projected

recent to, to XA supplemented and risks uncertainties most report Such which in incorporated by that Item with described in from Kohl's are are XX-K limited include, Form herein of filings are reference. those not be Kohl's SEC, and time annual on may all the expressly other but as in time

no update Forward-looking obligation statements to Kohl's to date relate them. the initially made, undertakes and

make to found investor in filed Form non-GAAP non-GAAP we during measures. financial addition, website. Relations exhibit of the with be the SEC call, is this an financial our In can as available reference to on measures and company's X-K Investor the filed may presentation Reconciliation

that Please will recorded. be call this note

this of updated. not be replays call will However,

to information. you're no Kohl's a longer no and of update it is this listening possible discussed that current, if So undertakes to obligation is call, the such information replay

With Timm, Officer. CEO; morning Tom and me this our Kingsbury, our are Jill Chief Financial

to now will call over turn Tom. I the

long-term. to the Mark, and over in progress make our continue to pleased Kohl's efforts we business you, Thank significantly that good morning am everyone. report to improve I

strategic persistent just good and pressures customers Our efforts our second on quarter earnings the our with underway. many We in were macroeconomic are of that about expectations. line performance, given our feel our

inventory experience, the our strategies, further value and priorities, we our discipline, continue XXXX, to In with expenses simplifying strategic on sheet. four balance accelerating and strengthening and which enhancing are; customer focus managing

will impact and strategies to some for take time our sales performance. are of realized. the drive our full earnings It'll that efforts confident We be

even with back in is year of and beyond. XXXX show half incremental the more objective to benefit improvement our the in However,

to are for it XXXX, our guidance. As we relates outlook reaffirming our

momentum the sales Restore quarter. flat sales sales of total to We opened to me Sephora comparable strong company greater XXXX. second quarter, nearly we've Net driving down beauty and than total with existing sales the X.X% X%. highlighted turn expectations, year. relative shops last beauty our a in in and Sephora for XXX continues continues major decreased accelerate increase and Let Kohl's opportunity to business, nearly home now in the in to exceed Sephora sales our XX% XX% improvement the which showed long-term outperforming shops comparable and is year-over-year. the Kohl's, were our in growth quarter. opened Sephora XXXX And a shops

able successfully reduced X.X% margin the were XX%, of manage we to line, which an Beyond both top and we and achieve of gross operating than to better plan. expenses were margin inventory

growth want is I'll to our initiatives the building product detail which more and experience priorities, blocks. so in viewing achieving customer how essential and our now turn our priority. I are clear to is on provide Getting and back we mentioned. top four longer the just initiatives on to through our be merchandising goals, stores Enhancing online term I our to overarching

We business. an improve in opportunity core offering to have our the

to will we and years, stores However, in most new impulse, the term the be our coming believe growth. gifting, home contributors decor, longer Sephora, significant

driving we bringing our gains. that while our performance at The customer new existing resonate considerable frequently. also shopping and in are are base, is expectations with share beauty to Sephora continues Kohl's exceeding customers more

gifting fall and such well overall we about are Sol feel and and our the seeing as were assortment good assortments, Rare as in highly our solid Collection, We brands including national successful We expand last Charlotte Janeiro which year. our Sephora Sephora Fenty this growth exclusive as brands, Tilbury. will de further Beauty,

the During These shops. the opening shops. will this and approximately opened rollout we complete are shops, we nearly XX foot Sephora XXXX openings square month XXX of second quarter, our XXX,

XXX of of a these shop We they the exceeding foot in smaller open are earlier year, the five continue remainder drive We square solid format, chain. smaller the expectations. Sephora in to our beauty also sales, opening and shops

and will our XX featured expand be XXX we an XX In the small stores format shops the additional of We the third to to by couple than remainder year-end. Sephora of of years. quarter, us the open more next chain of will in bringing the in end by total, XXXX, the over will

another major business home Building growth opportunity. represents our

offering We pet. historically our larger and Many gifting, has assortments meaningful new in opportunities not presence. these presence fall to a a had Kohl's on in include significant capitalize impulse, begin decor, of and existing with optimize will will holiday. areas set where in These

as relative second strong -- home During encouraging housewares as by as the cookware, existing quarter, as from new our driven by our showed the early improvement such growth This relative was category and reads offering noted. initiatives. well primarily I

holiday products, continue Day, We strong items and will leverage destination, highlight create as and of July. Xth showcasing the sell-throughs Memorial later seasonal supported we we space Day, aisle fall gifting such a Mother's are products. in harvest during Currently, to removals register and to and back-to-school which and backpacks additional Day, this dorm Father's

