KOHLS Corp 8-K, filed May 19, 2020
KOHLS Corp (KSS)
About this 8-K
KOHLS Corp filed this 8-K on May 19, 2020.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 2.02. | Results of Operations and Financial Condition. |
On May 19, 2020, Kohl’s Corporation issued a press release reporting its earnings for the quarter ended May 2, 2020. A copy of the press release is attached as Exhibit 99.1 and incorporated by reference herein.
| Item 7.01. | Regulation FD Disclosure. |
See Item 2.02. As part of its press release reporting earnings for the quarter ended May 2, 2020, Kohl’s Corporation provided an update on actions taken in response to COVID-19, including the Company’s actions against its priorities at the onset of the COVID-19 pandemic and the health and safety protocols it has incorporated into stores that have begun to reopen following the Company’s previous announcement of nationwide store closures due to the pandemic.
The information in Items 2.02 and 7.01, including the exhibit attached hereto, is furnished solely pursuant to Items 2.02 and 7.01 of Form 8-K. Consequently, such information is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section. Further, the information in Items 2.02 and 7.01, including the exhibit, shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933.
Cautionary Statement Regarding Forward-Looking Information and Non-GAAP Measures
This current report on Form 8-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause the Company’s actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company’s Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in the Company’s filings with the SEC. Forward-looking statements relate to the date initially made, and Kohl’s undertakes no obligation to update them.
In this press release and presentation materials, the Company provides information regarding adjusted net (loss) income and adjusted diluted (loss) earnings per share, which are not recognized terms under U.S. generally accepted accounting principles (“GAAP”) and do not purport to be alternatives to net income as a measure of operating performance. A reconciliation of adjusted net (loss) income and adjusted diluted (loss) earnings per share is provided in this press release and presentation materials. The Company believes that the use of these non-GAAP financial measures provides investors with enhanced visibility into its results with respect to the impact of certain costs. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies.
| Item 9.01. | Financial Statements and Exhibits. |
| Exhibit |
Description | |||
| 99.1 |
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| 99.2 |
Presentation Materials for May 19, 2020 Quarterly Earnings Conference Call | |||
| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: May 19, 2020 |
KOHL’S CORPORATION | |||||
| By: |
/s/ Jason J. Kelroy | |||||
| Jason J. Kelroy | ||||||
| Executive Vice President, | ||||||
| General Counsel and Secretary | ||||||
Exhibit 99.1
Kohl’s Corporation Reports Financial Results
| • | Significantly increased financial flexibility during quarter, ending with $2.0 billion in cash |
| • | Swift and aggressive actions taken in response to COVID-19 resulted in positive operating cash flow |
| • | First quarter net sales decrease (43.5%) |
| • | First quarter diluted loss per share of ($3.50); adjusted diluted loss per share(2) of ($3.20) |
MENOMONEE FALLS, Wis.—(BUSINESS WIRE)—May 19, 2020— Kohl’s Corporation (NYSE:KSS) today reported results for the quarter ended May 2, 2020.
| Three Months | ||||||||||||
| ($ in millions, except per share data) |
2020 | 2019 | Change | |||||||||
| Total revenue |
$ | 2,428 | $ | 4,087 | (40.6 | )% | ||||||
| Net sales(1) |
(43.5 | )% | (3.3 | )% | ||||||||
| Gross margin |
17.3 | % | 36.8 | % | (1,950) bps | |||||||
| Selling, general, and administrative expenses |
$ | 1,066 | $ | 1,275 | (16.4 | )% | ||||||
| Reported |
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| Net (loss) income |
$ | (541 | ) | $ | 62 | (973 | )% | |||||
| Diluted (loss) earnings per share |
$ | (3.50 | ) | $ | 0.38 | (1,021 | )% | |||||
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Non-GAAP(2) |
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| Adjusted net (loss) income |
$ | (495 | ) | $ | 98 | (605 | )% | |||||
| Adjusted diluted (loss) earnings per share |
$ | (3.20 | ) | $ | 0.61 | (625 | )% | |||||
| (1) | Not reporting comparable sales due to store closures |
| (2) | Excludes Impairments, store closing, and other costs |
“We entered the year in a strong financial position and our business was tracking to our expectations prior to the onset of the crisis. We immediately responded with actions to protect the health and safety of our associates and customers and to preserve our financial position. I am incredibly proud of how our associates stepped up to face this unprecedented challenge with speed and agility. Our actions to manage cash outflow and increase liquidity have been instrumental in enhancing our position to navigate this crisis, and we believe our history of prudent capital management will continue to serve us well,” said Michelle Gass, Kohl’s chief executive officer.
