KSS - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q2, 2020 Kohl's Corporation Earnings Conference Call. At this time all participants are in listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mark. Please go ahead.

Mark Rupe

morning. good and you, Thank of Certain statements and within projected results Reform call, meaning on company's future this Act Litigation the Securities statements the including initiatives of financial Private made XXXX. are the forward-looking Kohl's should, expressions plans, will, expects, anticipates, terminology, intends forward-looking or statements. such forward-looking identify believes, may, as to similar results forward-looking to from those materially subject are uncertainties, statements. statements differ risks and which in to such could Such certain cause Kohl's actual projected described in limited XX-K Such the are time-to-time incorporate risks with report SEC, filings to, by but recent and most from not uncertainties and XX-Q Kohl's maybe as expressly quarterly Form herein reference. XA and those Item all Annual include, are recent on on of Kohl's Form other are in supplemented in that Report most which

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

we to to earnings as EBITDA, during recorded. make is necessary note Information and addition, the Form SEC the be found measures In share company's with can measures adjusted X-K per will will call income, adjusted presentation, and our to adjusted an including reconcile non-GAAP this these on call be flow. net this Relations cash reference non-GAAP investor website. exhibit that Investor the Please available in free filed

not However, replays will of this be updated. call

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

Michelle Gass

Kohl's certainly and you health and morning, families to and hope call. earnings entire safe economic to Good conference world. quarter Mark. formidable second you, be the a for challenge and continues your continue welcome COVID-XX present healthy. to Thank I

to and been am navigating the these business challenges, has responded pleased crisis. our is our how immune organization has I not While with

looking future. short-term the our and the the to associates customers, priorities of protecting also against and are preserving of position while financial We executing our company,

Our and special subsequently team our few that XX all start over preparing past to I collaboration helped express to stores all our and stores of measures, a of our best-in-class our process health great associates want reopening gratitude in week us over months. showed with rebuilding kick period. safety the

second lead billion. We key also $X.X achieved positive we how the our further is purpose, part to free EBITDA, racial we actions balance business reinforce live diversity families over during inclusivity flow fulfilled our to we making are Kohl's motivated inspire take generated is cash adjusted advance quarter. strengthened lives communities and and customers A increased our our of associates, serve. position financial to we day. for and fostering and our lens, that cash equity. our and committed to empower how progress and positive We every values to running greater With to

our enhancing benefit diversity providing that focusing our talent, the Some to efforts supply of for and commitment the cultural recent year, that by chain, people a serve in training communities. deliver color and approach, associates organizations all with nonprofit cross increasing our marketing developing include unconscious end in our and increasing on actions bias supporting on of diverse

the why take successful and the step a to quarter, over Jill the Before want be of long-term. and Kohl's first I will get into you I back results remind

our effectively financial this well-disciplined strong position We navigate are operator, a through crisis. leveraging to

are on uniquely significant and digital investment to the a in our solidified through foundation capabilities, of the And behaviors, our years evolving experiences, changing from and industry. enhancements to strategies brand of positioned We have which retail introductions. loyalty capitalize innovative are omni-channel disruption and store build, new and strong consumer we

a to and in a among that are This the we all new for operations reopening in retailers. associates. our safety best flexibility of of agility safety and of matter and recognized our We store training procedures, fleet and measures our showcased first, all responding operating So and conditions, new weeks, our well-disciplined entire with operator. proactive been associate have our for transformed customer

flow. We also long In our environment cash a cash reflection It's and of flow we we of delivered direct prudent in year and capital and in This have management have worst managing a history, efficiently. part XX take our free focused retail nearly of flow pride in positive our cost history action. our DNA. generation, business is cash the culture

discipline, we that maintaining will our of to two more our is to the A rating. with decisions make challenging we've the grade continue business knowing manage expected through in the long-term objective for remain held than investment environment will status the of decades. great And We near-term. lens

iconic and evolving and capitalize brands the industry XX disruption Second, deliver third, and record strong in we and provide changing are we has loyalty And to shop continue this our convenient and years. our experience closed Kohl's. differentiate omni-channel, stores, portfolio Kohl's been and and assets. last behaviors we programs. great shop We on strategies for our recent easy solidified uniquely in have digital, our relevant significant appreciate they off the best us, loyalty entire million digital a through the family. offer year. and retail These efforts foundation, A which charge to are to investments we are in consumer categories stores positioned value They industry. customers cash, leading the paying to brand because our And

growing known stores through Kohl's and shopping have will supported of digitally. casual a is large capabilities. a by our beneficiary We digital our expansive and be more casual consumers business, and we omni-channel adopting a apparel destination for lifestyles more

and Even opportunities actively new also customers we pursuing looking see are pandemic, We are of capture great midst the forward. the dislocated from and competitors share to in market store closures. potential acquiring

our will stores. update provide are closing how We our our where past marketing an increasing I leveraging now strategies on locations, competitors recovering. is and in are investment business

impacted has with chain retail forced on have of our business. familiar disrupted we been impact consumer As both crisis The behavior, store immense. all directly spending wide and has closures which are COVID

release, our saw in impact. second you this As reflected results COVID quarter morning's

During reopened the a with hours digital's for with than the most our fewer our reopened. as in of limited the of majority June vast since was of We most majority year, days challenging quarter, stores period a in XX% operated stores the closed quarter the approximately our with and saw and May remaining. stores were momentum our stores rebound month. strong last

areas we have from June some the country deceleration strength, heightened COVID However experience been cases in July, concerns did in of where sales as escalating.