products items. offering addition, wellness, expand beauty, which in In of impulse include we XXXX, of will and spring our snacks, toys, will other

in décor, to few. with basis, on In across and have glassware, merchandising following chain building inventory across the name botanicals we successful in-store pet, storage, new market test like a last category wall fall. space the lighting partnerships, we home a dedicated vendor areas weekly art, and XX-store forming buy our a enhancing And expanded are to

like dog to cat in space, moving Pet second and by beds, we toys. driven the the apparel dog a include momentum performance expect things offerings pet sales space quarter Our and forward. and maintain strong delivered additional

stores track first quarter to we open We're fall. this opened on open new these growth seven store remaining remain long-term. also relocation. one committed the the to including capitalizing the set In new to in over stores, with on Two of five opportunities XXXX,

assortment Turning have in to polished remain our Two demand, to our reflect footwear highlighted with and our men's, women's, our to customer's response across optimizing customer quarters customers we to apparel our offerings. dressy children's. on recent interests. in casual offerings continue resonate that apparel and We areas which focused and

We both are leaning in women's Lauren key brands into like occasion West, VeraVera through Conrad, Simply dress in expanding these our while areas and in also offerings Nine casual. special Wang,

And results well our expanding like strong seen Little Jumping have on and continue core build children's, we and pants, we shirts amplify forward. continue and men's, and to businesses. to Beans areas suiting, dress moving dress in these in are areas as as Carter's Co, we'll In

an Active also important remains business. piece of our

recent the as success quarter, outdoor as trends soft, were footwear. and also remains in pleased active and on the with trends in building newness. Eddie we well Armour with While Bauer overall working on in In Under apparel, our focused in while in brand Nike the our second are in sales space national partners bring we golf outdoor, to our offering

decor, To significant priority top home term we summarize are growth driving new enhancing stores. gifting, our of focused impulse, the Sephora, longer experience, in and customer on

core also see footwear apparel and to opportunities We our improve several offerings.

which is Now our accelerating and value second discuss priority, let simplifying strategies. our me

customers engagement and showing we to simplify greater believe efforts how the have many conversion. underway to up customer are we as we We drive can

items, began offers brands. is value clarity eliminating continued in And the and in QX, also evolving select in-store we offers our slower our second are merchandise consistent private the only testing targeted which in points efforts a simplified. pricing digital online our promotions selling This more graphics competitive favor greater more events apparel of with we we and continuation our strong message reducing work During price key more of home and pricing more around our general ads. to and and goods basis. on on within in broadcast clearance a clear to quarter, a and regular marketing make our We're is

While are we response encouraged remains a early, seeing it customers. we very from are with

items on it planning business the opportunity value scale to are This XXXX. positively. for results, and we now are compelling a performing in key based thoughtfully initial is our over long-term Our

Lastly, which Cash, strong industry-leading has card. credit to more as we even leverage Kohl's to Kohl's our value Kohl's will our Rewards, label and foundation, a customers. program to loyalty deliver private a loyalty includes mechanism continue our

credit Building One we with co-brand to launched quarter. second on a Capital card the select this, customers in

existing to co-brand small meaningfully in only have of this benefit and it credit will a and come number XXXX. in new a we to customers offer card results, the contribute and expect to as to we year's the While greater more XXXX grow years

priority, and managing now is discipline. will with which to transition our expenses I third inventory

to evolved down percent. buy, goal mid compared agile inventory During quarter, last as We in XX% with greater allowed the operated demand the open planning we second environment to to reduced of us second digits quarter. the single inventory stay year, which exceeding our by

more we're maintaining in we As customer's improving buy from minimize to inventory trends implement becoming and stock selling demand, operating risk, responsive distribution chase flow to floor. our processes, with in additional centers planning levels to the open basics, better and to new and core allocation the

Looking with good about to our the manage current discipline. our ability fall season, we inventory feel continue inventory to to levels and

of Kohl's Turning managing discipline. a expenses. history costs has to with

stores our ratio to include the are of to a We to operations e-commerce of lowering across improve our more level centers. in A to productivity capitalize examples continuing efficiently drive and of such proactively embedding as goal fulfillment couple more higher opportunities efficiency spend of in our flow kiosks in technology marketing on automation to areas company. all self-checkout our X% our newer goods into

