Form 8-K - Current report

KOHLS Corp false 0000885639 0000885639 2024-11-26 2024-11-26

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 26, 2024

 

 

KOHL’S CORPORATION

(Exact name of Registrant as Specified in Its Charter)

 

 

 

Wisconsin		001-11084		39-1630919
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

N56 W17000 Ridgewood Drive
Menomonee Falls, Wisconsin		53051
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: 262 703-7000

 

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $.01 par value		KSS		New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On November 26, 2024, Kohl’s Corporation (the “Company”) issued a press release reporting its earnings for the quarter ended November 2, 2024 and provided updated earnings guidance for fiscal 2024. A copy of the press release is attached as Exhibit 99.1 and incorporated by reference herein. A copy of the presentation materials for the November 26, 2024 quarterly earnings conference call is attached as Exhibit 99.2 and incorporated by reference herein.

 

Item 7.01

Regulation FD Disclosure.

See Item 2.02.

The information in Items 2.02 and 7.01, including the exhibits attached hereto, is furnished solely pursuant to Items 2.02 and 7.01 of Form 8-K. Consequently, such information is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section. Further, the information in Items 2.02 and 7.01, including the exhibits, shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933.

 

Item 8.01

Other Events.

As previously announced, on November 13, 2024, the Board of Directors of the Company declared a quarterly cash dividend of $0.50 per share. The dividend will be paid on December 24, 2024, to all shareholders of record at the close of business on December 11, 2024.

Cautionary Statement Regarding Forward-Looking Information and Non-GAAP Measures

This current report on Form 8-K 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,” “intends,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Forward-looking statements include the information under “Updated 2024 Financial and Capital Allocation Outlook.” Such statements are subject to certain risks and uncertainties, which could cause the Company’s actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company’s Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in the Company’s filings with the SEC. Forward-looking statements relate to the date initially made, and the Company undertakes no obligation to update them.

In the attached presentation materials, the Company provides information regarding adjusted free cash flow, which is not a recognized term under U.S. generally accepted accounting principles (“GAAP”) and does not purport to be an alternative to net income as a measure of operating performance. A reconciliation of adjusted free cash flow is provided in the presentation materials attached hereto as Exhibit 99.2. The Company believes that the use of this non-GAAP financial measure provides investors with enhanced visibility into its results with respect to the impact of certain costs. Because not all companies use identical calculations, this presentation may not be comparable to other similarly titled measures of other companies.

 

Item 9.01

Financial Statements and Exhibits.

 

Exhibit No.		Description
99.1		Press Release dated November 26, 2024
99.2		Presentation Materials for November 26, 2024 Quarterly Earnings Conference Call
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

						KOHL’S CORPORATION
Date: November 26, 2024				By:		/s/ Jennifer Kent
						Jennifer Kent Senior Executive Vice President, Chief Legal Officer and Corporate Secretary

Exhibit 99.1

Kohl’s Reports Third Quarter Fiscal 2024 Financial Results

MENOMONEE FALLS, Wis.—(BUSINESS WIRE)—November 26, 2024— Kohl’s Corporation (NYSE:KSS) today reported results for the third quarter ended November 2, 2024.

 

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Net sales decreased 8.8% and comparable sales decreased 9.3%

 

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Diluted earnings per share of $0.20

 

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Updates full year 2024 financial outlook

 

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Kohl’s Board announces CEO transition process

Tom Kingsbury, Kohl’s chief executive officer, said “Our third quarter results did not meet our expectations as sales remained soft in our apparel and footwear businesses. Although we had a strong collective performance across our key growth areas, including Sephora, home decor, gifting, and impulse, and also benefited from the opening of Babies “R” Us shops in 200 of our stores, these were unable to offset the declines in our core business. Importantly, we delivered gross margin expansion and managed expenses tightly in the quarter.”

“We are not satisfied with our performance in 2024 and are taking aggressive action to reverse the sales declines. We must execute at a higher level and ensure we are putting the customer first in everything we do. We are approaching our financial outlook for the year more conservatively given the third quarter underperformance and our expectation for a highly competitive holiday season,” Kingsbury continued.

