Slide 1: Investor Presentation
Investor Presentation March 2024
Slide 2: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking Information This presentation 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,” “anti
Slide 3: Agenda
4 Investment Highlights 5 Kohl’s Foundation 8 Our Strategic Priorities 29 Financial Outlook 3
Slide 4: A compelling opportunity through extensive repositioning
A compelling opportunity through extensive repositioning • New leadership team executing new growth strategy led by accomplished retail veteran Tom Kingsbury • Sephora at Kohl’s driving significant sales gains and is expected to exceed $2B in sales by 2025 • Capitalizing on $2B+ new category growth
Slide 5: Kohl's is building on a solid foundation
Kohl's is building on a solid foundation Convenient Nationwide Great Product from Top Brands Omni-Channel Reach 1,174 Stores 80% of Americans live Largest department store chain in America (1) within 15 miles of a Kohl’s store 20M+ Delivering Great Value Active App Users 900+ Sephora @ Kohl’s 60M+ 3
Slide 6: Meaningful opportunity to improve performance
Meaningful opportunity to improve performance Long-Term Financial Framework SALES GROWTH OPERATING MARGIN Low-single digits % 7% - 8% +LSD% • Delivered 2023 earnings ahead of guidance range, with best $18,471 7% to 8% comparable store sales performance since 2010 $17,161 8.6% $16,586 (1%) to +1% • W
Slide 7: New leadership team positioned to capitalize on opportunity
New leadership team positioned to capitalize on opportunity Tom Kingsbury appointed as CEO in 2023, bringing exceptional industry expertise and leadership experience in transformational strategies • Track record of growing retail businesses, coupled with deep knowledge of the Company through previou
Slide 8: Strategic Priority Highlights
Strategic Priority Highlights Accelerate and Manage Inventory Enhance the Simplify Our Value and Expenses Strengthen the Customer Experience Strategies with Discipline Balance Sheet • Re-establishing stores as key • Increasing productivity • Increasing inventory turns • Driving cash flow through foc
Slide 9: Enhance the Customer Experience
Our Strategic Priorities Enhance the Customer Experience • Re-establishing stores as key focal point of strategy by creating an engaging in-store experience to regain sales productivity • Sephora sales expected to exceed $2 billion by 2025 • $2+ billion of incremental sales opportunity in under-pene
Slide 10: Re-establishing stores as a key focus to drive productivity
ENHANCE THE CUSTOMER EXPERIENCE Re-establishing stores as a key focus to drive productivity Store Experience Actions 900+ Sephora at Kohl’s locations Enhanced signage and simplified graphics Front-of-store seasonal gifting destination Expanded self-checkout kiosks Improving merchandising flow & adja
Slide 11: Sephora at Kohl's is a beauty share leader
ENHANCE THE CUSTOMER EXPERIENCE Sephora at Kohl’s is a beauty share leader +90% $2B+ Total Sales Sales Goal by Growth Y/Y 2025 +25% 910 • Sephora at Kohl’s sales exceeded $1.4 billion in 2023 with strong growth Comparable Sephora at Kohl’s experienced in both large and small format shops. Rolling ou
Slide 12: Underpenetrated Categories are a $2B+ Sales Opportunity
ENHANCE THE CUSTOMER EXPERIENCE Underpenetrated Categories are a Home Baby Gear $2B+ Sales Opportunity Gifting Impulse 12
Slide 13: Home is a meaningful market opportunity for Kohl's
ENHANCE THE CUSTOMER EXPERIENCE Home is a meaningful market opportunity for Kohl’s • Aggressive expansion into home decor, a large and growing category • Efforts leverage leadership’s prior experience in building home business • Strong initial customer response to our in-store home decor assortment
Slide 14: Partnering with Babies "R" Us to expand baby gear
ENHANCE THE CUSTOMER EXPERIENCE Partnering with Babies “R” Us to meaningfully expand our presence in the baby gear category • Establishes Kohl’s as a destination for the total baby • Leverages Kohl’s strong omnichannel platform across stores category through strategic partnership with Babies “R” Us