around selling increased start to uncertainty to school. season, given kids back-to-school returning We also saw softer a the

the productivity for stores in all for So, was quarter, store reopened approximately XX%.

pleased the strong We sales that digital in XX%. increasing at are remains quarter,

support to continue business. leverage the We overall our to omni-channel capabilities

Our we providing valuable. an customers and are and are the conveniences rate, investments our at timely be accelerating have to embracing proven

second sales. this. in for of up accounted XX% digital fulfilling of with picking-up XX% stores store for quarter, the instrumental half drive the nearly in were Customers store of accounting During digital demand,

Hence, touch this Consumer the spending altered to operating let plan XXXX. concerns, continue important of that me and don't year. on pandemic. expect in to we been given for are rest has of approaching balance how the a near-term. of profoundly conservatively safety we still midst our we're behavior and Now, in It's the the we business change remember to the

by return navigate their season I back-to-school mentioned, has the will impacted kids just this school crisis, as families how been As to the year.

lot Fortunately, such basics, denim and for can round. back-to-school assortment as is of sell products a our active core your and

start aspects with be changing be like all our not open ahead families. no Looking to their of customer with, out home COVID the other. holiday be to a response. our is Day, made holiday, allowing of To are decision adapting on in we Thanksgiving we've it season more expectations, and will associates to plans

we ahead of increasingly get holiday expect leverage omni-channel many our addition, In and shopping, customers their and capabilities. digital to

early holiday making our adjustments all We October beginning demand across capture channels. to of and in drive are anticipated

have assortment compelling that We speaks living how customers to our today. a are holiday

good ability of Cozy demand. to We feel kids items, and emphasize the category chase holiday as key in well content toys. will We our Comfort, about our as and really home our relevance

on uncertainty, prudent conservatively plan So, any business it upside it as to the continued and chase unfolds. based COVID remains the

market are also active COVID and capture accelerated short-term So, have landscape, shopping over long-term. has been how business adopting and growth our now the the competitive let and more underway we casual that drive me movements transition they're are to and important positioning has disruption. creating in share industry Customers COVID for discuss lifestyles, digitally. significant changed time. some more the

dressing on has from are starting life more will and living take taking flexible growing We talk products. casual Kohl's more beyond adapting consumers schedules, are work casually. been COVID. trends a working about with we are will actions destination, believe known me these their more customer trends, and home, carry of full as always advantage comfortably Today, we and casually. the Let

trends. remain expansion existing lean focused as will further reflect both build into optimizing key brand through and greater on result, Active we to a As these providing brands at even a driving relevancy. as brand. And to the and we through Champion our our are will options We our destination evolving partners, as our more by national casual drive strength business, assortment our Leisure, of well the

We are we new Toms brands will introducing also Shoes. and Lands’ like and End Active to dedicate more space casual

our are assortment. clarity period using this in to make moves In addition, bold we to improve

expectations. men's depth We and across are to our and significantly reducing operate our meet choice customers' counts, women's increase

remain in women's over choice stores announced rebounded This fourth private by quarter, beauty down part previously XX% business, underperforming eight the the counts women's Further, example, which we driven was depth growing be For of in with XX%. our up nicely will reopened. brands. as to committed exit

for As to we've is growth new I've well an and our them Beauty been too. the that innovations and in brands of customers company, responding indicated introduced have area past, the

let how we elevating experience. the Next, are about talk me

channels. experience. touch interaction have call, COVID presented discussed opportunities us about many when think on across and with to we we last As on we our customers every the the has point with quarter's think we accelerate are how And all broadly elevating experience, we

our customers to this Driving improve and entering has pleased experience, newness from our around continues cleanliness. customer a sanitizing enhancements more removed We've fall. we learnings, We've as closing and especially experience. you'll store safety on and stores, the and have safety all our holidays. several to fitting and plexiglass be see are the we measures, such the opportunity terminals, the at discovery a customers to time, based taking POS moves fixtures. important with these associates for operating. also welcome in are the And aisles our so, In adding checkout, beginning and marks As installing Feedback and been and to with rooms positive moves facilitate carts the enhanced masks greeter both customers with customers, are how we made strong stores it do relates to store. doing to these created our our better widened requiring cost low during

exciting to will such, expanding by [ph]. featuring like Kohl's Candy our As Source, we XXX platform and Club U.B. Paper brands [ph] interesting and be Curated Coxico stores,

we other ways. important we In addition embrace efforts, we stores and to see shifts This is consumer seeing given merchandising as digital many our can the asset omni-channel as behavior our that in are relevant customers an leverage our especially offerings.

digital supporting serving Our from fulfillment hub and our a business, stores store critical ship for customer are pickup. as increasingly

destination to Americans family. XX% and easy an are Kohl's well-positioned digital retail the miles of a live of leading be store, to within As XX we access for

of will be capability important has and successful, launch Up Store holiday been this Drive an particularly season. Our