CEO Transition Process

As announced on November 25, 2024, Chief Executive Officer Tom Kingsbury plans to step down as CEO, effective January 15, 2025. He will stay on in an advisory role to the new CEO and retain his position on Kohl’s Board of Directors (the “Board”) through his retirement in May 2025. The Board appointed retail veteran Ashley Buchanan as CEO and Board member, effective January 15, 2025.

Third Quarter 2024 Results

Comparisons refer to the 13-week period ended November 2, 2024 versus the 13-week period ended October 28, 2023

 

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Net sales decreased 8.8% year-over-year, to $3.5 billion, with comparable sales down 9.3%.

 

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Gross margin as a percentage of net sales was 39.1%, an increase of 20 basis points.

 

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Selling, general & administrative (SG&A) expenses decreased 5.1% year-over-year, to $1.3 billion. As a percentage of total revenue, SG&A expenses were 34.8%, an increase of 125 basis points year-over-year.

 

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Operating income was $98 million compared to $157 million in the prior year. As a percentage of total revenue, operating income was 2.7%, a decrease of 120 basis points year-over-year.

 

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Net income was $22 million, or $0.20 per diluted share. This compares to net income of $59 million, or $0.53 per diluted share in the prior year.

 

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Inventory was $4.1 billion, a decrease of 3% year-over-year.

 

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Operating cash flow was a use of $195 million.

Nine Months Fiscal Year 2024 Results

Comparisons refer to the 39-week period ended November 2, 2024 versus the 39-week period ended October 28, 2023

 

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Net sales decreased 6.1% year-over-year, to $10.2 billion, with comparable sales down 6.4%.

 

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Gross margin as a percentage of net sales was 39.4%, an increase of 42 basis points.

 

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Selling, general & administrative (SG&A) expenses decreased 3.4% year-over-year, to $3.8 billion. As a percentage of total revenue, SG&A expenses were 34.8%, an increase of 95 basis points year-over-year.

 

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Operating income was $307 million compared to $418 million in the prior year. As a percentage of total revenue, operating income was 2.8%, a decrease of 79 basis points year-over-year.

 

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Net income was $61 million, or $0.55 per diluted share. This compares to net income of $131 million, or $1.18 per diluted share in the prior year.

 

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Operating cash flow was $52 million.

 

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Long-term debt was reduced by $113 million through the redemption of the remaining 9.50% notes due May 15, 2025.

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Updated 2024 Financial and Capital Allocation Outlook

For the full year 2024, which has 52 weeks compared to 53 weeks in full year 2023, the Company currently expects the following:

 

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Net sales: A decrease of (7%) to a decrease of (8%)

 

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Comparable sales: A decrease of (6%) to a decrease of (7%)

 

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Operating margin: In the range of 3.0% to 3.2%

 

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Diluted EPS: In the range of $1.20 to $1.50

 

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Capital Expenditures: Approximately $500 million, including expansion of Sephora partnership and other store-related investments

 

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Dividend: On November 13, 2024, Kohl’s Board of Directors declared a quarterly cash dividend on the Company’s common stock of $0.50 per share. The dividend is payable December 24, 2024 to shareholders of record at the close of business on December 11, 2024.

Third Quarter 2024 Earnings Conference Call

Kohl’s will host its quarterly earnings conference call at 9:00 am ET on November 26, 2024. A webcast of the conference call and the related presentation materials will be available via the Company’s web site at investors.kohls.com, both live and after the call.

Cautionary Statement Regarding Forward-Looking Information

This press release 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,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Forward-looking statements include the information under “Updated 2024 Financial and Capital Allocation Outlook.” Such statements are subject to certain risks and uncertainties, which could cause the Company’s actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company’s Annual Report on Form 10-K, which are expressly incorporated herein by reference, and other factors as may periodically be described in the Company’s filings with the SEC. Forward-looking statements relate to the date initially made, and the Company undertakes no obligation to update them.