“We have begun the rebuilding process, recently reopening about 50% of our stores across the country. In doing so, we have taken special care to equip our stores with the latest health and safety measures as we welcome back our associates and customers,” said Gass. “As we look ahead, we know this experience will have a lasting impact to customer behavior and the retail landscape, and we are evolving our strategies to ensure our relevance and to capture market share.”
Actions Taken In Response to COVID-19
As part of the COVID-19 response, the Company has taken the following actions to preserve financial liquidity and financial flexibility:
| • | Managed inventory receipts meaningfully lower, |
| • | Significantly reduced expenses across the business inclusive of marketing, technology, operations and payroll, |
| • | Decreased planned capital expenditures by approximately $500 million, |
| • | Suspended share repurchase program, |
| • | Suspended regular quarterly cash dividend beginning in the second quarter of 2020, |
| • | Replaced and upsized revolver to $1.5 billion secured facility, and |
| • | Issued $600 million notes due 2025. |
First Quarter 2020 Earnings Conference Call
Kohl’s will host its quarterly earnings conference call at 9:00 am ET on May 19, 2020. A webcast of the conference call and the related presentation materials will be available via the Company’s web site at http://corporate.kohls.com/investors/events-and-presentations, both live and after the call.
Cautionary Statement Regarding Forward-Looking Information and Non-GAAP Measures
This current report on Form 8-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause the Company’s actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company’s Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in the Company’s filings with the SEC. Forward-looking statements relate to the date initially made, and Kohl’s undertakes no obligation to update them.
In this press release, the Company provides information regarding adjusted net (loss) income and adjusted diluted (loss) earnings per share, which are not recognized terms under U.S. generally accepted accounting principles (“GAAP”) and do not purport to be alternatives to net income as a measure of operating performance. A reconciliation of adjusted net (loss) income and adjusted diluted (loss) earnings per share is provided in this release. The Company believes that the use of these non-GAAP financial measures provides investors with enhanced visibility into its results with respect to the impact of certain costs. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies.
About Kohl’s
Kohl’s (NYSE: KSS) is a leading omnichannel retailer with more than 1,100 stores in 49 states. With a commitment to inspiring and empowering families to lead fulfilled lives, Kohl’s offers amazing national and exclusive brands, incredible savings and an easy shopping experience in our stores, online at Kohls.com and on Kohl’s mobile app. Since its founding, Kohl’s has given more than $750 million to support communities nationwide, with a focus on family health and wellness. For a list of store locations or to shop online, visit Kohls.com. For more information about Kohl’s impact in the community or how to join our winning team, visit Corporate.Kohls.com or follow @KohlsNews on Twitter.