And lastly, our fourth balance priority our sheet. strengthening is

to level. returning a sheet in remains its of X.X focus a our Our managing leverage times historical with objective balance to strength long-term

and During to of our solid a by revolver at the a allowed Jill dividend, yield overall continues reduce the price. which the flow, will priorities, returning current ours. cash discuss remains borrowings to second capital generated commitment our us to capital $XXX healthy share we which allocation million including quarter, represent shareholders

I'm am closing, that underway I earnings. is confident success. work with long-term for pleased have Kohl's second we the quarter positioning In our

take and growth operating beginning is of and with initiatives organization discipline many strong Our driving just are our efficiency, to shape.

recent relates more to good are our trends, our and by items. our a sales back-to-school August driven to fall As off to start, date it seasonal

visit want associates our the work adaptability a see improved chance to and I hard especially store get good for and thank you'll to hope all us our position entire work future to I stores performance. their to the team for underway. Kohl's

over Jill our outlook. and I'll second the quarter to call to discuss XXXX results now turn

and Thanks joining. everyone you thank Tom for

and I year review today's results quarter details will our fiscal our For on call, guidance. second provide XXXX

As we delivered priorities in strategic additional made our and our expectations. line earnings Tom progress against shared, with

X.X% in QX, in driven and year pressure to our both remained primarily declined the year-to-date. home to showing last last versus down in strong at Store sales sales sales QX are improvement versus sales down quarter QX. in sales pre-pandemic XX%, with most X.X% are by penetrated so results. growth and XX% Turning second were the up flat to Sephora Net Digital year levels.

and We customers to expected elimination only seeing were of shift back simplify towards strategies. our stores sales by promotions value impacted the are as work we online as

outperform quarter. perspective, brands private in brands a From national the product

Our Hager, top Nike, Bauer. performing national Eddie brands Armour, and Hurley, Izod, included Under

our jewelry. and year, private Lauren Kohl's. partially beauty Jumping displaced Apartment Sephora category was Beans. last Accessories increase sales The performing to up sales Conrad LC was While by in in top offset brands performing were X, driven by best XX% our

Nike increased by part quarter, Footwear relates noted, declined to with category. which Armour categories. as the our in revenue, reads in also encouraging previously early second showed strongest in QX. Other other credit in business, an showed in driven categories, primarily Under improvement new QX in versus trend the it our from trend trend of growth As X% our some home the and is sales improvement improvement

expense related the P&L. offset last cost gross gross by a lower of Moving cost shipping. XX% year. freight last year, by XX points basis and digital was QX partially higher Year-to-date, of down margin driven margin decline was inflation to to XX%, product flat shrink, and

distribution expenses billion. X.X% by store higher offset have costs. increased to Sephora by was expenses Year-to-date, openings, $X.X compared expenses X.X% SG&A increase and year. was investments. wage pressure, last The and to This SG&A marketing store driven lower to experience primarily due decreased partially

$XXX million depreciation million, Year-to-date, earnings interest borrowings. $X.XX. the to million share was primarily revolver Net to was net increased million was technology reduced increased $XX than capital of million was expense million last decreased $XX and share Interest year $XXX Depreciation year, million income lower $X.XX. Year-to-date, $XX than due per million. of to income $XX $XX spend. was $XX Year-to-date, $XXX last as diluted higher last per expense due to expense for to diluted year earnings expense $XX million. compared quarter and million, was

Turning equivalents. to was the single year, last of at ended quarter $XXX balance to cash down XX% our decline. exceeding sheet commitment million and cash Inventory cash quarter the compared end with of mid flow. We digits a and

feel how quarter good entering fall Tom we positioned manage we season. As about the we how shared, the inventory are in and

was Operating cash $XXX $XXX cash million. in free the was million flow second flow quarter, and

We generation of $XXX remainder source Capital for continue the in to cash to QX. flow expect during million. a drive expenditures year, quarter inventory which of be the cash strong and were positive will QX the

are We approximately $XXX of for XXXX. in capital million still to $XXX million planning expenditures

that let Now reduced times. It's we allocation In term on priorities. our longer our our borrowings balance our to second manage is our me important top our at by update capital leverage continue this as million. in XXXX. X.X $XXX sheet target revolver quarter, of a business an goal capital and remains provide planned, Strengthening of the priorities it and rebuild position one cash structure to we

ahead, Looking to seasonal the in continue capital revolver build to working receipts. holiday we'll utilize for QX related