About Kohl’s

Kohl’s (NYSE: KSS) is a leading omnichannel retailer built on a foundation that combines great brands, incredible value and convenience for our customers. Kohl’s is uniquely positioned to deliver against its long-term strategy and its purpose to take care of families’ realest moments. Kohl’s serves millions of families in its more than 1,100 stores in 49 states, online at Kohls.com, and through the Kohl’s App. With a large national footprint, Kohl’s is committed to making a positive impact in the communities it serves. For a list of store locations or to shop online, visit Kohls.com. For more information about Kohl’s impact in the community or how to join our winning team, visit Corporate.Kohls.com.

Contacts

Investor Relations:

Jill Timm, [phone], [e-mail]

Media:

Jen Johnson, [phone], [e-mail]

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KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended								Nine Months Ended
(Dollars in Millions, Except per Share Data)		November 2, 2024				October 28, 2023				November 2, 2024				October 28, 2023
Net sales		$	3,507			$	3,843			$	10,210			$	10,876
Other revenue			203				211				614				644
Total revenue			3,710				4,054				10,824				11,520
Cost of merchandise sold			2,137				2,349				6,188				6,638
Gross margin rate			39.1	%			38.9	%			39.4	%			39.0	%
Operating expenses:
Selling, general, and administrative			1,291				1,360				3,769				3,902
As a percent of total revenue			34.8	%			33.5	%			34.8	%			33.9	%
Depreciation and amortization			184				188				560				562
Operating income			98				157				307				418
Interest expense, net			76				89				245				262
Income before income taxes			22				68				62				156
(Benefit) Provision for income taxes			—				9				1				25
Net income		$	22			$	59			$	61			$	131
Average number of shares:
Basic			111				110				111				110
Diluted			112				111				112				111
Earnings per share:
Basic		$	0.20			$	0.54			$	0.55			$	1.19
Diluted		$	0.20			$	0.53			$	0.55			$	1.18

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KOHL’S CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(Dollars in Millions)		November 2, 2024				October 28, 2023
Assets
Current assets:
Cash and cash equivalents		$	174			$	190
Merchandise inventories			4,099				4,239
Other			344				291
Total current assets			4,617				4,720
Property and equipment, net			7,472				7,861
Operating leases			2,500				2,492
Other assets			465				394
Total assets		$	15,054			$	15,467
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	1,873			$	1,918
Accrued liabilities			1,245				1,324
Borrowings under revolving credit facility			749				625
Current portion of:
Long-term debt			353				111
Finance leases and financing obligations			80				84
Operating leases			93				94
Total current liabilities			4,393				4,156
Long-term debt			1,174				1,638
Finance leases and financing obligations			2,533				2,714
Operating leases			2,799				2,780
Deferred income taxes			78				107
Other long-term liabilities			273				321
Shareholders’ equity:			3,804				3,751
Total liabilities and shareholders’ equity		$	15,054			$	15,467

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KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Nine Months Ended
(Dollars in Millions)		November 2, 2024				October 28, 2023
Operating activities
Net income		$	61			$	131
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			560				562
Share-based compensation			25				31
Deferred income taxes			(33	)			(25	)
Non-cash lease expense			67				70
Other non-cash items			2				13
Changes in operating assets and liabilities:
Merchandise inventories			(1,216	)			(1,046	)
Other current and long-term assets			(75	)			66
Accounts payable			739				588
Accrued and other long-term liabilities			(2	)			58
Operating lease liabilities			(76	)			(69	)
Net cash provided by operating activities			52				379
Investing activities
Acquisition of property and equipment			(367	)			(495	)
Proceeds from sale of real estate			2				15
Other			2				(11	)
Net cash used in investing activities			(363	)			(491	)
Financing activities
Net borrowings under revolving credit facility			657				540
Shares withheld for taxes on vested restricted shares			(10	)			(13	)
Dividends paid			(166	)			(165	)
Repayment of long-term borrowings			(113	)			(164	)
Premium paid on redemption of debt			(5	)			—
Finance lease and financing obligation payments			(62	)			(68	)
Proceeds from financing obligations			1				19
Net cash provided by financing activities			302				149
Net (decrease) increase in cash and cash equivalents			(9	)			37
Cash and cash equivalents at beginning of period			183				153
Cash and cash equivalents at end of period		$	174			$	190