Contacts
Investor Relations:
Mark Rupe, (262) 703-1266, mark.rupe@kohls.com
Media:
Jen Johnson, (262) 703-5241, jen.johnson@kohls.com
KOHL’S CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | ||||||||
| (Dollars in Millions, Except per Share Data) |
May 2, 2020 | May 4, 2019 | ||||||
| Net sales |
$ | 2,160 | $ | 3,821 | ||||
| Other revenue |
268 | 266 | ||||||
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| Total revenue |
2,428 | 4,087 | ||||||
| Cost of merchandise sold |
1,787 | 2,415 | ||||||
| Gross margin rate |
17.3 | % | 36.8 | % | ||||
| Operating expenses: |
||||||||
| Selling, general, and administrative |
1,066 | 1,275 | ||||||
| As a percent of total revenue |
43.9 | % | 31.2 | % | ||||
| Depreciation and amortization |
227 | 230 | ||||||
| Impairments, store closing, and other costs |
66 | 49 | ||||||
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| Operating (loss) income |
(718 | ) | 118 | |||||
| Interest expense, net |
58 | 52 | ||||||
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| (Loss) income before income taxes |
(776 | ) | 66 | |||||
| Provision for income taxes |
(235 | ) | 4 | |||||
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| Net (loss) income |
$ | (541 | ) | $ | 62 | |||
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| Average number of shares: |
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| Basic |
154 | 161 | ||||||
| Diluted |
155 | 162 | ||||||
| (Loss) earnings per share: |
||||||||
| Basic |
$ | (3.52 | ) | $ | 0.38 | |||
| Diluted |
$ | (3.50 | ) | $ | 0.38 | |||
ADJUSTED NET (LOSS) INCOME AND DILUTED (LOSS) EARNINGS PER SHARE, NON-GAAP FINANCIAL MEASURES
(Unaudited)
| Three Months Ended | ||||||||
| (Dollars in Millions, Except per Share Data) |
May 2, 2020 | May 4, 2019 | ||||||
| Net (loss) income |
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| GAAP |
$ | (541 | ) | $ | 62 | |||
| Impairments, store closing, and other costs |
46 | 36 | ||||||
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| Adjusted (non-GAAP) |
$ | (495 | ) | $ | 98 | |||
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| Diluted (loss) earnings per share |
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| GAAP |
$ | (3.50 | ) | $ | 0.38 | |||
| Impairments, store closing, and other costs |
0.30 | 0.23 | ||||||
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| Adjusted (non-GAAP) |
$ | (3.20 | ) | $ | 0.61 | |||
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KOHL’S CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (Dollars in Millions) |
May 2, 2020 | May 4, 2019 | ||||||
| Assets |
||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 2,039 | $ | 543 | ||||
| Merchandise inventories |
3,557 | 3,680 | ||||||
| Income tax receivable |
174 | 15 | ||||||
| Other |
400 | 397 | ||||||
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| Total current assets |
6,170 | 4,635 | ||||||
| Property and equipment, net |
7,169 | 7,211 | ||||||
| Operating leases |
2,373 | 2,453 | ||||||
| Other assets |
157 | 167 | ||||||
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| Total assets |
$ | 15,869 | $ | 14,466 | ||||
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| Liabilities and Shareholders’ Equity |
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| Current liabilities: |
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| Accounts payable |
$ | 1,866 | $ | 1,295 | ||||
| Accrued liabilities |
1,070 | 1,184 | ||||||
| Income taxes payable |
68 | 40 | ||||||
| Current portion of: |
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| Finance leases and financing obligations |
124 | 115 | ||||||
| Operating leases |
159 | 158 | ||||||
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| Total current liabilities |
3,287 | 2,792 | ||||||
| Long-term debt |
3,449 | 1,855 | ||||||
| Finance leases and financing obligations |
1,351 | 1,225 | ||||||
| Operating leases |
2,605 | 2,680 | ||||||
| Deferred income taxes |
165 | 233 | ||||||
| Other long-term liabilities |
222 | 239 | ||||||
| Shareholders’ equity |
4,790 | 5,442 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 15,869 | $ | 14,466 | ||||
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KOHL’S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended | ||||||||
| (Dollars in Millions) |
May 2, 2020 | May 4, 2019 | ||||||
| Operating activities |
||||||||
| Net (loss) income |
$ | (541 | ) | $ | 62 | |||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
227 | 230 | ||||||
| Share-based compensation |
15 | 15 | ||||||
| Deferred income taxes |
(91 | ) | 18 | |||||
| Impairments, store closing, and other costs |
51 | 49 | ||||||
| Non-cash inventory costs |
187 | — | ||||||
| Non-cash lease expense |
37 | 37 | ||||||
| Other non-cash expenses |
5 | 2 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Merchandise inventories |
(205 | ) | (202 | ) | ||||
| Other current and long-term assets |
(21 | ) | 6 | |||||
| Accounts payable |
