Kohl's Corporation · NYSE:KSS
Kohl's — Q4 2020 Earnings Presentation
31 slides from Kohl's's earnings presentation, Mar 2, 2021
Slide 1: Q4 2020 Results Presentation
Exhibit 99.2 Q4 2020 Results Presentation March 2, 2021Exhibit 99.2 Q4 2020 Results Presentation March 2, 2021
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. Words such as believes, anticipates, plans, may, intends, will, should, expects, and similar expressions are in
Slide 3: Important Shareholder Information and Where You Can Find It
Important Shareholder Information and Where You Can Find It Kohl’s intends to file a proxy statement and BLUE proxy card with the SEC in connection with the solicitation of proxies for Kohl’s 2021 Annual Meeting of shareholders (the “Proxy Statement” and such meeting the “2021 Annual Meeting”). Kohl
Slide 4: Agenda
Q4 2020 10 Driving Top Line Growth Results COVID-19 Update 5 Presentation Q4 2020 Results 7 2021 Outlook 12 Our Strategy 14 4Q4 2020 10 Driving Top Line Growth Results COVID-19 Update 5 Presentation Q4 2020 Results 7 2021 Outlook 12 Our Strategy 14 4
Slide 5: COVID-19 Update
COVID-19 Update 5COVID-19 Update 5
Slide 6: We established two priorities in response to the COVID-19 crisis
We established two priorities in response to the COVID-19 crisis + 6 Protecting the health and Preserving our safety of our associates financial position and customers Protecting Associates and Customers Financial Liquidity Strengthened financial position with cash of $2.3 billion at year end 2020 C
Slide 7: Q4 2020 Results
Q4 2020 Results 7Q4 2020 Results 7
Slide 8: Q4 2020 Results Key Takeaways
Q4 2020 Results Key Takeaways • Q4 2020 earnings exceeded company expectations, with significant improvement from Q3 2020 • Digital sales growth remained strong and accounted for 42% of net sales, with stores playing a critical role in supporting the heightened demand • Actions to improve gross marg
Slide 9: Q4 & 2020 Key Metrics
Q4 & 2020 Key Metrics Consolidated Statement of Operations Three Months Ended (Dollars in Millions) January 30, 2021 February 1, 2020 Net Sales $ 5,879 $ 6,537 Total Revenue 6,141 6,832 Gross Margin Rate 32.0% 32.7% SG&A 1,603 1,742 Depreciation 218 232 (Gain) on Sale of Real Estate — — Impairments,
Slide 10: 2020 Gross Margin Performance
2020 Gross Margin Performance Actions to improve gross margin showed great progress through the year, driven by our key margin enhancing initiatives, including • inventory management and price and promotion optimization In Q4 2020, strong merchandise margin improvement helped to offset increased shi
Slide 11: Enhanced Liquidity Position
Enhanced Liquidity Position Key Balance Sheet & Cash Flow Items: Q4 / 2020 February 1, 2020 Beginning Cash $723M Key Takeaways Sources • Long history of disciplined and prudent capital management Operating Cash Flow $1,338M • More than two decades of maintaining New Debt $600M Investment Grade ratin
Slide 12: 2021 Outlook
2021 Outlook 122021 Outlook 12
Slide 13: 2021 Outlook
2021 Outlook Metric Full Year Guidance Mid-teens percent Net Sales increase versus 2020 Operating Margin 4.5% to 5.0% EPS $2.45 to $2.95 Resuming Capital Allocation Strategy • Capex: $550 million to $600 million • Dividend reinstated: $0.25 quarterly dividend payable on March 31, 2021 • Share Repurc
Slide 14: Our Strategy
Our Strategy 14Our Strategy 14
Slide 15: Kohl's has built a powerful foundation
Kohl’s has built a powerful foundation Customers Digital Digital sales 40% penetration in 2020 Active Customers 65M Website visits 1.6B in 2020 Loyalty Members 30M Kohl’s App user 18% growth in Q4 2020 Kohl’s Charge Stores 29M Card holders $5.9B 90% 95% $4.5B $4B of stores of Kohl’s stores $3.6B gen
Slide 16: Our Strategy
Our Strategy The most trusted retailer of choice for the active and casual lifestyle Expand Disciplined Strong Operating Capital Organizational Margin Management Core Drive Top Line Growth Destination for Differentiated Agile, Active & Casual Leading with Omni-channel Operating Margin Maintain Stron
Slide 17: Driving top line growth
Driving top line growth Grow Active to Beauty Growth Reignite Extend Casual 30% of Sales with Sephora Women’s Growth Lifestyle to Home • Fuel growth with key national • Highly complementary strategic • New organization structure and • Expand soft home category brands, Nike, Under Armour and partners