Amazon stores our ease Returns, appreciate like to we also services We where provide. leveraging our convenience to the customers deliver are and continue innovative

safety. stores, greater As for own of Amazon reopen outpost to social distancing back area Returns its allow enhance we the the and store, the we to moved to in

pleased traffic the of remain We build with overall the have seen program. and performance

and the our in enhancements, on Turning digital important broad current capitalize in to personalization were been functionality, crucial ability in our environment. our and shopability site to have experience, investments growth

let machine in-house, addition, have digital value We've enabler we a incredibly brought search industry recognized efficient many been strategy. using provide next strong our equation efforts as rewards month, drive on working structure, way. a happy bringing as growth, million be of I are launching and our It's cash. customers, our in integrated we lastly, new that digital a loyalty rewards about industry. loyalty piece in that with the program. will around confident critical of piece greater marketing to of an results a spoken saw program. foundational touch important operating you program Kohl's together frequently our further to know, a are and we learning members. Loyalty been will our been and nationwide, In our on Last all in It position new iconic efforts results a buying. with our more search in has more And earned and assets and share yielding has our have positive am in We the excellence. we media another this is of XX pilot our as times improved me impact we new a enhance key simplified leader program fall, leader our

the shipping the cost seeing Based out our in on positioned overall of that resources planning conservatively drive are to ensure greater manage we putting effectively even to seek efficiencies. are and business possible. and We we are will as and we digital to on trend acceleration, are focus supply chain as continue productivity,

has been on this priority front work always been important, its While has our elevated.

summarize let Jill, to I my comments it Before today. off hand me

period made and of positive during and the change to through quarter, reopening digital We flow extraordinary progress fleet, position. growth a continue our free accelerating generating second further effectively strengthen our We to uncertainty. financial cash navigate entire

full planning crisis of headwinds are continue also weather storm, not to emerge that we only for present take opportunities but the advantage the in the to will near-term, it. from that are confident While very we we the

a well-disciplined are operator. We

incredibly these foundation times our provide I'll of us industry. valuable our associates the extremely consumer quarter a significant the over to closing, that, strategies, our we changing am crisis. Kohl's strong becomes and visible during of tangible. has culture proven the With retail our In evolving details capitalize I the value and our will turn and want It's and shined culture through, associates our of and the across which business. positions uniquely financial proud on and organization's on an of this country We second Jill, position. results are call the who and now to have disruption I all around thank like together when behaviors, to

Jill Timm

will good second our the thoughts for on our liquidity you, morning, position. business Thank start then by the will Michelle, year. I and quarter of results and our I everyone. update an providing discuss remainder on

lot have We maintaining financial talked a history about a strong position. of the long

DNA of making. the decision of As Michelle forefront part it's indicated, is our at our

cash XX%, be how We've liquidity continued COVID to a the So pleased reduced preserving led EBITDA managed cash nearly inventory as unfolded, efforts than down crisis capital XX% position $XXX and flow. priority. our strengthened million more than further despite the expenses more pressure lower tightly flow facing with These during SG&A adjusted expenditures. quarter, continued crisis. key we to I our $XXX operating of the am $XXX by of million, positive free and million from of

In position, cash. transaction $XXX completed XX of leaseback a our We nearly further enhance generated our sale centers. distribution two addition we to of liquidity million for

cash we at of ended up $X.X billion with result, first a the As $X than from quarter billion the in more end quarter. the

$XXX additional an have revolver. also under We million available our

up Other receivable the days last operating sales primarily due XX% than with limited revenue, of in quarter, quarter second to expected fewer stated XX% represented Digital being This me increased balances stores lower sales. the approximately year. with results. credit lower to year, and discuss Net XX% last quarter's sales XX% the consists which our revenue, XX% hours. let net declined declined net was of associated from our as accounts Now due in open primarily sales last call. and XX%

than others. Children, women's demand apparel and softness have strong pressure categories acknowledge due dress Home, for health about under the attire. impacted lower as encouraged a the in that in remain sales, some it's has to experienced to of we We've men's line however, are expected more and perspective, revenue such to important crisis significantly business credit expect overall From seen we while Active Importantly, the of portfolio. near-term the

remained strong and business overall Home during XX% up with quarter, Our up digitally. over the very second sales double digits

outperforming. with Our food strong customers their as for and kitchen preparation as increased furniture with their purchases kitchen spaces decor well electric, for bedding, the cookware, for living demand and

apparel. the digitally. solid in increasing offering key in our leveraged three quarter, than Under partnerships and Our more Nike, in Armour deliver Active brand Adidas Active outperformed with also results national We to sales XX%

assortment strong building brand into continue for we Champion, last and in a lean expanded in We our this by Also investment quarter, inclusive demand out Under the our of is also earlier in launches significant really will the Armour a Adidas year, growth and Armour & driven to with in Big year of paying-off sizes Plus future. the and Under fall. saw last Active, that Tall

in Carter's and brand the digit private performed for solid business brand above double our demand growth did LEGO perspective, We and saw baby From Beans. our outperformed Lastly, and Children's average. gear Jumping sleepwear. as toys, a company

margin. gross XXX the second activity Approximately decline was points to penetration. quarter. to to promotional Gross Home of driven XXX Margin by sales mix, points and digital to XXX cost items. the impacted related The points primary basis And be related during of two shipping Turning to to increased due increased as COVID continued continues by basis outperform. basis

cost to of XXX to point during work the points the relates was slightly to split digital for impact This basis cost period, periods. short-term as margin commentary in as the XXX to expect to shipping XX it a we down points of point of penetration. our stores. the inventory We is every shipping, past basis headwind, issue primarily basis XXX in and shipments future due this basis see increased increase in point basis historical headwinds the to range XX As above return a

