KOHLS Corp Q1 FY2025 earnings call

• Focused on customer priorities with three key areas: curated assortment, reestablishing value and quality, and frictionless shopping experience. - In assortment, rebalanced jewelry business, worked on women's apparel assortment, completed petite business rollout, and continued investing in Sephora and Impulse. - Reestablished value by elevating proprietary brands, introducing new ones, and enhancing promotions by moving brands back into coupons. - Enhanced omnichannel platform by optimizing store layout, restoring trip assurance, and managing inventory. - Achieved 5% reduction in SG&A cost this quarter on top of a 3.7% decline in Q4.

Net sales declined 4.1% and comparable sales decreased 3.9% in the quarter. Jewelry sales were up 10% in Q1. Sephora had net sales up 6% and comparable sales up 1% in Q1. The Impulse business is being expedited with an additional 613 stores to be rolled out by Q3. Proprietary brands showed sequential improvement in Q1, with approximately 400 basis points better than Q4. The petite business had solid performance in Q1, up high teens driven by Simply Vera Wang and Lauren Conrad. Stores had a comparable sales decline of 2.6% in the quarter, while digital sales declined 7.7%.

• Comparable sales down 4% to down 6% for the year. - Operating margin of 2.2% to 2.6% for the year. - Diluted EPS of $0.10 to $0.60 for the year. - Expect inventory to be down high single digits by the end of the year.

• Tariffs remain a fluid and uncertain situation, impacting cost and pricing. - Middle and low income customers are pressured, prioritizing value and trading down. - Kohl's card customer performance has lagged, though improving as investments are made and coupon exclusions reduced.

Q: Mark Altschwager asked about adjustments to strategic priorities and returning to comp growth.

A: Michael Bender said no major changes to strategy, and restoring growth will take time as they align with customer needs.

Q: Julie asked about gross margin breakdown and private label penetration.

A: Jill Timm said mix benefit and inventory management were key drivers, and proprietary brand penetration can improve margins.

Q: Dana Telsey asked about store footprint and tariffs.

A: Jill Timm said stores are profitable, with ongoing evaluation of store base, and tariffs are fluid with mitigation efforts.

Q: Jacquelyn Wang asked about Sephora.

A: Jill Timm said Sephora is in all stores, pleased with performance, and has future opportunities.

Q: Tracy Kogan asked about e-com performance and tariffs.

A: Jill Timm said e-com has progressive improvement, and guidance accounts for tariff mitigation.

Q: Blake Anderson asked about growth prioritization and national brands.

A: Jill Timm and Michael Bender discussed focusing on core customers and balancing proprietary and national brands.

Q: Chuck Grom asked about margin guide and phasing.

A: Jill Timm said comfortable with guide, with back half having margin accretive potential.

Q: Brooke Roach asked about women's business and credit.

A: Jill Timm said women's has green shoots, and credit performance is tied to customer sales.