Kohl's Corporation (KSS) Earnings Call Transcript & Summary

Thank you very much. We're really excited to be here with Kohl's. It's Oliver Chen. I'm Cowen's retail new platforms and luxury analyst. We're here at the future of the consumer conference, and we'd also love your support in the institutional investor poll under retailing department stores. So we're hosting Michelle Gass, the CEO of Kohl's; and Jill Timm, the CFO of Kohl's. Kohl's is a leading omnichannel retailer over 1,150 stores and a $6 billion digital platform, men's, women's, kids and accessories and a modernizing store footprint, which is increasingly modernizing with a lot of great initiatives. Cowen has an outperformed rating in Kohl's with a $60 price target based on 8x. There's numerous comp and margin-enhancing initiatives we'll get into as well as partnerships and digital optimization. Thank you so much. Great to be here with you, both.

It's good to be here, Oliver. Thanks.

So let's jump into modernizing the stores. There's a lot of great pieces here from Sephora to active to the field. I've always enjoyed walking through your stores, and they've been well maintained. But what's happening next?

Yes. So that is a -- it's a great question. Something we're really excited about. As we thought about the pieces of our strategy coming together, I mean, for us, the stores are at the center of everything. And I'm sure we're going to talk at length about Sephora, and I'll sprinkle in a couple of comments right upfront. But as we embarked on our transformation and put a strategy out there, which sort of culminates to really being this leader in the active and casual lifestyle, these stores, which we call our transformation stores. We have -- we're now approaching 300 of them. We opened 200 last year. We'll open another 400 this year, getting us to 600. Those transformation stores are the future of Kohl's. Now we're going to continue to evolve and learn. But it was really taking our strategy on differentiating in the market. And you can't be all things to all people. And for us, we saw the green shoots in certainly the active categories, and we may touch on that. And we've always been a destination for casual, things like denim and basics and fit fashion within that as well. But importantly, stores are relevant. I know through the pandemic, we've all had a different experience, but people are coming back to stores, and we have profitable stores, they are highly cash generative. So for us, it's how do we lean into stores and make them even more relevant. So for us, the big catalyst, which was the deal that we did during the pandemic, finally getting into the beauty business with Sephora was really that catalyst to renovate the entire experience. Because said another way, if all we were doing was adding Sephora to our kind of existing or older strategy, if you will, that would not be the innovation, the future leaning. So we really did take the opportunity. We did customer research. And what came out the other side was this completely renovated store, building out a beautiful 2,500 square foot Sephora store finally being in the beauty business, and we can talk about that. But importantly, flowing the store in the ways that the customer sees us in a differentiated way. So our active powerhouse brands right in the front, and we've worked with our brand partners with Nike and Adidas, Under Armour, elevated merchandising expanded space. And really running the gamut from your core active to athleisure to streetwear, outdoor, all of those categories doing really well. And then also throughout the store, updated and refreshed merchandising. So we're really proud of those stores. The quarter didn't necessarily -- the year didn't start out as we expected, but I will tell you, those stores in total, produced a positive comp in light of all the headwinds that we've been navigating overall.

But some of the biggest learning, surprises and/or attachment rates around Sephora that you would highlight? And what's ahead for that plan to add more Sephoras?