spending consumer gross we potential remain uncertainty to heightened unique penetration to the expect promotional a continue pressured year's be due the into environment, as this expect Looking shipping, holiday digital heading given to around ahead, season. for and of margin elevated, we to increased cost

payroll, would SG&A note, driven decreased $X discuss me Of and credit In expenses. expenses billion, to by lower SG&A have XX% to related primarily let down store SG&A. expenses COVID-XX. been XX%, excluding marketing Now, QX,

of As year. we continue planning decline SG&A rest look to forward, to the are we for the

from continue level Depreciation the decline core opportunities to look items. let first-half, we million are of expect same San this emerging of to in and of additional capitalize sale last our given overall capital days not billion and We $XXX on million on outstanding our the our me financial compared and this and industry the XXXX. for Last, the our open, Centers. to sale However, year of stores expecting touch due efficiency. additional discipline to leaseback on retail we we reduced a we significant $XX spend issued of improve in Distribution of to continue Fulfillment of the excellence, said, as year. the last plans will our and be are some a greater operational disruption. was due the than to second-half year, on expense That leverage as $X lower number recorded related gain April million $X to Bernardino revolver, Interest bonds million the $XXX increased versus to opportunities

remain We quarter, the was last expect a as result a year million per share per higher share. interest factors. was earnings to of for basis net $XX continue these income On than GAAP $X.XX to expense diluted and

share. for adjusted $XX quarter, million adjusted items $X.XX of per or an non-recurring loss the loss Excluding was net

cash driven billion billion by quarter billion, largely we Turning outstanding. an was the increase with to from equivalents. in This the the last higher debt balance $X.X and of more $X.X than year cash of sheet, ended $X.X

as to Our lower driven quarter year, compared the our inventory through end quarter down last ability as inventory dollars inventory work existing at by during were the XX% receipts reopens. and stores the to of

the the demand. to we of to look year, we manage with tightly the will inventory to continue opportunity As into chase balance

as COVID. year-to-date, strategies This reduced the generated technology, including we year-to-date, significantly we expenses. inventory flow, million of quarter the and cash million below including million is as Capital and reduced due $XXX omni-channel positive cash across to operating we last to million in second flow our quarter. were store $XXX expenditures in $XX Turning $XXX spending second year,

of continue balance the of as around uncertainty adapting COVID remains look significant are the consumer holiday to through the business. the year, this amount we mind, are impact season. in to we to to spoke a our and industry including the back-half As behavior of Michelle the year, discipline, opportunity, In react optimize position. ensure retail ever earlier, expecting With There inventory to with our will expense and continue merchandising marketing and changing strengthened summary, unfolds. our prepared are as selling we our to to to and the agility season prepared our be financial with we'll the we environment. we manage to Further, further plans respond great we

quarter quarter. and results this delivered have first from we operating accelerated generation positive cash quarter consecutive second crisis, the for During our flow, cash second our of

expect near-term, the the navigate the to challenging environment opportunities. capitalize crisis, we only also we continue to While be emerging on well-positioned in remain to but not

take We your are time. to this happy questions at

Operator

from Instructions] comes Your [Operator first question Hutchinson. Lorraine

line Your is open.

Lorraine Hutchinson

for quantify morning. Good that you the are and deceleration, XQ both you recent inventory Can sales back-half? Thank sales thinking about deceleration? your given how the also you. And commitments volumes

Michelle Gass

Lorraine, Hi, here. Michelle Sure. Thanks question. for the

So add the we'll me and on about then a first, more talk let context back-half. little QX

experience had So, a sales hotspots month where a in I we strong most digital We little And you've closed. sales stores wanted see moment. did to stores as our the back some attribute still online we up we close strength. that XX%. a strength. was its did our to this. and quarter soft correlation we as did came July talk And more start in add because that rebound June, about digital did heard May to share we'll store from get to very said June maintained color our in and deceleration some that, us productivity, of around our obviously back-to-school, COVID see We to remarks, Around softest

one expect in the but continue we to with demand, okay think new we there all that that in as kind and at hours, headwinds we're for So do it, operating around much the level, shared, consumer. now, reduced our have operating volumes, again, their given the that operating right which with out we're And there's normal share a we stores digital were But our that include thinking overtime. We around point never XX% important that the our that our when into will this for it about pandemic. I that business our grow has wanted been has hub and gets was digital think critical that still been hope we When data typical stores of to business, being just XX%. more that fulfilled mentioned so the about given we're of of about productivity XX% by than this during stores. when We'll maximize productivity stores, actually facing. stabilized this fear closer you to orders such this actually

stores strong the So, are demand. critical very also to role our a but demand, walk-in playing only not support to handle digital the

very, recognize So the with think we for pandemic the decisive back we $X.X we important thing rate over to a I lots cash the cash And Jill our position, of still and it's feel cash strong shared, of disciplined operating about very about think I it said exit stay billion call to to QX, is unprecedented mean, good as midst operating the us sheet. flow. in to are of an continue as variables. really And and important of as and very back-half, balance positive think agile I we and maintain that and

the can like is Jill going been I'd our we technology categories back-to-school. have spending are all, caused overall has kids, So, school, for back-to-school, first remotely. that back of very shared kids school, impacted level talking from going today, and and of the we lot sell of disruption recognize with all inventory there's the that's into say listening -- that created operate the conservatively. probably at parents disruption XX%. that parents inventory this on to positioned kind pandemic call we down about for of to And obviously good that a news

of year. You back-half asked how we're planning the the

round. to upside But chase with plan of after seen sell the do other an a continuing very does say back-to-school thing and vendors in our that our go you've are back-half product inventory and demand, of the the it about position. and year is that from us lot to is, I'd assortment conservative are year core any We working the we around closely past.