660 | 108 | ||||||
| Accrued and other long-term liabilities |
(98 | ) | (141 | ) | ||||
| Income taxes |
(139 | ) | 1 | |||||
| Operating lease liabilities |
(34 | ) | (49 | ) | ||||
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| Net cash provided by operating activities |
53 | 136 | ||||||
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| Investing activities |
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| Acquisition of property and equipment |
(162 | ) | (238 | ) | ||||
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| Net cash used in investing activities |
(162 | ) | (238 | ) | ||||
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| Financing activities |
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| Proceeds from issuance of debt |
2,097 | — | ||||||
| Deferred financing costs |
(19 | ) | — | |||||
| Treasury stock purchases |
(8 | ) | (121 | ) | ||||
| Shares withheld for taxes on vested restricted shares |
(20 | ) | (25 | ) | ||||
| Dividends paid |
(108 | ) | (108 | ) | ||||
| Reduction of long-term borrowings |
(497 | ) | (6 | ) | ||||
| Finance lease and financing obligation payments |
(23 | ) | (31 | ) | ||||
| Proceeds from stock option exercises |
— | 2 | ||||||
| Proceeds from financing obligations |
3 | — | ||||||
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| Net cash provided by (used in) financing activities |
1,425 | (289 | ) | |||||
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| Net increase (decrease) in cash and cash equivalents |
1,316 | (391 | ) | |||||
| Cash and cash equivalents at beginning of period |
723 | 934 | ||||||
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| Cash and cash equivalents at end of period |
$ | 2,039 | $ | 543 | ||||
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Exhibit 99.2 Q1 2020 Results Presentation May 19, 2020 1Exhibit 99.2 Q1 2020 Results Presentation May 19, 2020 1
Cautionary Statement Regarding Forward-Looking Information This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as believes, anticipates, plans, may, intends, will, should, expects, and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, but are not limited to, comments about Kohl's future financial plans, capital generation, management and deployment strategies, adequacy of capital resources and the competitive environment, including statements related to the ongoing implications of the novel coronavirus (COVID-19). Such statements are subject to certain risks and uncertainties, which could cause Kohl's actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Item 1A in Kohl's Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in Kohl's filings with the SEC. Any number of risks and uncertainties could cause actual results to differ materially from those Kohl’s expresses in its forward-looking statements, including the ability of Kohl’s to successfully navigate the impact of COVID-19; the short and long-term impact of COVID-19 on the economy, and retail and economic activity; changes in consumer behavior and confidence, including those changes related to rising unemployment rates; the duration and scope of COVID-19, and the pace of recovery thereafter; the actions that governments, businesses and individuals take in response to COVID-19, including store closures and limiting or prohibiting certain retail activities; general economic uncertainty and a worsening of economic conditions or low levels of economic growth; the effects of steps Kohl’s takes to reduce operating costs and increase its cash position; competitive conditions in the retail industry; relationships with Kohl’s associates, customers, vendors, lenders, and stockholders; and the availability of capital to operate Kohl’s business. Forward-looking statements speak as of the date they are made, and Kohl’s undertakes no obligation to update them. Non-GAAP Financial Measures In addition, this presentation contains non-GAAP financial measures, including Adjusted EPS. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are included in the Appendix of this presentation. 2 2Cautionary Statement Regarding Forward-Looking Information This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as believes, anticipates, plans, may, intends, will, should, expects, and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, but are not limited to, comments about Kohl's future financial plans, capital generation, management and deployment strategies, adequacy of capital resources and the competitive environment, including statements related to the ongoing implications of the novel coronavirus (COVID-19). Such statements are subject to certain risks and uncertainties, which could cause Kohl's actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Item 1A in Kohl's Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in Kohl's filings with the SEC. Any number of risks and uncertainties could cause actual results to differ materially from those Kohl’s expresses in its forward-looking