Yes. You bet. Well, I'd say today, Sephora is exceeding our expectations. For us and for Sephora, it's really been as we set out in this partnership. We've always said it would be a win-win that we bring this omnichannel capability. Clearly, our 1,200 stores, we've aligned to 850, but who knows, maybe there'll be more than that. All the new stores that we are looking in the foreseeable future are going to have a Sephora, so that's really exciting. But we bring this incredible reach, incremental. They're seeing the business with Kohl's as being almost 100% incremental to them. So again, the sort of win-win. And obviously, what we got in the partnership was instantly not really being in the beauty business to being in the beauty business with the global leader in prestige beauty. I'd say out of the gate, what we're seeing and very positive is, first of all, just how our customers resonated with our customers right away. So -- and we made a lot of changes in those stores. And yes, there's a little bit of disruption. We moved some categories like our young women's business or juniors to a different part of the store. But largely, the customer, when you make those big of a changes, it can be very disruptive, and it's a big bet. But we've been very pleased with what we're seeing with the customer. I think importantly, our existing customers, they love Sephora, and we're seeing them shop. So again, there wasn't a blink there, and then we're getting a lot of new customers. So 25% of all the customers coming into Sephora are new. And as part of our strategy, it's going to maintain our core customer, but bring in that younger customer, that more diverse customer. So we're seeing that. We are seeing a halo effect. So when I'm talking about a positive comp in the low single digits, that's the total store. And again, those stores have the same headwinds, and I'm sure we'll talk about around lapping stimulus or inflationary pressures and the like. So over -- more than overcame those pressures because we are seeing the growth of the beauty business and the halo and attach. Roughly half of the customers are adding another item in their basket, which is great, and that's coming from active. It's coming from women's. It's coming from accessories. I think one of the nice early surprises, which we anticipated, but I'd say it's happening sooner is the repeat. So these customers are shopping -- now that we have some time with those first 200 stores, they're shopping twice as often as what would be a traditional Kohl's customer. So one of the things we always loved about getting into the beauty business was that replenishment aspect, and we are already starting to see that. So a lot of good. The other thing, too, we've been very pleased the Sephora customers whether again, they're new or existing, they're shopping across all the categories. So all categories are performing. I think one of the nice surprises because we did have a decent fragrance business that, that is doing really well and the customer is buying up to some incredibly premium brands that we introduced.

Well, that's a segue to a great topic, the consumer being at a crossroads right now. The results were softer than you expected. What's happening with inflation, the consumer at the lower end and other factors because anniversarying the stimulus was difficult?

Yes. Yes. Jill, you want to jump in?

Yes, so I think we definitely are seeing there is some consumer uncertainty happening today. And I think we serve a lot of customers. And we talked about the fact that we do have a bifurcation in our customer. We're seeing them buy Sephora. We're seeing them by these high AUR new brands like Tommy and Calvin. And we continue to see our AUR expand. But we are seeing the customer become a little bit more selective in how many units they're putting in their transaction. And I think that's because their wallet is shrinking because they have to spend more for gas and they have to spend more for grocery. So we really need to lean into value. And as you know, Kohl's has been built on 3 tenants: brand, value and convenience. So although we're seeing AURs move up, we also are seeing customers migrate to our opening price point proprietary brands. So the power of Kohl's and the duality of our brands, national and proprietary really help us in these types of circumstances. Jumping Beans, which is an opening price point kids brand had a positive comp in the quarter. And Sonoma also had positive comps and Tek Gear is doing incredibly well with active. So as we watch the consumer moving under these pressures, we are going to move with them and say, okay, how can we now migrate and showcase some of these opening price point brands, so we can still satisfy their needs. But a little differently than maybe we've seen in the past couple of years, given the uncertainty, I think, that we're all navigating ahead of us. I think in Q1, we did have a strong start to the quarter. We felt great. It was really when we started lapping that stimulus late March into April, that became a pretty big change interacting in our business. And I think you heard that across retail. So as consumers wallets tightened, we saw them pull back. So now we have to lean into how we can help them. Seasonal part of our business, we were talking before this definitely was something that was a headwind for us in the first quarter. But as we said last week on the May call, we saw a notable improvement in our business, and a lot of that was with the weather shift as well. So I think there's still demand there. It's just going to come in different forms and maybe more on those proprietary brands. But for us, that's a good thing as well because they have a little bit higher margin.

Yes. It's a great balance of that national brand and private brand. Jill, building on your comments, what about inventory? The state of inventory? You've historically worked to sell with less, less can be more, but the pandemic changed a lot. What does it look like now?

