KSS
#We don't really have the NPD data for the second quarter yet but I'm assuming that it will tell us that Amazon continues to gain market share as do off-price.
We did a lot better in the second quarter than we did in the first, so I think that will probably help us out as well.
From a traffic, Kevin talked about, we are doing a good job with the credit card customer.
They continue to shop us and shop is more than they did last year.
We have to continue to make inroads with a non-credit card customer.
That's part of the thing we talked about.
I think <UNK> asked the question earlier on loyalty trying to engage them more, trying to round them up to a higher level of reward to get them to come in more frequently and raise the response rate, to hammer home the differentiation of us providing Kohl's Cash and the Yes2You rewards versus our competition.
All that takes time.
It's not going to turn on a dime.
So we just have to continue to do that.
If you start to notice our broadcasts I think you'll see a more consistent theme on highlighting those vehicles versus just saying what the current event is.
I think over time that is going to resonate with the customer and get them to come into us more often.
I think Wes definitely covered the key points.
And if you think about what we've covered in the call, <UNK>, we're definitely trying to bring out the message that we know that we've got to improve our speed strategy in private brands.
And we've been working on that and we're now starting to get confidence that we can scale that across the store.
So that's a big one.
And I think Michelle is now more confident than ever that wrapping loyalty platforms together allows us to move customers up through Yes2You and credit card combos that would lead to higher engagement and higher sales.
The other part that I think it's probably important for you to understand is that we do think that we have a big opportunity to amplify both the rollout but more importantly the relevancy of our store base.
So we made some store closures.
As Wes said we monitor stores all the time but there are no stores that we would anticipate closing next year right now.
And the indicators through things like our ability to ship from store more effectively and less expensively and Buy Online, Pick Up In Store adoption rates I think give us a sense that that's also a key element for us to see the value in having a broad network of brick-and-mortar stores.
I think it's a big advantage.
No, I could still think it's going to be about 30 basis points in total for the year.
Shipping cost is about 20 and then mix is about 10.
The bulbous portion of that is obviously the biggest advantage in terms of profitability.
That's moving up nicely but not to the point where it can help us out significantly yet.
I think the fourth quarter will be a big indicator of how good that can be.
You alluded to split shipments.
That's something we're working on very diligently.
The ship from store option for us makes us competitive with Amazon Prime in terms of we can get the shipment to the person's house in less than two days about 90%-some of the time.
So speed is a big initiative from that perspective but if we had to ship it in two packages that's a problem.
So we're continuing to fine-tune our algorithms to allow more packages to go together and not split shipments.
And I suspect we'll have more improvement as we move into the back half on that.
I mean, is it fair to say, Wes, that the opportunity on the online margin is more about improving the net merchandise margin the next few years.
Yes, the shipping costs given where we think online is going to go is going to probably be around 30 basis points.
But if we can increase the apparel penetration through the combination of having both better product and smartly extending assortments and things like special sizes and big and tall, even footwear with some of the wide shoe options, that will allow us to do a lot better from a merchandise margin perspective.
We made a lot of progress online from a clearance perspective and cleaning that up and I think there's also opportunity with reducing SKUs which will help as well.
No, nothing to share with you right now.
But as we said that continues to be a key focus for Michelle, both adding new brands to our portfolio but also strengthening the ones in key areas.
Active and wellness is a great example with Nike.
And then secondly, the speed initiative in private brands has an equally and important role as she sees the mix of national and private brands evolving.
Wes might be able to answer the first part.
I can definitely reiterate ---+
Because there are malls very similar to when Penneys was pursuing their different strategy we didn't see a big pickup.
We haven't seen a big pickup from the Macy's closures.
I would think the mall-based retailers would see more of that.
Then from a store closure perspective it's hard to predict the future.
If we can start to drive top-line sales more consistently that should make these stores better.
I don't see ---+ we mentioned earlier, I don't see any stores that we're going to close next year.
When we get a better idea of what the retained sales are going to be from the 18 that we just closed in June that will tell us what our projections are going forward and make us feel better about either be more aggressive on closing stores or more conservative once we get that information.
And just generally go, <UNK>, again, I think we all feel that the role of brick-and-mortar stores in our future we actually are more convicted about it than less convicted about it.
Now there can be individual stores as we go through the next few years that Wes might determine financially don't make sense to have.
But if you think about all the things we're talking about whether it's the rollout of these 35,000 square foot stores as a potential to replace larger stores over time or it's all of the easy experience initiatives that we're implementing or it's the adoption of Buy Online, Pick Up In Store and our utilization of ship from store to make customer convenience on online orders easier and as Wes just said faster, they all to a great extent point us toward saying that having a really strong base and portfolio of stores is an important element of why we're actually going to be successful in the future.
Fewer stores generally are not going to be a ticket to success in our mind.
That doesn't mean if stores don't pass a financial hurdle that we won't close them or downsize them.
We will have smaller stores in the future.
As leases come up I think it will be smarter for us to relocate into a smaller store in the next five years.
But I think Kevin is right, distribution points as digital becomes a bigger part of everybody's business is important.
Obviously we don't scale things like that in terms of volume externally.
Internally we have a plan.
I think the way Michelle spoke about it when she announced the launch of it is it will be the biggest launch that we've done.
And it's going to be funded accordingly.
And more importantly, from my standpoint, Michelle is looking at the overall active area because as you just heard in the script, we have brands in that area that are performing at extremely high levels.
So we're not looking for Under Armour to diminish the rate of growth on other brands.
We are looking to expand our opportunity in active and wellness and also expand for Under Armour points of distribution to reach customers that they have not been as successful reaching.
