Kohl's (KSS) 23 Aug 232024 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. [Operator Instructions] Mark Rupe, Senior Vice President, Investor Relations and Treasury, you may begin your conference.

Thank you. this initiatives, projected are on the results made future company's forward-looking statements call, financial including and Certain statements. from results Such risks statements differ actual and certain in materially to uncertainties, which forward-looking are could cause subject statements. those projected to such Kohl's and on are not with uncertainties from as be Form are XX-K those limited most Kohl's time but of XA which herein incorporated all in SEC, supplemented filings Item and the in in include, Kohl's to recent risks to, that expressly Such described annual other reference. time report may are by

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

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

will However, this be replays call of not updated.

listening you're of morning CEO; is is over that and to replay if Tom to this Timm, such our Jill Tom. So Financial Chief are now our will turn it information. With Kohl's the discussed Kingsbury, longer current, update me the no no and this possible Officer. I to obligation information call, undertakes a call

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

our experience, the further strategies, our and value with are managing and Our underway. In the balance strategic priorities, feel macroeconomic and customers XXXX, persistent we continue line many simplifying focus and our to second which accelerate good our about discipline, strategic our are: expenses just earnings quarter sheet. pressures were inventory enhancing performance, efforts given in of our with strengthening We on four expectations. customer that on

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

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

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

nearly the me total the XX% year. decreased sales X.X% XXXX. Let in than quarter, in We the our exceed to increase flat down XXX Net Sephora turn and continues shops of to company opened outperforming growth X%, quarter. a comparable sales shops XX% nearly Sephora at were store and our second with Kohl's sales continues and and beauty XXXX total last the Sephora now sales driving Sephora expectations, momentum beauty to year-over-year. with existing sales in accelerate in shops opened greater comparable to

opportunity In highlighted as Kohl's, our major, long-term the Home relative which we've improvement strong for a in business, showed quarter.

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

back turn four product Enhancing is Getting now to our essential on our online longer-term growth provide customer which initiatives the and to and experience stores detail through I'll our top mentioned. achieving just overarching and in our to initiatives priorities, merchandising I is goals. more priority. our

clear be to blocks. on want we are I So viewing the building how

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

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

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

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

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

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

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

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

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

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

across storage following the across test to like our XX-store the and space last forming other few. enhancing impulse have will snacks merchandising we in and our successful in a In on include lighting, offering of [ decor, a and areas fall. with vendor name basis botanicals, addition, building glassware, wall products which spring And a home to expand beauty, market items. In we we are inventory new wellness, art, ] chain weekly dedicated buzz partnerships, Pet, in-store will toys, category XXXX, expanded of

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

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

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

children's, We are suitings, areas Wang, dress occasion both offerings areas have through women's brands we dress and Lauren key Vera Simply special leaning & casual. our Vera of Nine Co. as forward. In expanding to West as businesses. Active Little we'll pants, our into we are remains and continue in and areas shirts results dress in Beans like continue also moving business. these build Jumping and expanding an in in well on piece Conrad, while our amplify men's, Carter's strong seen to like important also and these And core

Nike significant in decor experience, Under home trends footwear. impulse, outdoor on in the space newness. in while on are our we to of we were our national bring brand stores. quarter, recent Eddie growth new with the building Armour our overall active priority sales summarize, and While soft, Bauer outdoor the In pleased golf the on apparel, are second in partners focused To customer as and driving well and we longer-term as focused remains in Sephora, trends enhancing success top in also offering gifting, in working our with

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

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

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

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

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

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

will to our a the we quarter. value even industry-leading our Kohl's Kohl's select leverage card customers. Rewards to label credit on One co-brand to continue program we Lastly, second loyalty a in launched loyalty more this, to deliver as foundation, private with and strong credit mechanism Kohl's has a Cash, customers card. Building Capital our includes which

to a which and meaningfully new While priority, to we is grow this number co-brand card years existing and XXXX. I of to benefit offer will as inventory in to only have a we now XXXX expenses expect discipline. results, credit will it third year's our come transition customers more managing to in with the and the contribute and greater small

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

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

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

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

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

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

which borrowings the to work I the returning earnings. dividend, cash confident we capital a current to am healthy million. shareholders flow, overall the our quarter, share that During represent allowed a have price. In with including is closing, $XXX will the at continues of discuss Jill second our allocation priorities, reduce generated to Kohl's revolver by ours. I us positioning pleased which we capital commitment success. remains And underway second solid long-term our yield for quarter am