an And So, actually while, important whether of Basics majority Denim. it business. Active, our is our that of QX, is the or not back-to-school part

Home of example, talked So we're in categories. We've selling of as an important the back-half really more about only positive becomes Home strong year. this past lots other overall, the quarter, being

So, while little the us, us. back-to-school way back-half the front softer a of is the I of most for in the business of year has about been think is

a other. after I back-to-school, We product to it We're no like to and said, the the start will for our needs like it's agile go lining our like be we'll going campaigns that's there think consumers. be I to and Kohl's. holiday anticipate positioned be changing up And of early. meet all demand out

Lorraine Hutchinson

you. Thank

Michelle Gass

Thank you. Great.

Operator

question the from line next Your comes Bob Drbul. of

open. is line Your

Bob Drbul

Hi, questions. good morning. I guess two

and and Jill, the first one, cost you've The gross margin that the shipping on seen we're seeing.

about category, women's? just versus maybe when important more that looking to just would that bit initiatives from into And your second talk Michelle, surcharges you're especially a manage through look considering? color of men's one business, As you the be of the in it's around you that the shipping perspective, guess compare could you Denim give more and then a that little helpful. piece are a demand to anything terms as contrast at the little apparel Can you. you're seeing question, I if the of and Active for back-half fall. And side, sort that we I wonder go on against seeing Thanks. it. of year, there And think mix of the that you're us you

Jill Timm

cost shipping. start to I'll Bob. Thanks, with

as the little wasn't stores So, a optimized was it for the to a were had elevated a cost to tried especially us, as will work time. to I saw expect I in penetration fact in of during of you cost we a in business, point. is be higher of our shut the obviously inventory to do shipping headwind back-half period QX the of this But have to of year, a through don't headwind digital headwinds that the naturally higher bit some with the our digital of continue at significant amount little more holiday inventory It will working front-half placement we're to continue bit shipping. at just of do out-penetrate increase that that because such period. down. We for given the the a rate surcharges continue the year. think portion

have have the demand forecast how through are surcharges, we some overages. announced both can them, vendors through working like, we relationships and teams So how with with we the of look that can our great it those would what and work these

for expect the to also We holiday season earlier. move

in some that demand of And that. can help that so as will alleviate October, move we

instituted also throughout carriers other We year. have the

that you're to to through So message then which year huge And have of well. vocal a a store think it, opportunity, pickup we to out avoid obviously shipping us going as in of drive about but the And associated our Last them to option. last, with well were see that heightened to marketing these with a no surcharges. it. we'll has it safe channels a up gives a to I more pickup way going hear do initiative cost for delivery push much there, leverage you're framework for marketing as have some

cost supply we're this lens focus and mitigate working our through biggest shipping for and to on excellence operational end-to-end the future chain is really pressures. think about talked help these an I really we've us to

biggest integrated enable is to a which So will drive flexible, the of really cost we very down supply to component split shipping. deployment, which going that's often look the driving inventory at very up shipments, a chain

to into see rest through those year this that for the of XXXX working elevated to So us continue costs. help offset overall, you'll

Michelle Gass

clarity. happened what’s been the structure office over more a Casual, home, COVID earlier, leadership are Great. working at hard that, more with a around likely it's their women's even assortment, with the new casualization more last the they happening through and and accelerated as transformation coming sort And and that expect working And have only brands And plays on we and before this specifically, months our the strengths. QX, very we so will on into the the The reiterated, of eight work. especially be to count women’s exited question we if really they're our are few more in pre-COVID, already at America, that people see starting we've we by the has around and business, remarks, choice We it about mentioned down COVID into as around do spoken XX%. upwards bit that, again, as organizational little Leisure, really accelerating of we new drive was differently, the pivot environment we team women’s continuum. pleased Active from of to Bob, your have began casual. And believe and trends commented merchandizing because business we

you're issues debt important the all that sure XX%. we're Our the think really by needs. make behavioral a if environment, be to will I this facing in you a to to And given during that servicing store and in increasing it's go stock decision customer want making COVID, their

So, for category focus this around a question has we see us. specific an huge as player. important real Denim, the a are your been that of Denim We To organization.

our Levi's consolidation course, and of like greater this brands, national driving more Denim become depth And both even down portfolio with great driving private brands. a will choices, important. and have We

direction. And we out year. I back-half the everything we'll do all good like there demand about the we're the said, can of to the in So, feeling chase

Bob Drbul

Thank you. Good luck. Great.

Michelle Gass

Thanks.

Operator

Altschwager with from comes Mark question next Baird. Your

line Your open. is

Mark Altschwager

Great. my question. Good taking Thanks morning. for

with the you've demand expenses, On now flexible highly uncertain. the SG&A historically, backdrop pretty with been reopen, front, store but stores but

reduce the there, potential of what we magnitude to the strategies back-half So, deleverage any are the about of the think as year?

Jill Timm

a We've been I over because around we've discipline think its has look if I what a operational you so think excellence have you been back And years. would tell about it several CAGR, you X.X% core SG&A growth strong know, for managed rate I is culture. you, tightly. know Mark, time, our as us So, cost to talking

of the look can. to and our back-half we we As we're as less with down, operating leverage expense. to hours. We're apparel continue year, number the one as is much drive Store going expenses to drive

Our fitting rooms are closed.

time, little the be putting while reason of bit one, we for the take less remain expect in cost it our I will what for see of the mentioned stores still the open. you'd that a during safety we had in to year. down So, than customers front-half is The forefront. looking are those the the to and period ways of fixed some associates out current of

know XX% retail spoke front So, opportunity we versus for QX. a period of will amount of be we also large us, terms we And to in the the of there's time of open full in in second, the then disruption.

to a acquisition a investment as marketing investment we're to So, look perspective a that from customers. from make perspective. share long-term at and customer really going acquire go market that after those We that new

last where closing, in couple the in overlap. we a have We go run customers playbook stores over we've years, very have after that of know we localized and successful strong the nature. it's areas a We are

I a will we're going work so that the definitely a but long-term perspective but investment playbook, And that from as well, investment well perspective. marketing some it's think from to worth take

Mark Altschwager

at And you to initiatives ability of inventory stronger key Wellness Beauty then your accelerate Home wondering areas? speak for just those chase just been other vendors? trending related like you. those lifted to some many you've products. some your you're into demand now. categories? to really if and as separately look Can does Categories there's like a Thank Active I'm in availability seeing leader in retailers time. your And any where What with relatedly, right constraints

Michelle Gass

our question. ability in good. say Yes. to all demand thanks very chase been the for I'd categories to-date, Mark, has these into

the diligently working point plan, everything with again, but into very very Beauty. So, quarter. those feel categories. I'd to same chase good They're about able hearing, those Home, I'm were to they we sales Yes, back goods. say vendor a very all after ability partners, I'll strong our surpassed to our their I go of go with to

been in beauty, in small We've know, with experimenting et tremendous we brought we clean today, shop new Beauty opportunity in, lots player brands a see you long-term. innovations, the We shops. new of are As over but cetera.

Our responding. customers are

I'd They've there. relationships supportive So, never This them. long-term been it's very opportunities. demand us, point, with and strategy our further to and say on that's with We're active support pleased progress like has out a And been been to pursuing we've greater. those the partnerships us I accelerated. are said, constant then agile been has we for chasing Active. in around in only your extremely very, and just with our national communication brand partners

I'm for back-half said, of I feeling good the quite about what as our So, the look prospects year.

Mark Altschwager

the all great. That's detail. for Thanks

Michelle Gass

Great. Thanks, Mark.

Operator

from next Chen question comes Your from Cowen. Oliver

open. is line Your

Oliver Chen

Michelle Good Jill. morning, Hi. and

of what average might Regarding see lower choice with mix, over in the do think retails happening And you as changes and and how how unit would of assortment you're prioritize things best? views major better, that count I about apparel Black control? you love your making and the holiday some with you'd mix the time? Friday apparel just your on you. good, the Thank evolve also within

Michelle Gass

question, Oliver. the for Thanks Great.

the talk just me assortment the let first, brands. about So,

the very As I we remarks, spoke operator. We've mean, demonstrated over look strong are on that We're believe this to I navigate long-term, ability our do a as we to my we well-positioned. pandemic.

has a very, you're the there's disruption consumer industry. Our solid. seeing as the position been But well as behaviors cash over lot long-term, in retail well, lot very of a change as importantly, in of as

place this, putting in to the long-term navigating our So, the further short-term things we both on and importantly to pointing solidify foundation. are but

to portfolio journey that's to very and customer notion are I forward. relevant the particular, Beauty started your going across And seen customers, what's in relevant relates that’s the We've premium brand deep many earlier, to just already think I the whether space, we of in think the look premium be us. amount going as our space at was it as commenting So, been I in delivering AUR's in do the increase brought athletic for we've but that as Active a Apparel opportunity tremendous specific taking clarity of categories, footwear. brands. to question national fronts, on brands we AUR,

great offering products shows appetite been to they we're an have Our buying the them. customers have up that which premium certainly buy

five long-term as opportunity will the as the going business no everybody wanting holiday hard the like. what this consumer I'll is going experience round think look to on paying see holiday that online the and been And reassurance to factors, both the things I the is product of well be retailers on most there, I But, demands particular. product, buy be terms this then shifts we a their specifically, fluidity a one. year the of in has very be shopping the do. just couple attention Both I lot would given, that customers to to just will to timing, But value, this team uncertainty From we of a I timing reiterate, standpoint, to they experienced short-term there's a So, lot what still in close start a on the But expect mean, in do brand. earlier. And we're work. like really customers behavior. want at work point as how and around has for other.

