Ladies and gentlemen, thank you for standing by. Welcome to Kohl’s Third Quarter 2018 Earnings Release Conference Call. Certain statements made on this call, including projected financial results and their future initiatives are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Kohl's intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause Kohl’s actual results to differ materially from those projected in such forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in Item 1A in Kohl’s most recent Annual Report on Form 10-K, and as maybe supplemented from time to time in Kohl’s other filings with the SEC, all of which are expressly incorporated herein by reference. Kohl’s intends forward-looking terminology such as believes, expects, may, will, should, anticipates, plans, or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause Kohl’s actual results to differ materially from those projected in such forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in Item 1A in Kohl’s most recent annual report on Form 10-K and as may be supplemented from time-to-time in Kohl’s other filings with the SEC, all of which are expressly incorporated herein by reference. Forward-looking statements relate to the date initially made and Kohl’s undertakes no obligation to update them. Please note that this call will be recorded and available for replay. Replays of this call will not be updated, so if you’re listening to a replay of this call it is possible that the information discussed is no longer current, and Kohl’s undertakes no obligation to update such information. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instruction] As a reminder, today’s conference is being recorded. I would now like to turn the conference over to our host, Michelle Gass, Chief Executive Officer of Kohl’s Department Stores. Please go ahead.

Thank you, John. Good morning and welcome to Kohl’s third quarter earnings conference call. With me today is Bruce Besanko, our Chief Financial Officer. We are very pleased to be reporting another quarter of solid financial results. Comp sales on a shifted basis increased 2.5% our fifth consecutive quarter of positive growth. We experienced growth in both our national and proprietary brand and a good performance across the company, with particular strength in apparel led by our men’s and children’s businesses. Our ongoing focus on inventory management and speed to market resulted in another great quarter of inventory reduction on a shifted basis and contributed to a 25 basis point increase in gross margin. Our sustained momentum demonstrates the traction we are continuing to gain with our product, marketing, digital and store initiatives, while our focus on operational excellence was a key part in driving our 40% increase in third quarter earnings per share. And while we feel great about the short term results we are delivering, we are also continuing to invest in our business for the long term. The entire organization across our stores, distribution centers, call centers and corporate offices are executing at an incredible level with great discipline, speed and agility. I’m encouraged by the sequential improvement we saw throughout the quarter and the momentum that we are bringing into the holiday season. I’ll now turn the call over to Bruce, who will provide details on our third quarter financial results. After Bruce’s remarks, I will return to add more color on the business, update you on our key initiatives and provide some initial thoughts on the holiday season.

Thank you, Michelle and good morning everyone. As just mentioned, comp sales for the quarter increased 2.5% on a shifted basis, consistent with our reporting in prior quarters; this shifted comp adjusts for the 53-week last year by comparing sales for the 13-week periods ended November 3, 2018 and November 4, 2017. So our shifted comp of 2.5% is a like-for-like comparable sales figure. As a reminder, additional information on the calendar shift can be found in the appendix of the June 16, 2018 analyst meet-and-greet presentation, which is available on the Investor Relations pages of our corporate Website. Digital was especially strong with another mid-teen increase. We’re also pleased with the results from our stores which were essentially flat for the quarter. Our driving traffic initiative helped us achieve a positive trend in transactions which together with an increase in average transaction value resulted in a positive comp for the quarter. From a line of business perspective, we saw a broad strength with all lines of business reporting positive comps, except for the accessories business which was essentially flat. As Michelle mentioned, men’s and children’s were particularly strong, women’s was positive in the second consecutive quarter and reported strong sequential improvement as the quarter progressed. For the company, all three periods had positive comps with October being the strongest. From an omni channel perspective, all regions reported positive comps with the Midwest, Mid-Atlantic and Northeast regions being the strongest. Our strategic initiatives continue to drive the momentum in our performance. We also believe our positive Q3 sales results were amplified by the competitor store closures. In total, we believe approximately one third of our store base is being favorably affected by department store competitor store closings, a significant increase over the one fourth that benefited last year. We expect…

Thanks, Bruce. I will now provide more color on our performance in Q3, touch on a few of our key initiatives and discuss our outlook for the holiday season. I am pleased with how our team continues to focus on driving positive sales growth, while managing the business with discipline. Our third quarter performance including sales, gross margin and inventory demonstrates our continued momentum and is a direct reflection of the progress we are making on our key priorities, of driving traffic and operational excellence. So let me start with a review of our third quarter results beginning with product. I am especially pleased with the continued strength in our apparel business, both across our casual apparel businesses as well as active. Our men’s business led the company with strength across all of our core men’s categories. We experienced notable growth in our men’s private brands, such as Sonoma and Croft & Barrow, as well as the national brands such as Haggar, IZOD and Columbia. Our men’s active business was incredibly strong, driven by our key asset categories and brands and amplified by additions in Golf and Big & Tall. Our Children’s business also delivered an outstanding Q3. We believe, we have a very unique position in the children’s apparel market, given our differentiated and balanced portfolio of private, national and active brands. During the quarter, our proprietary brand Jumping Beans posted a mid-teens comp. Our Carter's business accelerated and our Kid’s active business continued as positive performance. As you know driving sustainable improvement in our women’s business is one of our key areas of focus. And we had another quarter of positive comp sales as customers are responding to the changes underway in driving brand and value clarity as well as delivering more relevant fashion through our speed initiative.…

[Operator Instructions] And first from the line of Oliver Chen with Cowen and Company. Please go ahead.

Hi, thank you. You had a really strong fourth quarter last year, and you have a lot of great initiatives ahead. How would you prioritize the comp store sales initiatives in terms of fourth quarter, and the different items from product and marketing that you’re doing? And also on a second, a follow up is on thinking about digital fulfillment cost over a longer time horizon. What do you see as opportunities in terms of leveraging certain items or accommodations or investments you made [in the bank] [ph] as your e-comp penetration continues to nicely increase? Thank you.

Thank you, