KSS
#It was down a little bit.
I don't have the exact number unfortunately in front of me but I think it was down about, I want to say it was down about 150 basis points.
But I will give you call after, I'm sorry about that.
No, if you're alluding to things like Prime Day by Amazon or that no.
I think what happens on those kinds of things is all retailers are sensitive and aware about promotions in the space.
And you inevitably, therefore, strategize and target your own elements to offset to ensure that you don't get hurt.
And so I think actually the facts, Wes would probably be able to give specifics, but I think actually the facts are we saw much larger lifts during that short period of both Prime Day implementation by Amazon and related ---+
Yes, we beat our plan that day, for sure.
So I think it's just the way it works.
There's a lot of activity.
Get more people to the web.
They might buy it on Amazon, they might buy it on Wal-Mart, looks like more of them than we thought bought it on ours.
I do have the credit numbers.
Sorry about that, a little too much paper here today.
Charge sales for Q2 were 57.6, down 171 basis points and then year to date is 57.8, down about 130 basis point.
So it kind of makes sense given the fact that we're doing better from a non-Kohl's charge because we've put more emphasis from a marketing perspective.
So the Kohl's charge was sort of negative for the quarter, down low single digits while the non-Kohl's charge was up mid single digits.
So we're continuing to figure out a way to better balance those.
The goal obviously would get them to be both positive.
But we need new customers and that's what's coming with the non-Kohl's charge comp.
They spend a little less obviously because they are newer and the Kohl's charge folks spend a little bit more.
But we will continue to work on better balancing them and hopefully by the time we get to the end of the year they will both be running positive.
Through the test period, the test period essentially was an operational test period.
It was to ensure that on the technology side everything worked the way we wanted it to work, that the customer service was delivered in the right way and that we were able to achieve the speed we needed to.
On the store side of course it was a start to better understand what stores have to do in order to quickly present the product to the customer and do it in an efficient way.
So that's the process we went through in the second quarter.
I think we did 2.5% or 3% of demand as we experimented with out on the operational side, so it's a meaningless number.
We're planning a much larger percent of digital sales to come as Buy Online, Pick Up In Store.
That's what's baked into our planning.
We're not planning that it necessarily lifts the total digital sales but we do believe based on the attachment rates we're seeing right now it's got the potential to add sales in-store and add some visits.
Which as you know our two biggest challenges are win new customers, Wes kind of just touched on that one, and secondly get more visits into our store.
And that's why we're super optimistic about Buy Online, Pick Up In Store.
Well I didn't mean to alarm people on that.
It's probably going to be somewhere between 2% to 2.5% for the fall.
So it will be lower in the third quarter and higher in the fourth quarter.
Kevin mentioned Buy Online, Pick Up In Store, that's going to drive a little bit more store expense.
We're going to put a lot of the investments in we saved a lot of money in marketing this year and we're going to put a lot of investments in the fourth quarter on that.
We have a tendency to get outshouted especially on broadcast by some of the larger retailers that are bigger than we are, so that will give us a good opportunity to be more competitive from that perspective.
Obviously 80% of our cost roughly are fixed.
You can argue that advertising is variable but if you're not making your sales you're probably not going to cut your advertising.
So the easiest one of we don't make it would be related to incentive comp would come down.
Anything that's unit related we could save money in the stores from a processing perspective as well as the EFC's corporate expenses.
You can manage your hiring a little differently, leave positions open, but that's only about 20% of the expenses really what I would culturally variable.
Sure.
Off-aisle was originally conceived as a way for us to improve the valuation on our returns.
And as you know like any retailer we get a significant percentage of returns in our stores and a much more significant percentage of returns to our stores that originated with an online order.
So returns as a percent of sales for us had been rising consistently over time and it's just the math as more people bought online there is a higher return rate, those returns go to the stores so our total return rate keeps going up modestly.
When we looked at that the potential profit pool for managing what we get for those returns was pretty significant.
That coincided obviously with us trying to be more aggressive and experimenting more with new innovative concepts.
And so we created this off-aisle concept first and foremost to target an improved return on our returns from customers but secondly also to learn more about the off-price business in general.
So I would expect there are going to be more off-aisle stores coming.
Again not to queue too much into what we'll be talking about later in the third quarter as evolutions to the moves in the Greatness Agenda but definitely new formats including more off-aisle stores will be coming.
The results have been really good, they've been better than we expected.
Well, Wes can probably, but the real estate answer is honestly pretty simple.
Real estate is one of the assets that we have; like all the other assets we have, we're always reviewing what the options are that would maximize shareholder value.
And that's under constant review.
It's not necessarily focused on today's events or the last three month's events.
It's just a regular course of good governance and we'll continue to do that.
On the traffic side I think we're actually pretty optimistic I would say about traffic.
Yes there's a little bit of variability by region but not a ton.
And in terms of the number of stores we have a list of stores that we always look at incremental, negative incremental cash flow stores.
We run it once a year.
There is a list of probably 10 or 15 stores on that list.
We've tried to look at market by market versus individual stores because obviously if you make a decision to close a store in one market you might pick up some sales in a couple of other stores that might make a negative one turn positive.
Most of the stores that are negative cash flow we're talking in the couple hundred thousand dollars range per store.
So we think it's prudent to be a little patient.
We believe in the Greatness Agenda.
We believe we're going to continue to make progress and hopefully the slightly negative cash flow stores will turn positive.
But we closed a couple of stores this year, we're going to close a couple stores next year but we're really looking at handfuls versus major closures.