statements, including the ability of Kohl’s to successfully navigate the impact of COVID-19; the short and long-term impact of COVID-19 on the economy, and retail and economic activity; changes in consumer behavior and confidence, including those changes related to rising unemployment rates; the duration and scope of COVID-19, and the pace of recovery thereafter; the actions that governments, businesses and individuals take in response to COVID-19, including store closures and limiting or prohibiting certain retail activities; general economic uncertainty and a worsening of economic conditions or low levels of economic growth; the effects of steps Kohl’s takes to reduce operating costs and increase its cash position; competitive conditions in the retail industry; relationships with Kohl’s associates, customers, vendors, lenders, and stockholders; and the availability of capital to operate Kohl’s business. Forward-looking statements speak as of the date they are made, and Kohl’s undertakes no obligation to update them. Non-GAAP Financial Measures In addition, this presentation contains non-GAAP financial measures, including Adjusted EPS. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are included in the Appendix of this presentation. 2 2
Key Historical Highlights Leading omnichannel retailer with 65 million customers in 2019 • Accelerating, high growth digital business with sales penetration of 24% in 2019 • History of strong free cash flow generation and prudent capital management • Demonstrated commitment to Investment Grade: $940M+ debt paid down in 2018-2019 • Unmatched brand portfolio with collection of strong private and national brands • Convenient, off-mall stores located primarily in suburban neighborhood strip centers • Industry leading loyalty program, including strong Kohl’s Charge Card sales penetration of 56% in 2019 • Strong culture with best-in-class customer and associate engagement • 3Key Historical Highlights Leading omnichannel retailer with 65 million customers in 2019 • Accelerating, high growth digital business with sales penetration of 24% in 2019 • History of strong free cash flow generation and prudent capital management • Demonstrated commitment to Investment Grade: $940M+ debt paid down in 2018-2019 • Unmatched brand portfolio with collection of strong private and national brands • Convenient, off-mall stores located primarily in suburban neighborhood strip centers • Industry leading loyalty program, including strong Kohl’s Charge Card sales penetration of 56% in 2019 • Strong culture with best-in-class customer and associate engagement • 3
Q1 2020 Results Presentation COVID-19 Update 1 Q1 2020 Results 2 Strategic Highlights 3 4Q1 2020 Results Presentation COVID-19 Update 1 Q1 2020 Results 2 Strategic Highlights 3 4
COVID-19 Update 5COVID-19 Update 5
Our Top Priorities Protecting the health and safety of our associates and customers Preserving our financial position 6 6Our Top Priorities Protecting the health and safety of our associates and customers Preserving our financial position 6 6
Protecting Associates And Customers Store Closures to Help Slow the Spread of the Virus th Closed all of our stores on March 20 • Temporarily furloughed 85,000 associates on March 30th and supported them • with two calendar weeks of pay and continuation of existing health benefits Enhanced Safety Measures as Stores Reopen Reopened about 50% of our stores across the country since May 4, 2020 • Following a set of criteria, including state guidelines, health data, store readiness, • and field insights Significant enhancements to the store environment and operations made to • prioritize the health and safety of Kohl’s customers and associates Limited store hours • Social distancing measures • Elevated cleaning and sanitization measures • • Associate wellness and temperature checks, safety training and the use of masks 7Protecting Associates And Customers Store Closures to Help Slow the Spread of the Virus th Closed all of our stores on March 20 • Temporarily furloughed 85,000 associates on March 30th and supported them • with two calendar weeks of pay and continuation of existing health benefits Enhanced Safety Measures as Stores Reopen Reopened about 50% of our stores across the country since May 4, 2020 • Following a set of criteria, including state guidelines, health data, store readiness, • and field insights Significant enhancements to the store environment and operations made to • prioritize the health and safety of Kohl’s customers and associates Limited store hours • Social distancing measures • Elevated cleaning and sanitization measures • • Associate wellness and temperature checks, safety training and the use of masks 7