as So, categories go we working October time us we'll on are I'd side, as even the we new expect and for the product during from available had that start to more holiday that on been period. early positioning the front. to say important become product have and our campaigns, some that

cash, in category across very that sort gifts business. home, we causes And Active we're more Comfort, look of been harm on at quickly, of particular. time so looking strong Toys, hit Home, the then in season, and the that. practical known their the in point I'd for goes a of Value economic any for So research, little customers Cozy our us, obviously great all holiday are our seeing And just do destination extra as for spending a a many and money much this pocket that cold with at so for people headwinds. we're value that's also certainly lines won't

think in will trend accelerating. I clearly, really is be assets. experience investments important We've made On omni-channel us, for area. be lot our the digital a And at that the what side, will of

more they I product seeing us. And importance important. message that been quickly recently a brand think lot driving be we're I the of their free, Kohl's up get of lever together get I trust growth that last really clearly, Home that brand. in And can And us think So to think store big it the curbside. brand, expect is over never for going it then And and online I'd has kind more can that's is buy reassurance highlight a you all around trusted the pick piece holiday. very just and of then with a wrapping and

we're team agile five with thought demonstrated of has flexible as lot our over forward we our campaign. that anticipating look to the looking And we're integrated like our this last and on periods. extraordinary holiday months, And sharing a just we've So will put into that navigate we customers.

Oliver Chen

Thank you.

Best exciting. Sounds regards.

Michelle Gass

Thank you, Oliver.

Operator

Advisory with Your Telsey next Dana comes Group. Telsey question from

Your open. line is

Dana Telsey

Good morning, Hi Jill. Hi, everyone. Michelle.

Michelle Gass

Hi, Dana.

Dana Telsey

Hi.

seen with how a you how category, certain And you've these corporate As differential the in from stores there difference and a about think seeing when non-spiking at on And Home of look COVID and what states average versus states increasing are the Apparel? margin do penetration is increases, you. spikes Home you the Thank then performing? there? you're

Jill Timm

Sure. Good Dana. morning,

different of mentioned, Home, than highly economic business. of than terms a side margin private much national apparel a as to brands, Obviously, in I is it. branded it margin which more has our the our So It's women's is lower apparel.

the pressure of trend in positive. some like QX incredibly persist indicated the Home lines given of the QX. see of expect the being in current mix, would in So both we to back-half we year, do terms that And we and

as In well, I we would seen the those We sales mask mentioned COVID sales as we've as cause to in people we've moderate. want stores did in were moderate out stayed the say, seen seen we've spikes, states, the necessarily these I see go think more safety terms of mechanisms happen. spikes that not people mandates. inside, things as the those one stores generally And given of the of July, was there some the to as stores. Obviously,

open you drop we about feeling had exit a lot little than seen. slightly and better a rate to were there when see of people the had off June, lines. stores year, the was stores seen we what be confidence did caused trend lower were all the back-half those that When So which in the in

Michelle Gass

in that a The tremendous around But know, to we mix said only and you have excellence. planning the the margin, the thing organization, Jill I add focus accordingly. and as operational what would to we're shifts

things. transforming think we it's think we we're our goods where How And putting regard. from We on really So that we will how opportunity? us about it think of critical, greater position the long-term about focus the over even cost think these supply chain?

Dana Telsey

and further share you're any we've how opportunities, commentary others? And from opportunity? that planning the closures about share JCPenney on heard And given for market other increased

Michelle Gass

Yes. No, absolutely.

standpoint. We So Dana, one. and that a both the long-term I'll market think about share standpoint opportunities from take short-term a

facing I are past acquisition are pretty those dire think you customer very the consequences have there some used new customers, as that in of localized short-term, to level a know, closures. at after market from very literally thousands that are a go and unfortunately that that playbook the after we faced stores And and share. have we've go

to deploy So, marketing are that we've for personalized geo and strategy we after these proximity, is. And specifically go close we zip that what to use customers. targeting begun And often these stores overlap code us. down know in level to the

advantage So back know to medium-term. differentiating that is And you us it others. over And long-term, to really take notion. short the ourselves is going then we over will the full a from

very maintain the position so a private foundation, introducing of brands. our convenient new we've really on made brands. made to some and around national building our base, we're store and comments our strong well-disciplined how strong Even It's so balanced an financial agile in And invest. the of speaks operator, investments portfolio to being in we we omni-channel, we this can continue it earlier environment,

further of customers taking to pipeline our the existing COVID and strategies. continue opportunity to to then new brands our excite evolve have customers. coming new both We lastly, with And a we're

a normal and and be going So, shifts, our Active some enhancing the experience new into in and leaning long-tail to Casual that, expect so stores. really this permanent there's be we will what lifestyle

better we're we're for advantage our It's while We're pilot has time. mentioned. But about and because launch it starting a of safety aisles, we loyalty important the us to And shop, be for in years. very the program, excited we value, expect will fixtures, to store conversation. I talk been been didn't much in reduced greater new for So which in strength. couple some really this and then overall launch wider experience continuing the from last as depth, has taking so paramount that making also just easier

We million members. have XX

sure So data what we that put we do make to want today, positive. the been is and to very what there out we has accretive

the go think market think again, as in to the be share as the what share dollars the well of differentiation we're up really neighborhood, will and I So, local play billions opportunity I after future. our set acute market opportunity, capture

Dana Telsey

Thank you.

Operator

comes Your Boss next Matthew from JPMorgan. question from

Your line is open.