So we feel great about that.
You give u ---+ traffic is going to be down, give us credit for being smarter than we really are.
I'm just thinking we're going to be down somewhere between down 2 which was the run rate we had just recently and flat.
We think there are a lot of things moving in our direction to get to flat.
If we get to flat it's going to be because traffic is less negative.
I don't think traffic has to be positive for us to be flat because between a combination of either more units or slightly higher AUR or hopefully both we are going to have a higher transaction value.
I think there definitely is opportunity in the national brand portfolio to improve speed and it's definitely a focus for many of our key suppliers.
We are probably talking more about it with you on the private brand side because we completely control that.
And we know the elements of the cycle from design all the way through to delivery that we can take time out of on and we've piloted and experimented and seen the results.
I think, frankly, Michelle would tell you that she believes the metric that will improve if we effectively scale up speed beyond where it's been, has been piloted so far will be sales.
Yes, there's a corresponding positive that comes with more effective inventory and, therefore, if sales improve, as you know margins on private brands are quite bit higher and so there's a possible margin implication that would be to the positive, as well.
But I think the number she is looking to change the trendline on is implement speed in order to have more relevant product which will sell better, turn a little faster and indirectly I think raise our merchandise margin because we'll just be doing better in private brands.
It is Kevin.
There's definitely editing opportunities in our private brand.
And when I say private brand I'm including our exclusive brand portfolio, so the entire portfolio that represents almost 50% of our business.
And I think the factors that will impact that will be how quickly we can scale up the speed initiative.
It will probably tell us pretty quickly which of the brands benefit the most from that and therefore will point us in the right direction in terms of downsizing and then eliminating others.
We definitely know that that's an opportunity for us.
We broadened the base of private and exclusive brands that we have to offer over the last five years quite substantially and I think Michelle feels like there's a chance to tighten it up.
Our big private brands, though, the billion dollar-plus brands of SONOMA and Croft & Barrow and Apt.
9, they are not going away and those of the ones that probably will benefit the most.
There's always good things and bad things in private and exclusive brand results.
But generally the really good things have been the brands like SO that have had the speed initiative applied and the things that have struggled more ---+ and also things like SONOMA where we've relaunched it, and the things that have struggled more are those brands where we haven't had any adoption of the speed initiative.
So that's how we're thinking about it.
You're pretty new, <UNK>, so I'm going to help you with this.
So the reason we ---+ well, first of all, we didn't take the guidance down from where the consensus was.
You guys took it down for us so we thank you for that.
But the reason it is at $3.80 to $4 is that if things don't improve from today the quarter that we just reported we'll make $3.80.
Our internal expectation from a sales perspective are to improve.
If we can hit those we will make $4.
From a leverage perspective we've lowered our internal go from a 2% to 1.5%.
We did much better than that this spring.
If you do the math on the numbers I gave you we should leverage that a little bit about the flat comp for the year.
I can't sign up for that forever, but we do have a lot of initiatives going forward where I hope to do better than the 1.5%.
But that's what we're committing to at this point.
Well, this was the last batch of rollouts.
The new beauty environment in the stores we just rolled out in the spring averaged about a 34% comp in beauty, which was similar to the first two stages.
So it is now complete and it should continue to comp in those 267 stores in the 30% range through the balance of the year and slightly into next.
So that's been a big success and we are very happy with it.
Michelle is working on trying to get additional brands to strengthen that environment now that the physical environment is rolled out.
A lot of questions, <UNK>.
On how we think about we're navigating the weather changes that happen in regions and parts of the country over time.
I think generally there's two answers to that, <UNK>.
One is, and I think Wes may have mentioned it, if not I will make sure you know, as we look into the fall and holiday we definitely are planning ---+ we've planned down seasonal categories substantially more than the overall business.
So we feel like we want to make sure that we're in front of that and not chasing it.
And we'd much rather be in a position where we run low or do have to chase product in highly seasonal categories.
So the plan has that aspect to it.
The longer-term answer is definitely the speed initiative because many of our national brand businesses are less weather sensitive and most of our private and exclusive brand product is actually relatively highly weather sensitive.
So I think longer term we feel like speed initiative is the solution.
We've position private and exclusive brands I think, Wes, on an inventory basis really well going into fall and holiday.
We are down ---+
We are down like mid-teens.
In total inventory.
So I feel like we're in a really good place on that.
In terms of consumer behavior I think there isn't any new news there.
We had modest improvement in our business and in traffic but it's still negative.
So until such time as we can implement these merchandising and marketing changes we don't want a plan for traffic to turn positive.
So as we said earlier in the call, we are planning traffic to be lower than sales in the near term.
In terms of competition, I think Wes also addressed that a little bit earlier.
We continue to see and we expect that both Amazon and generally off-price space is gaining share and so to the extent we can we are really focused on making changes to our business model that would allow us to compete more effectively.
And one of the things that we're probably doing and have a stronger point of view about is the importance of our stores to do that.
We're in a good position in that we have stores who pass our hurdles and are financially performing.
But traffic is down so if we don't get that turned around at some point we will have to be looking at those stores more effectively.
But we're piloting these much smaller stores as perhaps replacements, so we continue to have points of distribution but they are less square footage, and then we are trying to utilize them as points of distribution through BOPUS and ship from store strategies.
So I think Wes and I and Michelle, Sona and Rick Schepp we all feel like stores are really important part of our future and we just have to make them work harder for us with customers.
And having more presence in markets had an impact on brand awareness and share awareness.
Beyond just distributing product and access points it just makes you a more important competitor in any particular market across the country.
Thank you.
Thank you.
Thanks everybody.