And just so we're totally transparent about this, traffic variability in short-term windows a month, a quarter are highly volatile.
They can change a lot.
So in a particular market, in a particular region, in an individual territory the traffic trends year over year can be really pretty volatile and that's because weather is a big factor in our demand.
The economic conditions in a particular market can be very different depending upon the job environment.
And it can uniquely be affected as well by competition as new competition opens up in a trade area or in a market in a big way.
We kind of look at traffic when we're evaluating real estate more on let's say a three- to five-year trend.
We're looking at is there a consistent pattern of decelerating traffic.
And that would cause us to do the evaluation Wes is talking about which is to say hey, what's the future of this store.
There will be no powder left dry this year.
We're going to spend $1 billion.
That's going to be lower than last year but we've been taking what I would call non-production savings out and it's not by cutting the number of events or anything like that, it is just repositioning.
So for the fall season for the first time we're going to be spending more money in digital than we are in print.
That's where our customer is doing their research, whether or not they purchase online from whatever device they are using they're definitely using the research to make their purchasing decisions.
So that's important.
In the fall season from a marketing, or excuse me in the spring season from a marketing perspective we reduced the amount of credit marketing we have which we actually charged to the credit profitability and actually increased the amount of non-credit which is what has driven the non-credit card comps being positive.
So we continue to do that and shifted into more productive marketing.
But the fourth quarter will be up significantly to last year in terms of marketing spend.
At the end of the day, <UNK>, we spent less money on marketing in the first half than we originally had planned and then last year.
And we intend to spend more money in the second half.
We're going to spend $1 billion.
We're certainly not going to spend $999 million.
That's the hope.
I think the way you've got to look at the loyalty users which is the way we have to look at, we have to look at them as unique loyalty users because you can't look at them as a pool.
Because we have twice as many loyalty members as we did last year, so it's kind of a meaningless, I think Wes, it's sort of a meaningless statistic.
Because naturally they transacted a lot more because there's two times as many of them.
So we try to look more at unique loyalty members, how our members who are in the program behaving.
And we are really focused on a different metric anyway which is the metric we're focused on essentially is to say that we've had a long period, five years or more, where the penetration of our credit business to our total credit business has risen consistently.
The problem is our total business hasn't risen.
So on a customer basis it's more customers transacting on credit but not more customers in total.
Loyalty's objective is to create and win new customers so that even if credit as a percent of total transactions is flat we win because total sales and total traffic is up.
So we look at it a little bit different.
And the answer to your question directly wouldn't get you to where you want to be because we'd tell you loyalty transactions are way up compared to last year.
We do need to do a better job of using loyalty to feed the credit program.
We've been focused more on getting people onboarded into loyalty.
I think the next lever to pull after we've done that for a year is to show that now that they've all experienced the value of that loyalty, the value of being a credit card customer is much greater.
We also have to do a better job of soliciting applications in the stores for credit.
We've taken a step back as we focused a little too much on soliciting loyalty applications.
So we need to do a better balance of that and I've been working along with the marketing guys and the store team to do that.
We've seen some dramatic improvement in July on that.
We've made some changes from an incentive perspective for both the applicant and the associate who is soliciting credit.
So I suspect that will do much better on soliciting credit in the fall season.
For two quarters in a row we've beat our guidance on SG&A so the year hasn't changed.
So it just got pushed further.
If we save money in marketing we're not going to spend less than $1 billion.
We're $20 million let's say below our plan for the spring, we're just going to reinvest that in the fall.
Yes, I would say the SG&A spend I think you guys assume it's somewhere between 2% in 2.5% for the fall season.
It's up, well, not high double digits because that would be like 99% but it's up mid to high teens.
Glad to see you are back on your course on the marketing questions, <UNK>.
I don't even know how to answer you.
I will try to answer them seriously for you, though, <UNK>.
Missy is probably I would say our most improved business trend and that's after a long period of not being able to say that.
Again as part of our evolution of the Greatness Agenda we expect to share with you later Missy apparel, women's apparel in total is going to be a real focal point of some changes we're making.
I think many of them are taking place internally now and we're getting a little bit of the benefit of that.
I think denim is definitely improved.
Yes, Levi's had a really good quarter in the second quarter.
So that's a really positive thing because as we talked about back-to-school definitely started later.
And that's typically not good for denim sales but denim sales have declined significantly over the course of the last probably 12 to 24 months and there's been a big change in trend in there for sure.
I think that actually is a really positive one as we look at August, September.
I think the pockets where we're still working through some of the junior stuff probably have a little too much inventory in kids and jewelry.
Those are the areas that have been soft versus their plan obviously.
When you miss the sales plan you've got to work through the inventory and that's what we'll do.
The other factor and Wes talked about it I think in our earlier scripted comments is we did make a decision that we were a long time ago, six months or more, that we were going to accelerate our overseas imports flow because we were concerned about ensuring that we had them in plenty of time for back-to-school.
As you know as it turned out the port strike was settled, flow dramatically improved and so overseas import items I would say generally private brand kind of merchandise ---+
Came in early.
Came in early and it wasn't really category related, it was across categories because it's all the same.
The biggest investment we have in inventory remains our national brands.
They are up, units are up double digits.
So that's where the investment I alluded to active, obviously that's a lot of national brand merchandise as well.
Outerwear we're really conservative.
We all get the same forecast that you guys seem to get, so it doesn't seem like it's going to be an extremely strong outerwear season from a weather perspective.
So we plan that down accordingly.
I will get back to you on that, <UNK>.
Thank you very much.
Thanks very much.
Take care, bye.