However, out of be December XXXX. bonds plan to by in $XXX of we retiring of inclusive continue year-end, million of to revolver the

it prioritize current to the our continue As capital our healthy shareholders. shareholders, represent for we'll which yields returning to relates dividend,

second to During per $XX quarter, $X.XX we dividends paid in million or the share shareholders.

addition, payable cash XXth. per quarterly to Xth, disclosed of on share a dividend Board September $X.XX In the on as shareholders previously declared August

Now for XXXX. me on let details our outlook provide

with we against our As we you've heard today, the are priorities. progress are making pleased

and to line good August to are with start. quarter on expectations, as a second sales off financial Based earnings reaffirming Our year full were we our are indicated, guidance. date this, Tom in our

be worth For the diluted the and growth. per point currently to one non-recurring includes sales X% full $X.XX any approximately decrease excluding to X% of net we charges. $X.XX, year, of range XXXX, approximately is percentage to margin the earnings X% Operating week, versus expect and share to which XXrd to in be

we quarter. Lastly, I want thinking are the of couple highlight about to a third about items how

We continue range. gross XX.X% to a in to expect margin XX% our full year

QX, For XX%. we approximately it expect be will

with year SG&A also unchanged full slight Our deleverage expense is outlook expected.

are X% store openings. by year, we driven planning compared Sephora related investments shop QX, and For small to SG&A approximately to additional XX increase as last expense

this I happy time. Tom take are With and that, at to your questions

[Operator Instructions]

your from question comes line from Guggenheim And Securities. first Drbul Bob the of

Your line open. is

morning. Hi. Good

Good morning.

A couple questions.

you that that into the learnings, talk about little making, you're Tom for First, taking it a you, progress quarters around see just when it. bit of now can you're of in you're few think more you the a the you the sort opportunity where that terms business and

give just And launch us and think relationship, rate, doing you the Jill, of of the the debt, terms that credit question, second new I year. bad program some insight in can you're delinquency this the on the the

Thanks. now, of into half we and in look thinking how the Just should sort you trends as be credit the right about back year. of

good. we the a stores overall. decrease pricing pretty stores in So, came strategy somewhat self-inflicted really we Most more about omni, business, positive was doing to that Bob, to the the because different of business. work reduced we have lot general strategies really wasn't we online have and digital, feel here. at been talk public We When look good strategy, a offerings. obviously, only just with of just have been this pricing we've about two simplified trend what's at We, from represents look of the that what's our moving more having -- to amount going on that going the on

comp things XXXX, stores Sephora one more it's good, XXXX pretty as we're consumer incredibly of we've a in in and a to XX% in -- has August business learned bringing have the It's from business the But diverse as younger August in -- remarkable. by -- well. well. the So encouraged the been

it'll it's So stores. been -- driver over the years but be next right really moving in And along. a and all we're couple

those real-time. We're we feel to even and that's get secure pay the goods really we've really to into home comes long impulse product to the category. is in to been It's in product as as going we the more better in moving marketplace business run decor holiday. going the on, in good. more bringing categories. home with company dividends closer working And And more that get The in

good. very that's So

thing the obviously new road stores. is the And we're to down other that at going look

the have the year, expanding lot at is We looking we're we stuff well. maybe company, that be not we'll just We that forward this but it's the feel whole product into working but a -- that just about. work underway. underpenetrated we're But going with and see effort, good really coming still

continue think feel can a can that progress we we good I in so, continue Sephora if make be pretty if we to And business, to in the position. grow -- we'll home,

And of we component core credit very credit, have equation of obviously period and stable portfolio a a credit. our Bob, has in in long value time, our of terms a over been

We sales. have other I is was -- out revenue a continue to a good that for the what We said year. be still with would line it partnership to What going in credit. looked with proxy with expect We to saw of Cap the we you One. say as is,

did as did a And We normalization payment payment see of more expected. levels XXXX actually rates levels. still our we drop above of then losses. credit are see we Those

think, year less what and the But anticipate we bank people have take losses increase cash to we obviously early So their we've in worsen fact as low that spoke really over was environment did a as did to -- last those credit the macroeconomic actions year. did I to to anticipated account.

at our we to take risk, and offer continue So risk cells worked did back partner, those of not some looked the as we that. with to

approached we as this. think I very proactive So we're

coming performing down, with to up, continue we to with portfolio anticipated So feel losses payment that it's and sales. really it say just but we really go as expect would good rates as, I expected, and we in as with it is

In a card. maybe label a we're want to credit be vehicle terms who of co-brand, private able new customers excited offer to didn't to

So And this hitting for as they're Sephora PLCC card. us equation necessarily that really not to that customers are driving. more into to affords we're customer to value a on card, we really the open we that to but younger, say, them credit opportunity diverse, think spread could bring that a

from we customers and expanding So to based brought card. of co-brand credit just those XXXX but watch about then migration migrated be that XXX,XXX before that in out we've the over we'll of learn card them out, our And we'll on in kind and extend that that results.

you. Thank

next your the Chen line Oliver from from And question of comes TD Cowen.

line Your is open.