Matthew Boss

thanks. Great,

what's store the or second private you're anything comps the either promotional current from just national to quarter, XX% upside you're the that backdrop downside surprised So seeing And the and in trend to versus pricing average you call out? negative across that relative the brands? seeing today brands to Apparel, than the

Michelle Gass

here. Michelle that, take I'll Hey, Matt.

and about the naturally of kind for think brands, I I those we're fairly are to accelerate categories of But and because as brands, and Home, Active that. even a I'd we're opportunity we for that penetrate national quite the brands. private relates question. seeing about results making say lot brand we really perform it would national like COVID continuing thanks balanced So and brands, say higher when to that exits seeing private on private I our the private are will I you in well. the leveraging tell think

course, from is market short-term doing we as pressures of And made there it productivity. bit, we standpoint earlier to a demand clearly a continue given have to of trying but standout that this share think up while that just be we say. as to for ourselves do some say concerns, about, we're talked relates we comments the expect in that COVID think concerns, available wouldn't headwind health little I to inventory whatever we the be that this we opportunities, the everything we to could headwinds, store out to, further going capturing overall, the there's we're there. But can an tailwinds that's set to chase those probably COVID I share that per market we natural about some us. So, And have drive are

Matthew Boss

just XX.X%? you headwinds this what's year, just gross we that think to about you'd XXXX earlier to at way curious structurally, drivers the think best Great. margins about to call. margin I'm in rank gross maybe the Jill, beyond follow-up. outlined the the offset And current if then how

Jill Timm

past, in management. as I you've think us, Matt, driver seen for is So, inventory the biggest the

look we years. actually returns, our expansion you back margin if you and that So those managed improved gross in the to inventory saw years

core mentioned will down quarter, going I a to excited placement inventory excellence trends discipline. for definitely as to this we have goods inventory with margin directly to some have in product sold. operational help initiatives supply inventory and back we're forward, we an of So expect in really go Michelle, from line. I'm and And continue our perspective. will the focused back mentioned, we that on that optimal managed be XX% also to move cost end-to-end we sales we'll be with chain

we will that continue So our headwinds we efforts persist. then offset margin, expect will be do at cost expand But will shipping those some mitigate. working and to of ways to the of also gross

basis to be that the continue So as XX efforts our do point down, how say focal we these well. will to points basis XX bring to through points

our management going to So, I margin be to driver expansion. would with is always us say, one, help our number inventory

Matthew Boss

Great. luck. Best of

Jill Timm

Thank you.

Operator

Your Alexandra next question comes from Walvis.

open. is Your line

Alexandra Walvis

morning. Good Thanks if could much taking wonder so I ask two I questions. for question. the

the that question, one Michelle, second my promotional expectations of new then the level are the second-half saw What year? pipeline your quarter? mentioned is first on for you for promotionality of the into How The the trending activity. And brands. you of

terms in? out to you. to or else expect those when in And some call I launching, think plans. new of perhaps in of got You've announce the there coming Thank second-half, anything brands you

Michelle Gass

take follow one. will Thanks, Jill, up. Alex. the first I'll

Jill Timm

Good morning, Alex.

promotional was a it environment in from activity, obviously QX. heightened So,

have opened doing some in that promotional activity. to clearance. driven higher stores lot additional people and we cost expected through that some reserve market working of we of were closed, a that by of a Obviously, pressure established we elevated recognizing QX, the going lot was the think we're lower of and with I inventory levels, down that

back-half we I to as it's promotional. I think, to year, be expect going of move the the

think margin as that kind that's liquidation to pressures well the to where expect after both as share is, pressure I earlier the period. people that holiday and persist, given market we go of we trying

to what we this know offer. know We has that offers really to how know promote, we don't of a given been what drive Value behavior. core So holiday fundamental has Kohl's.

for that environment heightened we the So are I and holiday will make the and share, underlying has customer of I when strength, it’ll that and that’s core known been are -- these especially get something we Kohl’s place in to period, would to think, type deliver. be to looking our investment a value so expect during people market new

Michelle Gass

Great. And either to us I as track then to to of brands the brand expectations. as And I your innovations, brand editing, it think always think a important pass of well for good we’ve or it's didn’t new bring maybe kind lifecycle, question, its relevant record pretty categories meet a customer. when is that,

the or some we do unique ever I great not in so in iconic mentioned, Driving we’re that planned yes, to editing brands, a in my to around editing drive for I trend look and I the space And think last my time brands. brands But then online that both store the on of doing some And And these choice brands liberty editing really doing point to share been at relevant we’re seeing. known our is introduce but consumer. for making excited And the these bring of on in curated. speak well did clarity, mentioned more two I that’s exciting whether share. Lands’ at really do important. so, in at we’re in Toms And for really remarks this to position the that, have counts a lot piece, have importantly doing new discovery for what customer. and customer, both, casual we’re the for to really End, that remarks, really I new work

XXX core program in these way offer know a that day-out. doors our about, and and So complement expanding kind don’t those brands Paper great to bringing many fun holiday that we of maybe to Source brands brands that day-in customers be and like will that of

to come that, Alex. So on more

Alexandra Walvis

all so Thanks and for Okay. color, all much best. the the

Michelle Gass

Well, we’re great. the I Q&A. Okay, of at our end think

Please to be our safe progress call everyone, you the today. to well. on in we And you stay thank November. look forward So, listening and on updating

Operator

today’s Ladies call. you and participating. gentlemen, Thank conference concludes for this

disconnect. You may now

Kohl's (KSS) 18 Aug 202020 Q2 Earnings call transcript