Update images w/Fall/Winter theme Exhibit 99.2 Q3 November 26, 2024

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“We have taken significant action to reposition Kohl’s for future growth. And while we are making progress against our strategic priorities, our efforts have yet to fully yield the intended outcome due in part to a continued challenging consumer environment. During the second quarter, our customers exhibited more discretion in their spending, which pressured our sales even as customers transacted more frequently. This overshadowed strong performance in our key growth areas, including Sephora, home decor, gifting, and impulse. In spite of this, we continued to execute well operationally, enabling us to deliver a 13% increase in earnings driven by gross margin expansion and strong inventory and expense management.” ” However, We “Our third quarter results did not meet our expectations as sales remained soft in our apparel and footwear businesses. Although we had a strong collective performance across our key growth areas, including Sephora, home decor, gifting, and impulse, and also benefited from the opening of Babies “R” Us shops in 200 of our stores, these were unable to offset the declines in our core business. Importantly, we delivered gross margin expansion and managed expenses tightly in the quarter. “We are not satisfied with our performance in 2024 and are taking aggressive action to reverse the sales declines. Our conviction in our strategy remains strong, however we must execute at a higher level and ensure we are putting the customer first in everything we do. We are approaching our financial outlook for the year more conservatively given the third quarter underperformance and our expectation for a highly competitive holiday season,” ” “We have taken significant action to reposition Kohl’s for future growth. And while we are making progress against our strategic priorities, our efforts have yet to fully yield the intended outcome due in part to a continued challenging consumer environment and softness in some of our core businesses. During the second quarter, our customers exhibited more discretion in their spending, which pressured our sales even as customers transacted more frequently. This overshadowed strong performance in our key growth areas, including Sephora, home decor, gifting, and impulse. In spite of this, we continued to execute well operationally, enabling us to deliver a 13% increase in earnings driven by gross margin expansion and strong inventory and expense management.” “Looking ahead, we are focused on ensuring that the substantial work that we’ve done across product, value, and experience is fully recognized by both new and existing customers. We will also capitalize on new opportunities such as our partnership with Babies “R” Us and continue to benefit from our key growth areas. Our conviction in our strategy remains strong and our operating discipline, solid cash flow generation, and healthy balance sheet will continue to support us as we work to return Kohl’s to growth.”

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1,178 Stores Q3 2024 Pls add FLX logo

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, ~ 15% Q3 growth of more than 9% Q3 Solid demand fragrance and hair care growth in Yves Saint Laurent, , and Laneige

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50% 25% Impulse sales in Q3 grew more than 40% as we introduced queuing lines in 200 additional stores Initial sales contribution from our partnership with Babies “R” Us as we opened ~200 Q3 40% in-store baby shops and expanded our baby gear and accessories presence on 200 Kohls.com Expanded gifting assortment in Q3 to prepare for the holiday season

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Increasing touchpoints with our most engaged customers through more targeted offers and direct mail Building Increasing relevancy of apparel & footwear offerings in 2024 Increase Inventory in Private Apparel Brands ● Balance our inventory buys in the near-term to ensure we have the proper support for our key private brands, which is already underway as evident with increased in-transit inventory at end of Q3 ● Ensure we are leveraging market brands opportunistically through a chase approach rather than as a replacement for private brands Repositioning Juniors offering next to Regain Traction in Select Categories Sephora in stores to better capitalize ● Jewelry: Reintroducing fine jewelry in 200 stores and expanded in-aisle Q3 on cross shopping opportunities in placement of bridge jewelry in all stores this holiday season 2024 ● Petites: Re-establishing presence by increasing offering and expanding to all stores in Q4 ● Intimates: Accelerating newness in key brands with incremental marketing support in Q4 Q1 2024 with positive sales growth ● Legacy home: Increasing innovation, new brand introductions, and stronger value messaging during the competitive holiday season Drive Increased Traffic ● Increasing our promotional activity, while also deploying more targeted offers and direct mail ● Marketing efforts focused on maximizing impact during key shopping days ● Continuing to leverage Kohl’s Cash and Kohl’s Rewards as a value differentiator Legacy home (kitchen electrics, floor care, and bedding): Women’s ● Strengthening young men’s ● Driving infant and category through newborn apparel the introduction of sales through new brands ● Continuing to Babies “R” Us including amplify polished cross shopping Aeropostale and casual through Quiksilver private and market brands