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

August underway. I work relates As improved the our our will I now the to more driven items. us associates to hope start, seasonal Kohl's stores work get performance. future our team position and our by want outlook. to discuss to quarter see for the thank fall to our date for I you'll our chance trends, it to to visit are especially Jill store off entire adaptability second good over to sales recent to turn and results hard good back-to-school XXXX their and call all a and a

Thanks, Tom, you, for and thank joining. everyone,

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

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

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

are up pre-pandemic So versus both levels.

the sales stores, by were private are national simplify we of We our product quarter. impacted the online-only elimination strategies. From as perspective, promotions a shift customers and value brands expected seeing outperformed brands to in as towards work back

IZOD, national Haggar, Armour, included Under and top-performing brands Hurley Bauer. Our Eddie Nike,

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

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

million last gross last decreased last of year, and technology strength, year. digital-related partially SG&A and and year, cost expenses X.X% higher million. capital QX was last was year was compared year. billion. decline a due expense due XX%, P&L. expense driven basis earnings increased XX distribution experience The freight to higher gross expenses product as than was million depreciation marketing to million, decreased $XXX lower increased expense $X.XX. due lower net primarily wage compared SG&A $XX Moving million to XX%, income $XXX have X.X% costs. Year-to-date, $XXX last spend. pressure to shipping. $XX offset per Year-to-date, Sephora year, increase expenses by margin of reduced borrowings. of to $XX per store to was partially Depreciation and increased $XX million and lower $X.X earnings expense million and $XX by the openings, of was interest to higher to to investments. quarter points driven primarily was Year-to-date, flat offset Interest income by store This was last cost than revolver for Year-to-date million. million inflation share $X.XX. down by was margin Year-to-date, Net million, was share $XX $XX the diluted diluted to expense

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

shared, Tom quarter, inventory feel flow million As second cash we was the was positioned free entering Operating and manage and how flow we in the season. $XXX million. $XXX good how fall cash about the are quarter in we

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

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

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

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

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

prioritize As shareholders, which to our yield current capital to it to relates returning continue our will shareholders. dividend, a healthy we for represents

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

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

Now details our let for outlook me XXXX. provide on

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

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

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

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

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

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

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

planning XX are to to small to by at Tom time. questions driven Sephora and are as additional take and year, last openings. With store-related SG&A we I compared expense that, X% investments your For happy QX, shop increase approximately this

[Operator from first Instructions] line Bob the your Guggenheim comes of Drbul And Securities. from question

couple of A questions.

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

of sort now as the And credit this and us and of to I relationship, half bad question, think in about look trends back insight of delinquency the just rate, we new Jill, the can the second give some in of launch the be year, the terms right you the how debt, should that you the doing credit thinking program year? just you're on

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

encouraged incredibly one by Sephora we're business good. business So the -- August August the been But the things we've as learned, well. has of

comp XX% more decor as moving in goods over stores years, home feel the And really the be run even pay of driver, better that, The in well. 'XX, we're to time. in product is marketplace a all really more secure it right those in in comes categories. we've couple next will company in the remarkable. And in on We're that's with been and category. long home the as into But in going 'XX, we We bringing have working younger, to in and consumer dividends more business a moving impulse get it's it's the real more to going pretty get it's diverse the product a as holiday. we along. And closer to good, been really bringing It's in stores.

road other going So that good. to look down new thing very And is stores. the the that's we're obviously, at

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

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

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

What payment of would levels. And proxy with a One. with did payment still to a say expected. sales. above normalization we of a did credit we for credit. partnership as We continue year. Cap is look more the in see -- we are drop is expect be We I Those said with going We actually have see line good was XXXX to We then it as what to losses. rates that out the you other our revenue saw of levels still

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

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

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

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

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

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

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

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

assumes we comparisons and as as we look get holiday think what the Tom and And And catalysts have in path finally, ahead, the of your how for should major plans would would about well growth transactions. in a resumption business, we forecast be lot What on as for and move? for Also, of traffic as the love love that just highlights and the what inventory easier. may your of traffic planning you are traffic, stores some terms the Jill, there? online will of your on there? thoughts seen ahead volatility

the some Digital, And of and do these a through the I big for all in well. business. as year gifting it We as moving for feel year last We're catalyst back by strong holiday good did in have the store, statement, -- well. we of product footage square this the to be anticipate as growth making then to making we this because really in once really again improving far it statement we 'XX, did the Well, the holiday the front some doing gift online-only going have gifting we some a as extra front. We a we're very major that see is gifting removed that goes, to going maximizing by progress season. year. obviously, digital promotions registered that anniversary base had. But to we it we

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

another we for then, doors. of open into we're move all-important back-to-school as So there. And excited and course, XXX period us Sephora to holiday we clearly, especially as work the continues