Preserving Financial Position Leaned into Digital business and quickly updated digital site • Drive content to reflect customer interest Digital Sales Launched Store Drive Up on April 2nd in most stores • Inventory: Managed receipts lower and extended payment terms • SG&A: Significantly reduced expenses across all areas • Reduced Capex: Lowered 2020 forecast by $500 million • Cash Outflow Dividend: Suspended beginning in Q2 2020 • Share repurchases: Suspended • Increased Revolver: Replaced, securitized, and upsized to $1.5 billion • Financial New Debt: Issued $600 million notes due 2025 • Liquidity 8Preserving Financial Position Leaned into Digital business and quickly updated digital site • Drive content to reflect customer interest Digital Sales Launched Store Drive Up on April 2nd in most stores • Inventory: Managed receipts lower and extended payment terms • SG&A: Significantly reduced expenses across all areas • Reduced Capex: Lowered 2020 forecast by $500 million • Cash Outflow Dividend: Suspended beginning in Q2 2020 • Share repurchases: Suspended • Increased Revolver: Replaced, securitized, and upsized to $1.5 billion • Financial New Debt: Issued $600 million notes due 2025 • Liquidity 8
Q1 2020 Results 9Q1 2020 Results 9
Q1 2020 Results Key Takeaways Entered 2020 in a strong financial position with business tracking to expectations prior to the crisis • Immediately responded with aggressive actions to significantly enhance financial flexibility • Positive operating cash flow in Q1 achieved through collective actions • Ended quarter with $2.0 billion in cash and $500 million of availability on our revolver • Q1 2020 Results COVID-19 materially impacted results as all stores were closed beginning on March 20th • Total revenue (41%), with net sales (43%) and other revenue flat • Digital sales +24%, and accelerated to +60% in the month of April • Gross margin significantly contracted due to COVID-19 impact • SG&A expense declined 16% in Q1, yet declined 19.5% excluding COVID-19 expenses • 1 Adjusted EPS ($3.20) vs. $0.61 in prior year • Inventory declined 3% year-over-year and receipts were down over 30% • 10 10 (1) Adjusted EPS is a non-GAAP financial measure. Please refer to the reconciliation included in the Appendix for more information. Q1 2020 Results Key Takeaways Entered 2020 in a strong financial position with business tracking to expectations prior to the crisis • Immediately responded with aggressive actions to significantly enhance financial flexibility • Positive operating cash flow in Q1 achieved through collective actions • Ended quarter with $2.0 billion in cash and $500 million of availability on our revolver • Q1 2020 Results COVID-19 materially impacted results as all stores were closed beginning on March 20th • Total revenue (41%), with net sales (43%) and other revenue flat • Digital sales +24%, and accelerated to +60% in the month of April • Gross margin significantly contracted due to COVID-19 impact • SG&A expense declined 16% in Q1, yet declined 19.5% excluding COVID-19 expenses • 1 Adjusted EPS ($3.20) vs. $0.61 in prior year • Inventory declined 3% year-over-year and receipts were down over 30% • 10 10 (1) Adjusted EPS is a non-GAAP financial measure. Please refer to the reconciliation included in the Appendix for more information.
Q1 2020 Key Metrics Consolidated Statement of Operations Three Months Ended (Dollars in Millions, Except EPS data) May 2, 2020 May 4, 2019 Net Sales $ 2,160 $ 3,821 Total Revenue 2,428 4,087 Gross Margin Rate 17.3% 36.8% SG&A Expenses 1,066 1,275 Depreciation and Amortization 227 230 Impairments, Store Closings, and Other Costs 66 49 Operating (Loss) Income $ (718) $ 118 Interest Expense, Net 58 52 Provision for Income Taxes (235) 4 Net (Loss) Income $ (541) $ 62 Diluted (Loss) Earnings per Share ($3.50) $0.38 Adusted Net (Loss) Income (Non-GAAP) $ (495) $ 98 Diluted Adjusted (Loss) Earnings per Share (Non-GAAP) ($3.20) $0.61 Key Balance Sheet Items May 2, 2020 May 4, 2019 (Dollars in millions) Cash and Cash Equivalents $ 2,039 $ 543 Merchandise Inventories 3,557 3,680 Accounts Payable 1,866 1,295 Long-term Debt 3,449 1,855 11 11 11 Adjusted EPS is a non-GAAP financial measure. Please refer to the reconciliation included in the Appendix for more information. Q1 2020 Key Metrics Consolidated Statement of Operations Three Months Ended (Dollars in Millions, Except EPS data) May 2, 2020 May 4, 2019 Net Sales $ 2,160 $ 3,821 Total Revenue 2,428 4,087 Gross Margin Rate 17.3% 36.8% SG&A Expenses 1,066 1,275 Depreciation and Amortization 227 230 Impairments, Store Closings, and Other Costs 66 49 Operating (Loss) Income $ (718) $ 118 Interest Expense, Net 58 52 Provision for Income Taxes (235) 4 Net (Loss) Income $ (541) $ 62 Diluted (Loss) Earnings per Share ($3.50) $0.38 Adusted Net (Loss) Income (Non-GAAP) $ (495) $ 98 Diluted Adjusted (Loss) Earnings per Share (Non-GAAP) ($3.20) $0.61 Key Balance Sheet Items May 2, 2020 May 4, 2019 (Dollars in millions) Cash and Cash Equivalents $ 2,039 $ 543 Merchandise Inventories 3,557 3,680 Accounts Payable 1,866 1,295 Long-term Debt 3,449 1,855 11 11 11 Adjusted EPS is a non-GAAP financial measure. Please refer to the reconciliation included in the Appendix for more information.