Hi, Tom Jill. and

As as the look are major some what of ahead, for will online and of as be terms the we catalysts think well Also, flow, we resumption plans would What about inventory of the there? comparisons we your just path highlights holiday easier. the get should as there? for business, love growth a in planning ahead

and would seen thoughts stores may you've your And your move. Thank love forecast volatility traffic traffic, for a lot you. finally, assumes and traffic how the on transactions, if of and what on in

because removed have have we're statement. making catalyst moving some some big major we really to well. again the register for strong some In this the really season. good a that gifting feel the very going gift of a making gifting to the well. by of and do store, statement, year I We're a that maximizing gifting But by front, business. as the going last we did be and year it square base doing it holiday Well, for did We front is product to holiday extra the footage

progress that growth year. XXXX, it goes, anticipate as we back Digital -- all online far had. we we to anniversary we this And only as obviously, digital we then see these promotions in once as through improving

Mother's on talked really year a registers. got It's we're are in the of actually having July. home of gifting. excited of And where store's positive through Xth presence a of we we Day, And really Day, stronger at that. QX. as our of about speak. then perspective, It's had great the of stores obviously happening performance flat increased that a lot efforts presence rid We sell-throughs Father's saw least the from the We're Tom in

So excited all the as especially back-to-school important into and we we're period there. move holiday

course, And clearly as us to of continues then, work Sephora for XXX open doors. we another

in and more XX going in August have We small XX October. doors

some from to haven't and So store's us a time. business excited think I well to being you see that we're an do heard continue which outperformance, perspective, from in

to And digital. reiterate just on

of out promotions that we're the It's an weighted impact there. think performances out categories. is similar I seeing just having

right thing And so know get through that, to to we but do. we the have it's really

have specific counter just As reiterate, Tom experience, omnichannel that. was to want to to said, offers having so online we an

we is why to the from thing in back XXXX. long-term growth this believe do is a think we So perspective, we'll right get which to

and are the up get to strategies you're Sephora? that on with younger love take pickup tremendous Okay. related the Sephora. around thoughts the and growth What women's merchandising Great. and rebalancing and on to follow brands women's apparel, it would And about Tom, there a leading that sustainable seeing from clothing younger and strategy at synergize the brands customer? the to your get the what growth will

haven't prints, opportunities far any of now going looking As color the would the brands and we have a some business real And we made we have, in. offering. been Nick chief much go, think more to is change offering. have Sephora we pretty more we've I can in brands we for of currently compliment every bring merchant. We've looking there lot brands to at -- New the there can that We this. assortments. out been going But can yet. the decisions as But Jones, with York other week Sephora get the different things been the

business. women's to mentioned. just for opportunity have that don't really change are as an we mean, we could at the But this. be the us as radically looking mix that We well feel to vendor I young capture you

add our over can we're that things going portfolio. -- to plenty there's that to brand then And So we're work we time. current in with looking brands for of other

of for really the with gifting. well. our We line the customer think think decor expansion could that's I good very is home that as Sephora customer that thing in and be other

Best regards. you. Thank

line comes question from Mark from Altschwager And next Baird. your the of

Your line is open.

few Tom, for allows consumer ago? Thanks the a for views any backdrop obviously versus question. to on your of morning. a outcomes. dynamic and range months the reiterating environment's change Good guide, the guide taking the You're the macro pretty

curious just if can additional So any you there. share thoughts

gross didn't noticed the as bit you a clearance impacting a margin shift little That I call margin, And out factor this gross surprising. quarter. Jill, then was

guess I have would color Just any well. you as you. there helpful be Thank

pricing Well, continues customer be fourth I through value less going doing environment well. think as third that the mentioned critical as we're it's for the work challenging continue to spend. for as obviously, already to possible, -- much our and just value I why started volume on we're we're the value at customer's goods money value We've making but prepared that But and sure in to much items, really as floor that really more macro competitive that delivering high the deliver bringing remarks. value to we them. That's key as reason -- we selling a on have we has and We've quarter just because it'll can focused hard in deliver have. -- brought as to the