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(7%) to (8%) (6%) to (7%) (5.5%) to (6.5%) vs. 2023 (3%) to (5%) vs. 2023 3.0% to 3.2% 3.4% to 3.8% 3.0% to 3.3% $1.20 to $1.50 Dividend: $0.50 quarterly dividend payable December 24, 2024

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as well as seasonally relevant businesses like toys, jewelry, and home Holiday Well-positioned to deliver the great experience and holiday value that customers expect from Kohl’s in stores and digitally Compelling holiday assortment with expanded selection across apparel (sweaters, fleece, dresses) and gifting (Sephora, toys, jewelry, cozy bedding) Key growth categories of Sephora, home decor, gifting, impulse, and Babies “R” Us increase in importance in Q4 Amplifying Kohl’s Cash and Rewards to drive engagement and maximize important holiday shopping days 13

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Coupon reflects incremental 125 bps step ups on May 2031 notes

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16 Q3

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Q3 Q3 Q3 net sales declined (8.8%) versus Q3 2023 and comparable sales declined (9.3%) Q3 results did not meet our expectations as sales remained soft in our core apparel and footwear businesses Gross margin increased 20 bps to last year driven by inventory management and lower freight expense, partially offset by higher digital penetration and increased promotional activity SG&A expense declined (5.1%) benefiting from tightly managed expenses across the organization, Strong collective performance Delivered continued strong performance in our key growth especially in corporate and store-related expenses areas, including Sephora, home decor, gifting, and impulse, and also benefited from the opening of Babies Operating income of $98M and net income of $22M or $0.20 per diluted share “R” Us shops in 200 of our stores Expanded gross margin by 20 basis points and managed expenses down approximately (5%) Reduced inventory by (3%) as compared to last year despite in-transit inventory increasing more than 40% 17

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Q3 Deleveraged 125 basis points vs Q3 2023 Increased 20 bps vs Q3 2023 $1,360M 39.1% $1,291M 38.9% 33.5% 34.8% Q3 Q3 Q3 Q3 Q3 Q3 Inventory management and lower freight expense Tightly managed expenses across the organization, especially in corporate and store-related expenses Higher digital penetration and increased promotional activity Investments in marketing, technology and growth categories 18 technology, and growth

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Updated w/ link in notes Q3 (Benefit) Provision for Income Taxes 19

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Update with link in description (rows 74-81) (20) (62) 1 1 22

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Update images w/Fall/Winter theme

Document and Entity Information	Nov. 26, 2024
Cover [Abstract]
Entity Registrant Name	KOHLS Corp
Amendment Flag	false
Entity Central Index Key	0000885639
Document Type	8-K
Document Period End Date	Nov. 26, 2024
Entity Incorporation State Country Code	WI
Entity File Number	001-11084
Entity Tax Identification Number	39-1630919
Entity Address, Address Line One	N56 W17000 Ridgewood Drive
Entity Address, City or Town	Menomonee Falls
Entity Address, State or Province	WI
Entity Address, Postal Zip Code	53051
City Area Code	262
Local Phone Number	703-7000
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Security 12b Title	Common Stock, $.01 par value
Trading Symbol	KSS
Security Exchange Name	NYSE
Entity Emerging Growth Company	false

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