Slide 18: Driving top line growth: omni-channel and loyalty
Driving top line growth Investing in Omni-channel Loyalty Members are Transforming the Role Enhance Digital Capabilities More Productive of the Store to Drive Growth • Recently launched Kohl’s Rewards loyalty • Modernizing the store experience through refresh • Continue to invest in the evolution of
Slide 19: Confident in expanding operating margin to 7% to 8% by 2023
We are confident in our ability to expand operating margin to 7% to 8% by 2023 SG&A Gross Margin Expense Rate ~36% Goal ~27% to ~28% Goal +20 to +40 basis points +70 to +150 basis points increase 7.0% to 8.0% improvement 6.1% Inventory Digital Stores management penetration / Marketing cost of shippi
Slide 20: Expanding gross margin through four key initiatives
Focused on expanding gross margin through four key initiatives Targeting 20 basis points to 40 basis points improvement in gross margin to ~36.0% as compared to 35.7% in 2019 • Merchandise margin improvement will more than offset cost of shipping headwind at digital sales penetration of 40% of sales
Slide 21: Lowering our SG&A expense rate through four key areas
Focused on lowering our SG&A expense rate through four key areas Targeting 70 basis points to 150 basis points improvement in SG&A expense rate to ~27% to ~28% from 28.6% in 2019 • SG&A expense initiatives to more than offset ongoing wage inflation assumed at rate experienced in recent years • Transfo
Slide 22: Balanced capital allocation strategy
We are focused on maintaining a balanced capital allocation strategy Long history of disciplined financial management with more than two decades of maintaining Investment Grade rating • Aggressive actions taken in 2020 to preserve financial flexibility during peak of pandemic, including suspending t
Slide 23: History of investing and strong free cash flow
We have a history of investing in our business and generating strong free cash flow Capex ($ in millions) Solid Free Cash Flow ($ in millions) Adjusted ROI Base Capital $1,403 Omnichannel Store Strategies $855 Technology 14.0% 14.0% 13.4% $672 $881 $908 $578 $700 $334 4.9% 2017 2018 2019 2020 2017 2
Slide 24: Returning capital to shareholders and optimizing capital structure
Long history of returning capital to shareholders and optimizing our capital structure Dividend ($ in millions) Share Repurchases ($ in millions) Long-term Debt ($ in millions) $2,797 $470 $423 $400 $396 $368 $2,451 $306 $1,861 $1,856 $108 $8 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 20
Slide 25: Agile, accountable & inclusive culture
Agile, accountable & inclusive culture We are evolving how we work Kohl’s is committed to to accelerate our path forward ESG Leadership Excellence Award Recipient 2020 • Kohl’s management, led by CEO Michelle Gass, is committed to fostering a diverse, • Kohl’s ESG journey began more than a equitable
Slide 26: Appendix
Appendix 26Appendix 26
Slide 27: Sale-Leaseback Considerations
Sale-Leaseback Considerations As an investment grade rated company, sale-leaseback transactions are typically an inefficient means to accessing capital Company has readily available and more optimal financial alternatives • Company has utilized sale-leaseback transactions in the past when it was a c
Slide 28: Reconciliations: Adjusted Net Income and Diluted EPS
Reconciliations Adjusted Net (Loss) Income and Diluted (Loss) Earnings per Share, Non-GAAP Financial Measures (unaudited) Three Months Ended Twelve Months Ended (Dollars in Millions, Except per Share Data) January 30, 2021 February 1, 2020 January 30, 2021 February 1, 2020 Net Income (Loss) GAAP $ 3
Slide 29: Reconciliations: Adjusted Operating Income, EBITDA, Free Cash Flow
Reconciliations Adjusted Operating Income Adjusted EBITDA Free Cash Flow January 30, 2021 Three Months Ended ($ in millions) January 30, 2021 ($ in millions) ($ in millions) Three Months Twelve Months 2019 Ended Ended Net cash provided by $ 428 $ 1,338 Operating Income $ 316 Operating Income $ 1,099
Slide 30: Reconciliations: Adjusted ROI
Reconciliations Adjusted ROI ($ in millions) 2017 2018 2019 2020 Operating income 1,416 1,361 1,099 (262) Depreciation and amortization 991 964 917 874 Rent expense 293 301 314 314 EBITDAR 2,700 2,626 2,330 926 Impairments, store closing and other costs - 104 113 89 (Gain) on Sale of real estate - -
Slide 31: Slide 31