Our inventories were up 40% in the quarter. And I think if you just take that off the face of the balance sheet, that seems like a lot. But if you actually break it down, the investments we're making in inventory, I put them in about 3 big buckets. The first is Sephora. So we didn't have 200 doors even operating last year in Q1, plus we have these 400 doors that we'll be opening in the course of the next less than 90 days. So we had about $330 million worth of inventory invested in those stores to generate the beauty environment that Michelle just talked about. The second packet was in transit. So last year, in Q3 and Q4, you guys heard us talk a lot about the fact we didn't have inventory. The supply chain disruption really harmed our ability to chase into inventory. And so this year, we added time to our intrinsic calendars. So we did have about $200 million more in transit inventory coming in, but those are receipts that are incredibly fresh. And we're right in set for summer and back-to-school receipts. So we'll be set. Last year, I would say we felt pretty light going into back-to-school. The third packet is about $80 million of pack-and-hold. So as receipts did come in late and fall and holiday, we looked at certain areas that said, hey, there's no sale liability to us to pack and hold it and put it out and fall. It's around fleece. It's around sleep. So those are things that really don't change a lot, so we can still sell them in the fall without having to take a markdown and really preserve our margin. If you take those 3 buckets out, our inventory is actually up 16.5% versus last year but down 15% to 2019. So we're still really mindful of being disciplined with inventory. The buckets of that 16.5% are to fund into active, which, of course, is a big strategy. We're reflowing it to the front of the store. We're giving it more space. We're getting access to more products, more in the outdoor space as well. And then the second one is women's. And last year, I think we had a lot of disruption in women's. We exited brands. We couldn't get into the newness. And so those are 2 key initiatives. So where we're funding the inventory, our strategies, and I think that is why it looks a little high. It will be up about high single digits by the end of the year. So we're mindful of that, and it's not going to be something that continues to stay elevated for the year, but it will be a process to work that back down.

Very helpful. And this duality and bifurcation is something we're seeing with the customer. We're asking every CEO at the conference about the consumer. On a scale of 1 to 10, how would you rate the health of your consumer acknowledging Kohl's services a wide swath of consumers?

Yes. I mean we certainly do. We serve over 60 million customers across really every demographic cohort. I think as we sit here today, I'd probably put it in that 6 to 7 range. I mean, based on what Jill was just saying. But we're conscientious that we're in this 40-year high inflation, and it doesn't feel like anybody is immune from that as they're looking at the gas prices and food prices. And making decisions based on where they're going to put their extra discretionary dollars from their budget. But that being said, just to build on what Jill was saying, first of all, again, pleased with the innovation we're bringing to the consumer because that's where we need to win, and we're seeing that in the Sephora, these transformation doors that are generating growth. And I look at that and say, even when things stabilize and getting past stimulus and yes, will be probably in inflation for a while that, that tailwind is only going to grow. And we actually are seeing that accelerate. So the gap between our innovation doors and our original or our core, that gap is only growing. So to me, that's really encouraging. And I look at some of the categories like beauty, which seem to be a bit more resilient to the inflationary pressures. So that's good for us. And then as it relates to our core businesses, it's incumbent upon us to show up with the best quality and the right value. And I think in the world of where is the customer going to shop, well, there's more -- like I said, more pressure to compete. But we are starting with a great proposition because we stand for quality and value. And I think retailers just have to be a lot more nuanced in how they're pricing goods as well. I mean, certainly in the world of digital, there's a lot more comparison shopping that goes on. So where can you frankly pass on price, where is the consumer willing to spend at? And there are categories outside of our categories where they're doing that and things like food. But even within our world, there are places where it makes sense. Dress apparel, men's dress. I mean one of our highest AUR growth in our business was in men's because we brought those premium brands on to jolting the bifurcation and they're spending up or they're spending for dress your clothes at this moment in time. We still are very much a casual brand, if you will, but we're serving the customer. So we do have these segments. On the other side, in your more elastic categories, there -- which become very competitive in an inflationary environment, you have to be relevant in value. And so that's where our private brands really come in. So sharp pricing, and we saw that in kids. As we've gotten sharper in pricing, we see the commensurate lift on sales. So we've built this capability. It's a lot around data and having the automation and the systems with the merchants and our -- we have a center of excellence in pricing and being super nuanced. And I think that's becoming really, really important. But overall, where is the customer, I mean 6 plus is where I'd put it for us.