margin, the of anticipated. actually And mark gross I then clearance think take in that did we terms we all

ones, we top impact that. ones the able promotions. our see is, the that talked helped I a us we think One as about lot line. out to to the didn't were a that couple take were that stackable of The have really we set things ones

was of benefit bigger to less offset think promotions, from able were XX%. I helped inventory the we clearance. as And the down our So factor is some that us

very the we into So as the we of look the inventory, back content feel as half the of positioned the at move we and well year. currency

up around were clean instilled to discipline that and us really And took really in to. lot agility we're the we able anticipated management, both inventory benefited management, than merchant and in of chase continue think hold And we the quicker is I the what organization why to And to that the to than which into a our we benefit expect the QX. anticipated. expecting receipt needed rest disciplines just us year, of has Tom we and QX. so But efforts to margin we QX more grow the

That's date read good color. follow then just as a X% start, that ahead to to should And we the down off quick of helpful rate? up, August QX a tracking comp

had the pleased. talked we're and used Obviously, QX word we in say look at we slightly would below. you May if quarters, I the

see and July were have that. in we with You And would obviously we better can that the start June feel I than say good August.

trending would yeah, we're above So I that. say definitely

Great. Thanks again.

Your the from line Matthew Morgan. JP Boss from next question comes of

Your open. is line

Thanks. Great.

you're versus putting see you maybe place? return do with reach that opportunity optimal the progress these line how see given differently, maybe you initiatives inventory as said the Tom, timeline category top that So to you've to consider micro and opportunities made macro assortment? sheet, in the all XXXX from to of to balance growth best the or about in think Or you here just an

been on that is about potentially would that fact the a get overall. -- And our the I categories could it to home capture categories, But that these of it'd think in just was in be capitalize we've objective back us I've touched in some the penetration, XXXX positive. one if that And us terms That's fruit can really the before. have lot we we really us obviously of should those the low opportunities, a hanging and just on growth quicker. business about we we But things in move the harder. really decor, get help right business every that there. will it all for to If categories lot there's it in. we're just help pet, position makes gifting, exciting it impulse, underdeveloped which there's can talking thing really future. help Again, forward

for And then maybe Jill. a follow Great. up

longer term? points year the to here ceiling differently, XXXX. basis first target XXXX a the to think I structurally levels? of XX% above I gross with best XX% to margin, about XXX how think maybe is more gross from margin So asked to than guess there half Or we gross think if relative margin

range. a be right think within comfortable out. impulse driver. Sephora in think as can see now XX% XX% moving We benefits assortment well assortment Obviously, where feel and I we and is definitely very depending decor to working home we margin on Obviously, just perspective. from an gross

digital business, definitely continue then We've out. we there's getting shipping but mixed tailwinds come component see it cost well softened, as to So can digital of some to that as grow if been a the growth. has you'll as

that's that feel So able deliver where we And top plan we these range. was in the of we're get the long-term most outlined That we're getting from that line I that opportunities comfortable, bringing to great that XX%. that then think to is operating some to the in that within really has really I we and margin the think growing. space to white feel still XX% value also our used new customer Tom Kohl's outlined,

our small focus. think I with margin operating a from big So of line amount model works really the top growth. long-term That's a

we I feel this great with that we're think the year. margin putting out

of great growth. of a great there small off top disciplines SG&A Our and will just -- amount gain line are leverage

So long-term really the perspective. focus, that's a from I think,

Best luck. of Great.

you. Thank

line from your next Telsey And Telsey Dana Group. question of the comes from

Your line open. is

everyone. Good Hi. morning,

morning. Good

out -- to -- hi -- stores has there, you there with making in are is about it as what and about seeing happening what's investments think shrink your you are -- you As shrink? you what deter think

thinking you. new store and thinking size, you about about potential about stores. in you then mentioned new What how it's in that whether opportunity lastly, are opening that Tom, a home stores, And or location, you a the on do you closing and impact with you category How branded opportunity. talked about and label And the private versus Thank margins? see that program?

problem. I on retail Okay. quarters, definitely we last we've Dana, -- shrink think, in I'll margins. called mean, has it's weighed out a definitely the And something two industry that with is start I shrink. our in

We different continue second headwind we've to efforts associates customers. it our but in expect remain measures. to and a of to taken the have in a lot we of put our really place the safety But half, prioritize

going to testers We are cabling within product to fixtures. just We're beauty.