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

we're heard continue perspective, that a having to similar haven't digital, So an of outweighted I you the out some which seeing see to in us and think there. just that impact categories. It's is time. And outperformance, promotions I business store being well reiterate think performances just do to from from on an we're excited

to know have omnichannel the Tom thing so really as that. get to we want But have we do, through it's we an And to said, experience. just right reiterate, to

that. specific offers was having to online counter So

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

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

As mentioned. some the lot looking the far We as have, with assortments. at more brands go, can we've Sephora New business a week that York to prints, And to the complement Sephora Merchant offering. offering. other now, that but for mix been this. the more an going we change yet, currently brands at we We've any that, decisions us get of -- could Chief for don't the is Jones, We and have pretty and young you out the looking every we opportunity be change real really business. are women's there think I've different capture Nick as feel been have can haven't the much been can vendor would going things in well color opportunities we made bring But brands the And we just to we of there radically looking in. this. But we to as

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

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

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

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

any then, little additional surprising. shift And margin. was gross noticed So factor just call this margin That you can Jill, there? gross clearance bit the a quarter. out curious didn't I a if share you thoughts as impacting

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

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

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

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

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

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

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

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

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

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

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

next line the JPMorgan. from of from Matthew Boss Your comes question

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

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

for then maybe And follow-up Jill. a Great.

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

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

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

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

think operating top a growth. margin of a amount long-term model I our with So works line from small

really that's the big So focus.

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

gain disciplines of small great amount top are line of leverage and there, a growth. SG&A just off we'll Our

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

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

about about As then deter new making -- is seeing And in what's you shrink investments new And about think what What you shrink? you are -- what the your stores? home And branded you in thinking stores, potential the to that and how whether mentioned out there, thinking about stores. it's are happening see with store Tom, opportunity are with program? there location? are and on that you label or closing versus impact talked size, about category private lastly, opening How you margins? you a And that you do the opportunity.

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

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

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

in have room. the We more attendance fitting

have of front store. more We the presence in

a going mitigate we problem until it's associates I but think, prioritizing bigger the really safety customers. and everything retail of can to see doing be we're shrink, legislatively. our to think really -- I But a step-up, we So it's

So it's expectations. our and put in have something we planned for

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

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

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

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

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

Wanted bit to Sephora. on dig a in

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

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

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

performing we I I stores as actually are to the these So we acceleration more assortment better, an that. see smarter, open on say, newer think, in would continue stores.

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

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

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

see that. We on do bring in. new can younger, you to they're So customers more continue to they They're continue diverse. accelerate

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

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

able opening that. Top we're selling in those store have So a terms take as store, can presence new our stronger of in that and of coming extra steps that talked we of were advantage it point. which is about Charlotte price Sol well price Sephora a high the de as which point, brands, really as Janeiro Tilbury, is but to an then in, we Collection,

I'd So you we're all performing which customer about, then don't we're we shop well. is and across talk for a Clinique store, of have Sephora see areas. -- Black there something Men, well in brands, that the not talk to seeing be incredibly remiss men's seeing And Jack as

and loyalty new think an to I So them have getting just those to program to we learn, continue bring customers, we convert into our just shop. to we customers continue in and opportunity

seeing Xx customer. existing more are shop We those than our often customers

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

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

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

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

Yes.

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

expense just about in in stores. the QX mainly So it our be also XXX I say in step-up self-checkout those to putting will would QX, in which related has investments. We're

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

inventory XX%, we were to down So we in work going being range. the mid-single-digit said had

we So year, payroll units. I cost obviously, managing you we're and in less those our the have mid-single-digit inventory of SG&A, rest logistics to benefit to in that that that be planning tell range. because would still store less the move

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

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

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

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

Sure.

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

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

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

the in some going opportunities the them to it's And to basket. And of so working there that terms have women's think then time the is to some put we bigger into into brands talking about through and We're fashion. opportunity to we I for really know the be think and that. easier I And shop getting time women spend pad.

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

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

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

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

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

Yes.

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

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

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

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

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

It does. Great.

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

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

had overall expecting your comps first could AUR quarter AUR 'XX traffic is looks second you you're like half? the what I and then in what Sephora wondering And were what tell in 'XX? locations and I for and in was opened in stores second The if the that was us wondering the

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

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

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

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

XX%. to we terms where Sephora, I continue It's see. And up really just I we say of good. look that's in So think would and feel

imagine, driving can you definitely a it's As benefit.

the Our stores We're [ X% on were flat up ] in our the in stores. season quarter.

the productivity pleased which more very we're out with. it obviously, is of So driving much box, very,

to Thank you listening the on call everyone today.

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

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