Yes, that elasticity and also that agile nature of pricing, having opening as well as this premiumization is all important. So every public company is for sale, being a public company. What do investors need to know regarding the latest state of the potential bid and acquisition process? You've been agile and disciplined and there is a fiduciary responsibility.

Yes. So Oliver, I'll just reiterate what we said even last week on the call, which is we are still engaging with multiple bidders in the process. We recently put out kind of a process to them looking for final fully financed actionable bids. So we expect that to be in the coming weeks. But yes, we're still doing diligence. We're very much in it. And I think we all feel like we respect the fact that we've had multiple parties that see the value in the company.

Thank you for that comment. Categories. So thematically, Cowen is seeing this going out trade working with people looking to dress up again, which categories have been stronger? And which ones are you more cautious about and how might you need to reorientate the portfolio?

Yes. So it's a great question. I do think -- and this is something we've been saying all along, especially as we asserted a bolder strategy on saying who we are, who we aren't type of thing. And playing up the casual categories and not that we've ever been a big dress apparel dressee. But I think great brands, you have to -- you have to stand the ground. You have to stand for something to be a destination. So that's where we're putting our chips as being this casual and active destination. All our data would say that this is a trend that's here to stay. And whether that is to work out or to be in -- going to the coffee shop or even going to work, people are still bringing that casual nature, that comfort, that functionality into those occasions. So yes, while we are seeing -- and we're seeing it as well, like in our men's business, dress your apparel, but we've been very deliberate to build in, like in our private brands, more stretchy fabric, more athletic fabric even in things like blazer, same on the women's side. So we're seeing those areas do really well. But at the same time, on the more traditional active. So with our brands, the Nike, Under Armour, Adidas, now Outdoor, collectively, that active apparel also positively comped in the quarter. So the customer is saying, "I want variety. And if I go back to work, I'm going to wear a pair of jeans and a blazer and sneakers." And that is all in our wheelhouse. Like any time our merchants are going to kind of turn the dials based on where the trends are. But I think they're doing an effective job. The last piece, I would say. So women -- men's business very strong. I think they've done a nice job. That was overall positive comp driven a lot by some of the strategies that I was just mentioning in active outdoor as well as the new brands that are really resonating, especially Tommy Hilfiger, which fits squarely in this casual lifestyle. And then on the women's side, we're in the midst of a major transformation as well. We started that journey at the start of the pandemic, and we had fits and starts. A lot of that driven by supply chain challenges were just could not chase into the inventory, and it really did hurt us, especially in the second half of the year. So we're looking forward to comping that but relevant to where we saw the customer going, kind of pivoting a little bit more to some of these kind of back to life, going out, going back to work. So the dress category is a good example. I know Jill is wearing one of our dresses, I think a WebEx exclusive. No, that's a category we said we wanted to double down on, and we're seeing phenomenal growth there. Now it's been a small business, but really beginning to build a dress shop for women in the store and online. The other thing, too, to think about is if you think about from a pressure on the budget and inflationary environment, dresses are great investment because it's sort of one piece. You're one and done. So that's doing really well for us. Denim is doing really well and some of our key private brands where we're doubling down, saying women's and across the board like Sonoma also. So I feel really good with the core essence of the strategy, but it will be incumbent -- important to us to continue to track where the trends are within this overall umbrella. But I think we have the assets to do that between -- again, we talk about bifurcation on national and private brands. I also think about it as the duality. It's a point of difference for Kohl's, particularly as we compete with off-mall retailers to have these really strong national brands that are doing well. The active Levi's. We're top retailer of Levi's, Tommy's, Eddie Bauer, et cetera, alongside with Jumping Beans and Sonoma and Nine West, et cetera. To me, that really sets the business apart.