We room. have the fitting attendance in more

customers. be and of prioritizing think it's so safety to doing have it's see in everything more I just the I -- planned associates have our shrink, store, problem in we for really think until But it's of up -- front We and legislatively, we but expectations. really a step bigger presence mitigate we're until the we've can a our put going something retail so to

stores. feet. of we're done the seed looking we thing cost of probably be the going effectively do going at at it. And stores But The thoughtfully going with We're at lot biggest going analysis the the the stores. we're And square some in it additional open looking know -- XX,XXX looking a of just to we'll a we're and we're in add about We'll but it very smaller It's we're stores. can we terms and lot being have should But open we're additional but still how talk really is now. where mostly really store behind more. we will that stores, of begun size analysis is the square obviously can the share we're adding expand. points do how to stores. I'll very, And earnings one Again, calls looking to XX,XXX developing feet. we at forward. we're We're of later analysis.

as to do doing and already we're we've the label. little far that. I think fact more in -- already the product and there's a product Maybe in of private buying As in brands in because that the we into real-time. the going And bit brands chase market opportunities both home goes, and want

margin I as could business. it higher margin be far is As goes, think decor home

it's go more in think to of positive real-time. to lot to happen to it react after able But going the I a that, gross is be business So want in this again, a the we because chase we overall. be -- margin could

you. Thank

next of question Blake comes your Anderson Jefferies. from line from And

line Your open. is

Wanted morning. on Hi. in Good dig Sephora. to a bit

you. a new similar You up had they Thank then lastly, And to trajectory? in greater an any impressive talk terms are transactions result out the in And on Can or about driving stores, beauty you stronger? were to still comp for that XX%? versus that newer than the customers performing categories What's there. call acceleration of basket? the

I for great obviously, been a think, performance has So Sephora us.

see customers back replenishment. it it's their in to we're fact repeatedly continue getting the terms just and to now those We of accelerate think I come that

in an to see that. we So continue acceleration

assortment we newer say I performing as stores. on I are think actually open better. We're stores the would smarter these

to we had we customer stores So Sephora maybe when their what wanted, opened what our opened our learned relative with. first XXX,

forward to opening. we're smarter on those getting able how of we're replenishment, actually being So now bringing on we're be smarter even with we're how and really But in then getting replenishing. better terms

existing and we how the the great are with think are performing. stores new I feel So opening stores

accelerate on see can continue they to that. you So

continue We They're customers bring new do more they're in. diverse. younger, to

think through cross them talked opportunity So we terms to that's big of shop a about I store. in the that getting

I of impulse, us, were quick add space we the basket. indicated decor, white that a the into lot it's gifting a think areas and for home particularly

of have So presence store of terms that can as we new our stronger in take extra store, of that in, in those advantage able steps to we're that. and a coming

but de brands, we Collection, Janeiro a well Sephora as price which which it, is were opening price really about selling then Top point. is the Sol talked point, an high as Charlotte Tilbury,

shop that the So all across we're customer of seeing areas.

I'd which then about, men. talk have well. well don't brands, talk, incredibly for seeing a see and And remiss not Sephora something as in you men's performing be Jack is there Clinique we're we store Black to

continue we to just I So think learn.

bring to new loyalty convert program and them just customers an we shop. getting to those continue customers our and to have We opportunity into in

We are our more existing seeing customer. often shop times those than customer two

that call. build as this to Tom have we indicated has on throughout build that So to opportunity really going assortment an the we're

up where exciting Yeah. five well. about format pretty is the it very store, we And think brought we five set the in other and they've done I that's which -- thing smaller

the in gives confidence we have of it us that our Sephora all can stores. So

in could much quarterly remind I year Jill, helpful. stores? you new And of us for That's the Sephora quarters out to SG&A. expense impact each trying how super this the figure the is was to just

Yeah.

think are that to that in up opening full-size October. opening from huge shops have year, QX stores XX thing of wasn't QX, small we are the there is so were XX increase really amount numbers and increase last in be in shops that August going the biggest against perspective. a I -- numbers The QX

QX investments. up mainly I would say those be step in will So the just

to putting about expense We're has XXX related which it in in QX, stores. our also self-checkout in

build which then on We than that we the continue think, reduction. as throughout more benefited QX pressure, inventory which I a we to seen in the well. you've see had And wage year, is expected with

to benefit less move down XX%. SG&A said because store So that we to we going mid less units. costs obviously logistics being payroll single had and We inventory so work the were those our digit range, in had

you the the in be to would in I year, tell digit that still single inventory rest of that planning mid we're managing range.

