Kohl’s Corporation (NYSE:KSS) Q3 2022 Earnings Call Transcript

And then, I think last is active is a place that you’ve seen softness. But on the apparel side, we’re still trending well. So you’re going to see that we move that to the front of the store with Sephora, you’re going to see that we’re going to have a great array of product, but really going to see more on our FLX and Tek Gear because of the value orientation of those products, which are going to be much more important during the holiday season. So I think as I look across inventory, I feel like the progress we made is where we expect it to be, we feel good with the content that we have as we head into holiday, and then we will have the flexible to make any moves that we need to, to make sure we enter 2023 from a strong position.

Omar Saad: Got it. Thank you. And then maybe any quick thoughts on what’s going on in the active footwear side of the business? And any levers you can pull to get that going again?

Jill Timm: Yes. I think right now, it’s about the supply chain and just getting the newness in. When we do get newness, it sells well. We just don’t have enough of it. From my understanding, we should start seeing a flow happen more in Q1. So we expect spring €˜23, we’ll start pushing that back into a positive zone. But I would say what I’m excited about in footwear, Omar, is the dress side of the business is really coming through. We actually ran positive comps there, and we have a great boot business happening as well, which is a good statement as we move into the holiday period. So, I think active footwear will lag a little bit, but really excited about the dress side of the business.

Operator: Your next question is from the line of Ashley Helgans with Jefferies.

Blake Anderson: It’s Blake on for Ashley. Good morning. I wanted to ask two questions. One on the promotions and just the impact to gross margins. So, I think you mentioned freight is a headwind in Q3 and then product cost inflation. I don’t know if you could hone in a little bit more on the gross margin impact from promotions? And then, maybe any directional read how we should be thinking about Q4 or promotions.

Jill Timm: I think, as you know, we have had a strategy around our pricing and promotion and really optimizing that. So, we actually called that out as a benefit to our margin in the third quarter, really helping offset some of these headwinds as well as helping us when we had to clear through some inventory to offset that. What I’d actually say is we’re optimizing those promotions to be much more effective as well. So much more targeted offers, much more personalized offers, eliminating a lot of stackability, which was confusing for the customer because they had to do math. So, really making sure that the offers that we’re putting in are meaningful to the customer to drive their behavior. So that strategy is still being employed.

Pricing being really important during this holiday season to make sure that we’re being competitive and then underlying where is that extra benefit we can get from Kohl’s Cash specifically and then of course, all offers. As we move into holiday, it’s always promotional. It’s something that Kohl’s has thrived in over the years as we know how to be promotional. We know how to lean in and out. And I think the agility that we have today is a new muscle that you haven’t seen in years past. So, we’re going to be able to make those moves much more quickly, dependent on what we’re seeing from a consumer perspective. So, we’re able to promote to be competitive, promote to see where the product is moving and promote much more in a targeted manner to move consumer behavior.

So, I feel that this actually plays to a strength of Kohl’s, and we’re set up to take advantage of that in the fourth quarter.