Kohl's Corporation · NYSE:KSS
Kohl's — Proxy Contest (March 2021)
28 slides from Kohl's's proxy contest presentation, Mar 9, 2021
Slide 1: Executing Strategy to Drive Significant Shareholder Value
Exhibit 99.1 Executing Strategy to Drive Significant Shareholder Value March 2021Exhibit 99.1 Executing Strategy to Drive Significant Shareholder Value March 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 has filed a preliminary proxy statement and form of BLUE proxy card with the SEC in connection with the solicitation of proxies for Kohl’s 2021 Annual Meeting of shareholders (the “Preliminary Proxy Statement” and such meeting the “2
Slide 4: Executive Summary
Executive Summary • Kohl’s has strengthened its financial and competitive position during period of profound change in the retail industry Well Positioned in Retail Industry • Broader retail industry facing margin pressures from increased digital penetration and cost inflation That Is Undergoing • K
Slide 5: Retail apparel industry has been undergoing profound change
-430 bps -410 bps -100 bps Retail apparel industry has been undergoing profound change Industry Evolution and Significant Industry Sales Store Closures and Bankruptcies 1 Consumer-Driven Trends Shift to Digital 2 • 67,750 retail store closings since 2010 26.3% 2 • Another 100,000 expected by 2025 23
Slide 6: Kohl's leadership responded to industry challenges by investing for future success
Kohl’s leadership actively responded to industry challenges by investing for future success Shift to Digital Investments in Heightened Trend towards Shopping Omnichannel Cost Headwinds Focus on Value Casualization • Invested in building digital, • Kohl’s invested in technology • To help offset cost
Slide 7: 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 8: 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 9: 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 10: Our strategy is producing results
Our strategy is producing results Q3 2020 and Q4 2020 Earnings We believe the rollout of Sephora shop-in-shops and new brands Results Exceeded Expectations (incl Calvin Klein) are big wins that can drive top-line performance (and help attract new brands, creating a virtuous circle). • Sales showed c
Slide 11: 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 12: 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 13: Confident in ability to expand 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 14: 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 15: Lowering 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 16: History of investing and generating 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 $334 4.9% 2017 2018 2019 2020 2017 2
Slide 17: Balanced capital allocation strategy maintaining Investment Grade rating
Committed to balanced capital allocation strategy with long-term objective of maintaining Investment Grade rating Dividend ($ 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
Slide 18: Strong Board with the right skills and relevant experience
Our strong Board has the right skills and highly relevant experience Significant Board experience in key executive roles Of the 12 Board members, five are current or former CEOs of public companies • Established Board leadership in retail or consumer-facing industries • Board includes members who ar
Slide 19: Strong and diverse Board of Directors
Kohl’s has a strong and diverse Board of Directors Board Refreshment New Board % Members 50 Directors Departed Michael Bender Peter Boneparth Steven A. Burd Yael Cosset +6 Directors -4 Added 2016 2021 Gender / Ethnic Diversity H. Charles Floyd Michelle Gass Robbin Mitchell Jonas Prising 42% 5 /12 30
Slide 20: Board of Directors serving as agents of positive change
Kohl’s Board of Directors are serving as agents of positive change Thoughtful Board Composition with Adrianne Michelle Shapira Gass (CEO) Yael Cosset Correct Set of Skills and Experience 2017 2019 2021 added to the added to the added to the Board Board Board S&P 500 92% Independence 86% Above Avg. H
Slide 21: Strong board with relevant and complementary skill sets
Strong board with relevant and complementary skill sets Skill or Expertise Bender Boneparth Burd Cosset Floyd Gass Mitchell Prising Schlifske Shapira Sica Streeter Current or Former Public Company CEO Senior Leadership Experience Public Company Board Experience (other than Kohl’s) Board Diversity (G
Slide 22: Kohl's Board outmatches Investor Group's nominees in key skills
Kohl’s Board outmatches Investor Group’s nominees in key skills Investor Kohl’s Group Board Nominees Public Company Board Experience 12 5 Kohl’s Board has broader Current or Former Public Company CEO 5 1 and deeper experience … Retail or Consumer-Facing Industries 12 8 … while the Activist Finance,
Slide 23: Activist Investors' actions raise concerns about their long term interest
The Activist Investors’ actions to date raise concerns about their real long term interest in Kohl’s We engaged constructively We reject the Activist to find common ground Investors' short-termism The Company engaged in multiple discussions The Activist Investors presented no ideas which with the Ac
Slide 24: Appendix
Appendix 24Appendix 24
Slide 25: 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 26: Reconciliations: Adjusted Operating Income and Free Cash Flow
Reconciliations Adjusted Operating Income Free Cash Flow ($ in millions) ($ in millions) 2019 2018 2017 2019 2020 Net cash provided by Operating Income $ 1,099 $ 1,691 $ 2,107 $ 1,657 $ 1,338 operating activities Impairments, store Acquisition of property 113 (672) (578) (855) (334) closing, and oth
Slide 27: 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 28: Reconciliations: Adjusted Debt to Adjusted EBITDAR
Reconciliations Adjusted Debt to Adjusted EBITDAR 2019 ($ in millions) Finance lease and financing obligations $ 1,491 Long-term cebt 1,856 Total debt $ 3,347 Operating leases 2,777 Rent x8 — Adjusted debt $ 6,124 Operating income $ 1,099 Depreciation and amortization 917 Rent expense 314 EBITDAR 2,