Tom Kingsbury: Well, we’re performing very well and, obviously, in the anniversary stores overall. We have a 30% comp, which is obviously significantly good and our overall beauty business is up 70%, if you include the — obviously the newer stores as well. But, right now, we have like — we have 900-plus stores — shops, excuse me, in Sephora, which is very exciting. I mean, it’s exciting in many different ways. One of which is the fact that, going into holiday now, we’ll have 50 more Sephora shops than we had last year. And as you know is that beauty is a really important category in the fourth quarter. So, we really feel good about that overall. We really expect to hit the $2 billion mark by 2025. Very confident about that based on what we’re currently doing.
Good news also, it’s accretive to operating margin. 40% of the Sephora baskets have an additional category purchase in the basket. Customers returning for additional purchases for Sephora, shop two times more often than Kohl’s base. Our return on investment, all the capital that we spent, obviously, is very significant overall. And what’s interesting is, I mean it’s really across — the performance is doing well across all the categories, especially the fragrance business, but we’re still doing well with skincare and makeup. And as I mentioned on last — the last call, excuse me, 30% of the customers that shop Sephora at Kohl’s are new to Kohl’s. I mean, that is a significant number. And obviously, it’s a newer — new customer, obviously. It’s younger, more diverse.
It’s really very important to bring a new customer into the store overall. And there is some ancillary businesses that are performing better than they have. Our Junior business is doing better than it has before. So, we’re capturing some additional sales there overall. But the partnership with Sephora is phenomenal. And we really feel that the numbers we put out there will be achievable in the near future. So, KVIs, your second question, so far we’ve done very well with KVIs. It’s a small subset of our private brands in apparel and in home, but we’ve seen a positive comp on that. So, we plan to — in 2024, we plan to roll out more high-volume price items, KVIs, and it’ll be primarily from our private and proprietary brands overall. But so far so good, and — but we’re going to be watching it.
We’re going to be watching it very, very closely just because we want to make sure whatever we do, it’s the right thing to do for the long run. So — but it’s good so far. So, feel good about it.
Bob Drbul: Thank you.
Tom Kingsbury: Thank you.
Operator: Our next question comes from Oliver Chen with TD Cowen. Please go ahead.
Oliver Chen: Hi, Tom and Jill. Within guidance, what’s assumed in terms of promotions in merchandise margins? And do you expect traffic to continue to be fairly volatile? And Tom, as you’ve made some nice strides in footwear and apparel, what might be the timing of that impact with the initiatives you’re taking — you’re putting forward? And also, how they may interplay with what’s happening at Sephora, which is quite remarkable and successful? Thank you.
Jill Timm: Sure. Good morning, Oliver. I’ll start with guidance. I think overall, as we head into holiday, we always know it’s going to be promotional. Promotions are core to what Kohl’s has done. And even though I think we’ve done some great editing throughout the year, you’re going to see us really lean into promotions. In the fourth quarter, I think we’ve talked about it, we aren’t going to leave ourselves empty from a promotion perspective or do as many cuts as you’ve seen in the first three quarters of the year because we know how important it is in holiday, particularly with the uncertainty in the macro environment. We’re going to definitely make sure we’re delivering the value our customers have known Kohl’s for. That’s all contemplated in the guidance.
And I think when you kind of work through getting to that 4% EBIT, we are expecting to now be at the high end of the 36% to 36.5% range that we did give from a guidance perspective. So, even with the promotional environment we’ve been anticipating this, we know we’re going to be competitive, and that’s definitely contemplated from a guidance perspective. In terms of traffic, I think we’ve seen our traffic improve in both channels as the year has progressed. Obviously, a lot of the efforts that Tom has outlined, particularly Sephora being a traffic driving initiative, has helped us build that traffic back from a store perspective. We’re also seeing a basket expansion, as well that customers are willing to spend a little bit more on that product.
So, I think it’s really a balance for us. But as we’ve seen a little bit of volatility like you mentioned, that’s more driven by weather patterns. And as we go into holiday, that becomes less of a factor as people really get into that gift-giving mode.