Versatility, casualization and interjecting the right kind of fashion, all important factors. In these 3 topics supply chain freight, what should we know now? It's been evolving. In many cases, it's been worse than expected for most retailers.

Yes, I actually feel like we got it pretty right. I think our margin this quarter, although down, better than we had kind of a headwind about 100 basis points. We did extend that to 100 to 125 basis points for the year. But I think freight is going to be a headwind for some time. We're not going to see the supply chain issues abate with oil prices as high as they are today. I think that's something that we're going to see persist into this year and into next year. So we continue to monitor it. We look at ways to add ports, so we can bring things in quicker. We add carriers, so we can continue to have capacity. And I think we are managing it quite well. So I feel like that's a place that we had our arms around pretty well as we entered or exited the quarter, and we feel good about that. You do start lapping some of those headwinds in Q4. So I think it's really -- you're going to see a lot of that in Q1, 2 and 3 and then see, hopefully, lapping it won't be quite as much of a headwind. But when we talk to our supply chain, I think they're saying, you should continue to expect this definitely through 2022 and into 2023. So that's how we're planning accordingly. I mentioned earlier, we're adding in transit times. So we're trying to do things because, obviously, given some of our AURs and our margins, we don't have the ability to do airfreight because it wouldn't make sense. So we're finding other ways to cut time out by adding in ports by adding in different carriers. You can do -- express it. So there's different ways we're being creative, but definitely, I are expecting that to persist for the year.

Back-to-school will be another exciting phase, the endemic we're in. Would love some highlights about how you're thinking about that. And how to be -- offer the consumer a clear value and be the right kind of promotional with what we're seeing?

Yes. No, it's a great question. And I think the last couple of years have all been a typical back-to-school in terms of if there was a back-to-school and then when it happened. Like even as we lapped last year, there was sort of these like many bubbles of back-to-school even in the spring, which we comped. But I think we're going to be really set up well this year compared to even like last year where kids was hard hit with the supply chain disruption. We go back in time, it seems like a long time ago. But when we planned the year last year, we planned it a lot more conservative than how the customer rebounded. And the 2 areas that had the biggest deficit was women's that I just was talking about and then kids. And so we were in chase mode in an environment where it was very difficult to chase. So we have, of course, corrected that. We've even brought some receipts earlier, as Jill mentioned. And we're always a great back-to-school destination for kids and for families. And we just haven't had a more traditional back-to-school in some time. We'll be set up for that or we'll be ready to flex if it's not more traditional. And in terms of what kids are looking to buy, we have the breadth. So we've got your more premium brands, especially in athletic. I mean we are a top destination for kids, whether it's boys, girls, younger kids, athletic brands like Under Armour, Adidas, Nike, which always do incredibly well. We're a top sneaker destination. So whether it's those brands or some of your more kind of athleisure, Vans or big destination for brands like Vans. And then in terms of what kids are wearing, our licensing business is always very popular. It's a big entertainment season coming up, a number of movies being released. And we're doing even some incremental buys around that, incremental merchandising in the store. And so that will all hit around that back-to-school season. So that kind of newness and relevancy on top of those core brands and categories. And then to your point on value, value is going to be critical. I mean, as we again talk about this environment and pressure on customer wallet. And so key brands like Jumping Beans, which had a positive comp the past quarter, we're going to lean in even further, even sharper, more marketing behind that as a true kind of valued traffic-driving brand. But then we also expect in this bifurcation that we'll still have a lot of customers gravitating up to those national premium brands as well.

Some of your competitors are definitely over-inventoried in apparel and they're promoting. What are your thoughts on how the promotional environment may unfold? And what's embedded in your base case?

