Kohls 1Q16 Earnings Call Notes

Kevin Mansell – Chairman, President & Chief Executive Officer

Further deterioration in April

“Thanks, Wes. The first quarter was well below our expectations in the sales line as a very strong start to the quarter in February was overcome by softer-than-expected pre-Easter business and then a further deterioration in April versus our plans. Our seasonal businesses followed a similar trajectory as the total company sales trend.”

We saw a similar pattern to Macys

“Much like Macy’s who reported yesterday, we had a very strong February. It was the first positive comp we’ve run since 2011, and we saw a pretty dramatic drop off the same timing they mentioned. So we’ll have to see if that drop-off is a macro-induced thing or if it’s company specific. We will know a lot more as more companies report later this week. But it will get warm. We have shorts to sell and we’re in a good inventory position. So I think at some point, people will need those clothes and will come buy them”

We’re trying to figure out whether this is macro or company specific

“So on the – one of the things we tried to make clear in the call, to be honest with you, Paul, is that right now I think we’re having a hard time determining how much of our underperformance was more related to macro factors, which you’re right, would have more implication on future performance and how much is related more to our company-specific factors which could have to do with inventory carryover, could have to do with marketing and effectiveness, particularly on events at critical times; could have to do with the transition because of weather, particularly in the Northeast and Midwest.”

Wesley S. McDonald – CFO, Senior Executive VP & Head-Investor Relations

Transactions per store down 4.8%

“Comp sales decreased 3.9% for the quarter. Transactions per store were down 4.8% for the quarter. Average transaction value increased 90 basis points comprised of 190 basis point increase in units per transaction and 100 basis points decrease in average unit retail.”

Capex is $825m this year

“Well, I think the number one priority for cash is to fund our growth so we’ll continue to invest in digital technologies to drive that business. So our CapEx for this year is $825 million. ”

Shift to digital advertising has helped drive digital sales

“Yeah, I mean, you’ve got four or five data points out there from people that have already reported. I be shocked if not everybody had some kind of a down-step change from fourth quarter to first quarter, the absolute value of which depends on the relative strength of the sector that they’re in and from a retail perspective. But I think one of the things we are in the process of looking at is we have made a pretty dramatic shift from print and direct mail into digital. That’s definitely helped drive the digital business very well.”

E-comm is not as profitable

“You are pretty new to the story so I’ve been an early I guess realist on e-comm versus brick-and-mortar. It’s not as profitable and I think everybody is coming around to that. Having said that, I think we missed our plan slightly in digital, it was only on a couple of days, so I don’t think there’s a material slowdown. The same things that affect traffic in the stores, you don’t need shorts you’re not going to buy them online just because it’s easier, and can ship to your house for free. You will buy it when you need it. ”

May be pulling back digital advertising a bit

“I think one of the things we are in the process of looking at is we have made a pretty dramatic shift from print and direct mail into digital. That’s definitely helped drive the digital business very well. We may need to rethink that mix to reach some more of our traditional customers that get their information from print.”

“We have a team of our best and brightest trying to investigate everything right now. So at a high level, I would think we’d be trying to test a little bit more weight into print and direct mail and maybe pull back from digital a little bit.”