ourselves In we're protecting holiday. fact, in to want sure we make

the mid chase say So going given little we're I better a single maybe that. than and that to seeing. we're bit would appropriately Obviously, react digits, demand

of Thank the second with half. you. luck Best

you. Thank

Your next Haskett. from question comes Gordon from Grom line of Chuck

open. Your line is

Can Thanks. other you're in cross evolved? And you talk parts store. how of morning. about shop into guess, couple Good past success having to the that's years guys getting those over Sephora shoppers of the I the

Sure.

are to store. of think customers I I we our the around around XX% shopping XX%-ish talked think about

we continue that's that So opportunity. to see an

mentioned, it's basket. opening around big point. in going in Those to It's are pieces. impulse, I that the these you're home much adds to is see it's white decor, gifting. space home like think, décor, I better price easy going the Particularly be to a opportunity

for And into be them so it's going to put the basket. to easier

woman talking there and have really women's spent we're And think shop pad. getting we then terms brands I working I fashion, some we to know think, opportunities the bigger about through of that in opportunity is time that. and Tom into And the the some has

So rate, getting into XX% as and think outlined to and I think white moving can do that across that we've that great opportunities well direction XX% shop women's given pad. we right her the in shop that that more we're with we cross but we the space feel to as

Okay. And to just stable? has or evolved that Has think to that way XX% years. of and past about continued is over there way couple been improve like the XX% to any how has been it it

they pretty been in as think -- coming because they're that are basket. stores, don't maybe for some to been a range the customers much since age get the pretty In stable the see of would stores. in what trip, new I'd I just the say we've for I the it's has totality, a range in opened more stable stores, we that in newer but has overall, say to more excited But replenishment a stores. bring maybe up customer. so mature Kohl's that more in

some this gain excitement introduce we'll newness, we I think hopefully that back. of when

Is as cadence hands just you the way on there Great. more our Jill, Okay. pretty XQ hold year both And one on well cycle the of basis little another as is the you and in multi-year but similar, for the comp half of phasing credit the a a one line? it's The back and on last comp year. any bit the choppy. on year XQ, then can a

So if be you would helpful. can maybe help that us on

Yeah.

XXrd I week in the -- you QX. obviously because talk not get XXrd week think benefit overall the about let's

Chuck, I at because for you stack look two-year the I think it a you stacks. -- know did you if I like on how much

XXrd pretty X see outlining is what the going stack a I to really consistent two-year we're week. think you're

a that on. stack it, went QX, two-year from -- but QX as if quarter see at stack improve saw You the little we we would've did the fallen looked in bit

in say would the in and expect the I better rate stack actually week, two-year X if was and So you. the be than I'd XXrd helps QX to that around QX level exit QX that

It does. it. Jill. Appreciate Great. Thanks

of Yep, course.

the today And your question for from Citi. last Lejuez comes Paul of from line

Your open. is line

Tracy It's Thanks. Paul. in had for I two filling questions.

in second half. The quarter you're looked traffic was first your what and is AUR for AUR the expecting second the what wondering in I and like

in what locations stores XXXX. And then I could comp wondering us overall were you and was opened that XXXX in Sephora the Thanks. tell had if

the tell would I has a been components Yeah. some for AUR time. for Tracy, you, driver us

you is a ticket, of of growth think Armour lot would driving seeing our which function about. and then which and Obviously, brands Hilfiger, our bringing AUR I Nike top up. of the that on Tommy Under But the businesses Eddie expect, AUR has Bauer. do going We're well. you a that's of that Sephora talked effect We've seen think be higher in. a we've to really we're

would last we're on that say I four would that pretty and we're say to that think that's And these years some consistent more comping focused five value. ticket. of our been over but AUR up. be drives expect And or So to continuing seen increase moving I introductions moderately that consume, all to we've going now obviously probably more I the brand

So in little which label, focusing a really a really important and focusing key on items, customer price value we think and this our door our private could about we most talked the competitive in environment. best, uncertain macroeconomic the those to bit out driving strained be

would So look we and say to I see. that's really continue where

you just up XX% a terms in And It's driving It's feel good. Sephora, as definitely benefit. think imagine. can we I of

season on the our it box, is stores flat in stores, one we're very the more which the on quarter. very, were up much obviously We're pleased Our so productivity outta driving with.

you. Thank

Thanks.

today. Thank everyone listening to the call on you

concludes today's call. your for conference This participation. you Thank

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