So I think we've had a strategy around simplifying our promotional environment and our pricing. So I think we're coming from maybe a different place than others because we've had a lot of promotion. So as we've simplified it, it's really taking the customer lead. It's made it easier for them to understand the underlying value instead of having multiple stackable offers and making them do math. It's really being much more transparent on the pricing. We will still be promotional. It's who we are, but we're going to do it in a much more simplified manner. So we just finished what we call an LPS sale. There's no coupons. But now you'll see we'll move into an event that will have a coupon. And so it's really leveraging those type of offers to drive consumer, but making sure they're always really sharp on pricing. So I would say I assume people will be promotional, but it's a core competency of who we are. I think we still have room to actually continue to add it down our promotions because we know there's still promotions that are driving consumer behavior. So can we be more targeted? Oliver, you and I are not buying the same thing at Kohl's. So why should we be getting the same coupon? And so I think that's what we have a huge ability to do through the amount of data that we have on our customers. And so we continue to move that way. But it's definitely in a paced approach because you don't want to do it wrong. So that's really where we're moving to. So I would say you're still going to see us continue to simplify our pricing equation. You're going to see us stand for price, but we can also take price through just having less coupons or changing your sale price from 40% off to 35% off. And the customer is still going to feel like they're getting something on sale. They're still going to feel that great value, and we're still being incredibly competitive.

We both buy...

We do.

And the other thing I was going to add on that notion of this value piece we keep talking about is we have a leading loyalty program. So we have over 30 million members. The currency is Kohl's Cash, and you can earn it every day if you're award member or you earn it when we have these special Kohl's Cash events. We get very high redemption on that. So that's also a lever, and others I think have tried to replicate this idea of Kohl's Cash. There's -- I don't think anybody has really been able to do it in the way we do. I mean it's a very iconic, go and look at Tiktok videos. If you want to see people excited about their Kohl's Cash. And one of the things we just introduced in May was a kind of up-leveling of the Kohl's cash and rewards you can earn if you're a Kohl's card member. Again, we have a lot of consumers in there. We did test that. That actually gave us about a point lift in comp when we piloted it, and we were very thorough in that. So again, as we think about the back end of the year, giving customers more reasons to come to Kohl's, there's increase -- the 50% increase in Kohl's Cash that they can earn, which is very meaningful, especially again in this environment. So Kohl's Cash, value, pricing, being thoughtful and promotion, personalization. All of those things really go into the sausage making, if you will, on how we will show up from a pricing and promotional standpoint. We also have a very agile model. So we can turn prices on and off very quickly, both in our stores and online.

Kohl's Cash is iconic. We should talk about the metaverse and NFTs.

Yes. There you go.

So data and AI, artificial intelligence is a big part of our franchise at Cowen and pricing and personalization play nicely here. What are your key priorities for using the insights and customer interaction data you have?