Q1 Gross Margin Q1 2019 Gross Margin 36.8% Usual clearance permanent markdowns in February spread • across significantly lower sales due to COVID-19 Inventory Actions (~1,500) bps Established a reserve for excess seasonal inventory given • the lower sales demand due to COVID-19 Cost of shipping pressure driven by significant shift of sales • to Digital in Q1 2020 (45% of total sales) vs. Q1 2019 (21% of Cost of Shipping (~250) bps total sales) due to store closures related to COVID-19 Unfavorable product mix as Home category outperformed • (~200) bps Mix / Other and increased promotional activity Q1 2020 Gross Margin 17.3% 12 12Q1 Gross Margin Q1 2019 Gross Margin 36.8% Usual clearance permanent markdowns in February spread • across significantly lower sales due to COVID-19 Inventory Actions (~1,500) bps Established a reserve for excess seasonal inventory given • the lower sales demand due to COVID-19 Cost of shipping pressure driven by significant shift of sales • to Digital in Q1 2020 (45% of total sales) vs. Q1 2019 (21% of Cost of Shipping (~250) bps total sales) due to store closures related to COVID-19 Unfavorable product mix as Home category outperformed • (~200) bps Mix / Other and increased promotional activity Q1 2020 Gross Margin 17.3% 12 12
Enhanced Liquidity Position Key Q1 2020 Balance Sheet & Cash Flow Items February 1, 2020 Key Takeaways Beginning Cash $723M Long history of disciplined and prudent • Sources capital management Revolver $1,000M More than two decades of maintaining • New Debt $600M Investment Grade rating Operating Cash Flow $53M Swift and aggressive actions taken to • Uses ensure appropriate financial liquidity to Capex ($162M) manage through crisis Dividend ($108M) Confident that actions taken will • Share Repurchase ($8M) successfully preserve financial position of May 2, 2020 the company Ending Cash $2,039M 13 13Enhanced Liquidity Position Key Q1 2020 Balance Sheet & Cash Flow Items February 1, 2020 Key Takeaways Beginning Cash $723M Long history of disciplined and prudent • Sources capital management Revolver $1,000M More than two decades of maintaining • New Debt $600M Investment Grade rating Operating Cash Flow $53M Swift and aggressive actions taken to • Uses ensure appropriate financial liquidity to Capex ($162M) manage through crisis Dividend ($108M) Confident that actions taken will • Share Repurchase ($8M) successfully preserve financial position of May 2, 2020 the company Ending Cash $2,039M 13 13
Strategic Highlights 14Strategic Highlights 14
Kohl's is a leading omnichannel retailer with a strong foundation, and a large and loyal customer base of 65 million An unmatched Easy and inspiring Leading brand portfolio at experiences loyalty program the best value 15 15 Based on 2019 FiguresKohl's is a leading omnichannel retailer with a strong foundation, and a large and loyal customer base of 65 million An unmatched Easy and inspiring Leading brand portfolio at experiences loyalty program the best value 15 15 Based on 2019 Figures
Strategic Focus Areas Strengthening Elevating Leading Operating product the the next with leadership experience generation excellence of loyalty 16 16Strategic Focus Areas Strengthening Elevating Leading Operating product the the next with leadership experience generation excellence of loyalty 16 16
Brands Strong collection of private brands Two $7B 4 of top 5 $1B private brands are brand sales private brands 17 Based on 2019 FiguresBrands Strong collection of private brands Two $7B 4 of top 5 $1B private brands are brand sales private brands 17 Based on 2019 Figures
Brands Strong collection of national brands 18Brands Strong collection of national brands 18