Slide 15: Kohl's has become a year-round gifting destination
ENHANCE THE CUSTOMER EXPERIENCE Kohl’s has become a year-round gifting destination • Repositioned Kohl’s to become a leader in gifting through our efforts in 2023 • Created robust seasonal gifting destination with expanded assortment to inspire customers as they enter the store • Strong performance
Slide 16: Building on initial growth in impulse categories
ENHANCE THE CUSTOMER EXPERIENCE Building on initial growth in impulse categories Impulse sales grew 40%+ in Expanding queuing fixtures to Expanding assortment to 2023, driven by expanded an additional 350 stores in include a variety of beauty, assortment 2024, bringing our total to 435 wellness, toy
Slide 17: Increasing relevancy of apparel & footwear offerings
ENHANCE THE CUSTOMER EXPERIENCE Increasing relevancy of apparel & footwear offerings • Refining how we buy and allocate goods to better meet our customers’ needs • Expect improved performance in 2024 across our apparel and footwear assortment Enhancing Processes to Deliver More Relevant Product Simp
Slide 18: Our efforts are underway and will build in 2024
ENHANCE THE CUSTOMER EXPERIENCE Our efforts are underway and will build in 2024 Dresses Juniors Men’s Kids • Building off of our • Market brands were • Diversifying offering • Strengthening offering recent success, introduced in late 2023 and to serve more across pre-teen, little kids expanding dedi
Slide 19: Accelerate & Simplify Our Value Strategies
Our Strategic Priorities Accelerate & Simplify Our Value Strategies • Increasing productivity through targeted offers and timely clearance events, while reducing complex layered and general promotions • Enhancing value perception by offering more consistently competitive prices, with successful test
Slide 20: Simplifying value to drive better customer engagement
ACCELERATE & SIMPLIFY OUR VALUE STRATEGIES Simplifying value to drive better customer engagement • Consumer expectations have evolved over the past decade as retail has shifted to more balance between price and promotional strategies Value Strategy Actions • We are simplifying our value strategies t
Slide 21: Strengthening our credit business with co-brand expansion
ACCELERATE & SIMPLIFY OUR VALUE STRATEGIES Strengthening our credit business with co-brand expansion Combining industry leading value with a new, modern credit approach • Co-brand card enhances credit offering and represents a significant incremental revenue growth opportunity of $250M to $300M annu
Slide 22: Manage Inventory & Expenses with Discipline
Our Strategic Priorities Manage Inventory & Expenses with Discipline • Increasing inventory turns by embedding new inventory management control processes • Planning inventory down mid-single digits % with increased ability to chase • Continuing to manage expenses tightly with greater marketing effic
Slide 23: Enhanced inventory processes are driving improved results
MANAGE INVENTORY & EXPENSES WITH DISCIPLINE Enhanced inventory processes are driving improved results Operating with open-to-buy • Greater ability to chase • Reduced markdown risk • Flexibility to react to demand Leveraging domestic marketplace • Faster lead times • More trend-right product Clearing
Slide 24: Long history of managing expenses with discipline
MANAGE INVENTORY & EXPENSES WITH DISCIPLINE Long history of managing expenses with discipline • Managed SG&A expenses flat versus 2017 despite significant expense inflation • SG&A expenses were down (1.3%) in 2023, despite the 53rd week Flat SG&A Initiatives to Drive Expense Efficiency $5.5B $5.5B •
Slide 25: Strengthen the Balance Sheet
Our Strategic Priorities Strengthen the Balance Sheet • Driving cash flow through inventory management and lower capital spend in 2024 • Reducing long-term debt and overall leverage • Maintaining balanced capital allocation strategy and commitment to dividend 25