Obviously, we have over 60 million customers, and we have a ton of data around it. And I think at Investor Day, we talked about a project both to use that data for personalization, but also for localization. And I think that's something -- you come into a Kohl's and a lot of the assortment had been the same. And we've been talking about localization, but more on the periphery. And now we're literally using the data to say this store over-penetrates for Nike. So we're going to give it 5 more racks of Nike, but they don't love Tek Gear. So we're going to pull up the Tek Gear. And we're being much more thoughtful on how those receipts are moving through and coming in versus being more democratic, which is probably the approach with a small amount of change. So we're starting with looking at across the company, but really active, kids and home are the first 3 areas that we're starting to leverage this. And you're going to see it in our home decor. So if you go in the south, it's going to stand for much more southern type living than if you were in the north. And in the past, we probably just had everything about summer. And summer happens very differently, as you know, in the south versus the north, and we hadn't been really adjusting those seasons appropriately as well. So there's a lot of learning on how we can allocate receipts, the timing of when we can transition, and really knowing that certain areas are going to be big active stores. We know outdoor out penetrates in the Northwest in our Seattle market. So they're going to get a lot more of the outdoor. But even when you underlie that, you say, of course, they do. There are going to be stores in the Northwest that don't actually want outdoor. And that was something we learned in our Milwaukee market. We just treated everyone the same. But based on where you are in the demographic of the customer, there was a big nuance in how we should be allocating what we're seeing go to clearance. So we were able to make those edits based on that data. So those receipts started getting written. We're starting to see those changes happen. So as you go visit Kohl's stores, hopefully, you guys start seeing the differences in localization. And then personalization, I think is really what we talked about is how do we talk to you? Do you want to have e-mail? Are you much more social and active? Do you have our app? What kind of coupons drive your behavior? Or is it more about just pure price? Are you a national brand versus a proprietary brand? And if you are a national brand, can we introduce you to a proprietary brand, especially if you think of our women's business? We now have this great dress business. Draper James, I think, is a new discovery module that we have coming in and we're resetting those. If you came in to buy Draper, can we introduce you to Lauren Conrad. And that's the type of personalization that we can start to that next trip in or why and how much they're putting in their basket. Sephora is going to be a huge opportunity for us as we start getting to know these customers and they're coming back for repeat trips and what and how can we put more in their basket. What Michelle mentioned earlier, we are actually seeing an acceleration on the impact of Sephora is having to our business, which gives us a lot of confidence, especially in the back half of the year, where we get 600 of these doors. I kind of like in the change to when you open a new store, you see that comp and years 2, 3 and 4, your best comps ever because you build awareness, you build the customer base, you build to return trips. And I think there's going to be a lot of that emulated to our Sephora offerings as well.

Yes, lots of extra interactions.

The only thing I wanted to add to that really quickly, I know we're getting short on time is as we think about building new stores. So -- and again, in this omnichannel world, we know how to run stores. We have communicated that we see at least 100 new stores. And a foundational element of those stores, Oliver, is around the intelligence, both in terms of where to put them, how to assort them, how to market them. And it's not only the data we have on the 60 million plus or the consumers in our area, but it's also using external feeds. So bringing both third-party data and our data together, we can tell what customers are searching online, not associated with Kohl's. So it gives us a lot more intelligence on how to build out those stores. And we're building a pilot one in Tacoma. We talked about that at our Investor Day and it's really coming together, and I think it will be a great test of how to bring all this knowledge together.

Connecting the whole journey and planning and personalization. Last question, 2 major ESG priorities that you're most excited about? And any closing remarks, things about Kohl's that are least well-understood?

Yes. So I'd say overall for ESG, this has been part of the company's DNA for decades. And I was excited when I became CEO to even take that further to talk about 2025 goals, et cetera. I'd say one area I am very passionate about, and we're making good progress is on the diversity side of things. And we have a Chief Diversity Officer. She's a direct report to myself. She is in all of our meetings and really everything we do goes through the lens of how do we serve a more diverse customer, how do we build the diversity of our associate base. With everything from talent, recruiting, training, how we create inclusivity. We actually are in the midst of launching an inclusivity survey right now with our associates. So very top of mind. Like every company, we're making progress, but there's a long way to go, but I think the whole organization is behind us. And then secondly, on the ESG side, we have said -- we put out the 2050 goal, but I think it's much more around the day-to-day operations of our business. We're making good progress there in terms of how do we minimize the environmental footprint. Because the biggest way we can do that in operating 1,200 stores is a lot of our energy use. So how do we reduce energy use? And we're doing that through retrofitting lighting. It may not sound like the sexiest thing, but use a lot of electricity through lighting. So changing that all to LED as an example, very active recycling program. And again, our associates are just so passionate and committed and we continue to challenge them with innovations, what can we do better to minimize the footprint we leave.

Well, it's such a pleasure to see you in person. Thank you. Thanks for sharing with us all the strategies.

Thank you.

Thank you so much.

Thanks, Oliver.