The power of our store base 80% 1,159 of Americans live within stores in 49 states 15 miles of a Kohl's Store 95% 99% of stores 4-wall cash-flow of Kohl's stores positive in 2019 are off mall Digital sales are 35%+ higher of digital orders with proximity to stores fulfilled by stores 19 Based on 2019 FiguresThe power of our store base 80% 1,159 of Americans live within stores in 49 states 15 miles of a Kohl's Store 95% 99% of stores 4-wall cash-flow of Kohl's stores positive in 2019 are off mall Digital sales are 35%+ higher of digital orders with proximity to stores fulfilled by stores 19 Based on 2019 Figures
Customer behaviors are influencing their expectations of the retail experience Shift to Mobile use Social media digital increase influence 50% 70%+ 16M of Kohl's digital of Kohl's traffic active Kohl’s sales are on mobile occurs through App users smartphones 20 Based on 2019 FiguresCustomer behaviors are influencing their expectations of the retail experience Shift to Mobile use Social media digital increase influence 50% 70%+ 16M of Kohl's digital of Kohl's traffic active Kohl’s sales are on mobile occurs through App users smartphones 20 Based on 2019 Figures
Digital has been key growth driver Digital sales $4.5B $4.0B $3.6B $3.0B $2.7B $2.1B Sales 11% 24% penetration 2014 2015 2016 2017 2018 2019 21 17% CAGRDigital has been key growth driver Digital sales $4.5B $4.0B $3.6B $3.0B $2.7B $2.1B Sales 11% 24% penetration 2014 2015 2016 2017 2018 2019 21 17% CAGR
Kohl’s has a leading loyalty program #1 30M 56% Loyalty program Loyalty Kohl’s Charge card 4 years running members penetration Based on 2019 Figures 22 Source: Bond Loyalty ReportKohl’s has a leading loyalty program #1 30M 56% Loyalty program Loyalty Kohl’s Charge card 4 years running members penetration Based on 2019 Figures 22 Source: Bond Loyalty Report
Recent investments are paying off Active Beauty Digital Amazon Sales nearly Sales increased Achieved 17% Innovation to drive doubled nearly 40% in past 5-year sales CAGR traffic into stores since 2013 5 years 23 Based on 2019 FiguresRecent investments are paying off Active Beauty Digital Amazon Sales nearly Sales increased Achieved 17% Innovation to drive doubled nearly 40% in past 5-year sales CAGR traffic into stores since 2013 5 years 23 Based on 2019 Figures
Our Capital Allocation Priorities Opportunistic, Invest in Share Dividend complementary 1 2 3 4 the business repurchases M&A Maintain strong balance sheet Long-term objective of maintaining investment grade 24 Due to COVID-19, the Company has reduced its investment in the business and has suspended its dividend and share repurchase program. Our Capital Allocation Priorities Opportunistic, Invest in Share Dividend complementary 1 2 3 4 the business repurchases M&A Maintain strong balance sheet Long-term objective of maintaining investment grade 24 Due to COVID-19, the Company has reduced its investment in the business and has suspended its dividend and share repurchase program.
Appendix 25Appendix 25
Reconciliations Adjusted Net (Loss) Income and Diluted (Loss) Earnings per Share, Non-GAAP Financial Measures (Unaudited) Three Months Ended (Dollars in Millions, Except per Share Data) May 2, 2020 May 4, 2019 Net (Loss) Income • GAAP $ (541) $ 62 • Impairments, store closing, and other costs 46 36 • Adjusted (non-GAAP) $ (495) $ 98 Diluted (Loss) Earnings per Share • GAAP $ (3.50) $ 0.38 • Impairments, store closing, and other costs 0.30 0.23 • Adjusted (non-GAAP) $ (3.20) $ 0.61 26 26Reconciliations Adjusted Net (Loss) Income and Diluted (Loss) Earnings per Share, Non-GAAP Financial Measures (Unaudited) Three Months Ended (Dollars in Millions, Except per Share Data) May 2, 2020 May 4, 2019 Net (Loss) Income • GAAP $ (541) $ 62 • Impairments, store closing, and other costs 46 36 • Adjusted (non-GAAP) $ (495) $ 98 Diluted (Loss) Earnings per Share • GAAP $ (3.50) $ 0.38 • Impairments, store closing, and other costs 0.30 0.23 • Adjusted (non-GAAP) $ (3.20) $ 0.61 26 26
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