Slide 26: Improving cash flow will return balance sheet to historical strength
STRENGTHEN THE BALANCE SHEET Improving cash flow will return balance sheet to historical strength Cash flow improved in 2023 and Key balance sheet and cash flow expected to remain solid in 2024 metrics set to improve in 2024 Operating Cash Flow (Billions) Adj. Free Cash Flow (1) (Billions) 2017-2019
Slide 27: Reducing long-term debt and overall leverage
STRENGTHEN THE BALANCE SHEET Reducing long-term debt and overall leverage Kohl’s has reduced long-term debt by more than $1 billion since 2017 Key Balance Sheet Actions in 2024 Pay down revolver balance Rebuild cash balance $2.8 $2.5 Capitalize on additional opportunities to reduce debt $1.9 $1.9 $1
Slide 28: Capital allocation priorities support balance sheet goals
STRENGTHEN THE BALANCE SHEET Capital allocation priorities support balance sheet goals Invest in the Business Support growth-driving initiatives (Sephora, impulse, Babies “R” Us) with capex of ~$500M in 2024 Committed to Dividend Return ~$220M annually to shareholders through $2.00 dividend per shar
Slide 29: 2024 Guidance and Long-Term Financial Framework
2024 Guidance and Long-Term Financial Framework 29
Slide 30: 2024 Outlook
2024 Outlook METRIC FULL YEAR GUIDANCE Net Sales (1%) to +1% vs. 2023 Comp Sales 0% to +2% vs. 2023 Operating 3.6% to 4.1% Margin Diluted EPS $2.10 to $2.70 (1) 2024 guidance includes potential impact from CFPB late fee regulatory changes in second half of 2024 and excludes any non-recurring charges
Slide 31: Remain confident in ability to drive a 7% - 8% operating margin
Remain confident in ability to drive a 7% - 8% operating margin 7% - 8% Drivers Pressures • Sales Growth Leverage • Wage inflation • Inventory management • Technology investments 4.1% • Product cost / freight • Marketing efficiency • Automation 2023 LONG-TERM 31
Slide 32: Appendix
Appendix 32
Slide 33: Q4 2023 Summary
Q4 2023 Summary Key Takeaways Q4 2023 • Fourth quarter earnings reflect strong • Net sales declined (1.1%) versus Q4 2022 and comparable sales, which excludes the 53rd week, declined (4.3%) gross margin and expense management compared to last year • Gross margin increased 937 bps compared to last ye
Slide 34: Q4 2023 Gross Margin & SG&A Expense Performance
Q4 2023 Gross Margin & SG&A Expense Performance Gross Margin SG&A Expense Increased 937 bps vs. Q4 2022 Leveraged 82 bps vs. Q4 2022 32.4% $1,677M $1,610M 23.0% % Total Revenue 27.9% 27.0% Q4 2022 Q4 2023 Q4 2022 Q4 2023 Q4 2023 Gross Margin Takeaways Q4 2023 SG&A Takeaways • Reduced clearance markd
Slide 35: Q4 Key Metrics
Q4 Key Metrics Consolidated Statement of Operations Three Months Ended (Dollars in Millions) February 3, 2024 January 28, 2023 Net Sales $ 5,710 $ 5,775 Total Revenue 5,956 6,019 Gross Margin Rate 32.4% 23.0% SG&A 1,610 1,677 Depreciation 187 200 Operating Income (Loss) 299 (302) Interest Expense 82
Slide 36: Healthy debt stack with opportunities to address near-term maturities
Healthy debt stack with opportunities to address near-term maturities $500M 4.625% (1) $427M 5.55% $353M $ IN MILLIONS 4.25% $113M $112M $101M 10.75% (1) 6.00% 6.875% $42M 7.25% May 2025 July 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2045 (1) Adjusted coupon rate 36
Slide 37: Leverage reconciliations
Leverage reconciliations Lease Adjusted Leverage Twelve Months Ended (Dollars in Millions) February 3, 2024 Borrowings under revolving credit facility $ 92 Long-term debt 1,638 • Remain committed to long-term lease adjusted Eight Times Cash Rent 4,584 leverage target of 2.5x Cash Rent Adjusted Debt
Slide 38: Adjusted free cash flow reconciliation
Adjusted free cash flow reconciliation Adjusted Free Cash Flow (1) February 3, 2024 (Dollars in Millions) Three Months Ended Twelve Months Ended Operating Cash Flow $ 789 $ 1,168 Capital Expenditures (82) (577) Free Cash Flow 707 591 Finance lease and financing obligation payments (25) (93) Proceeds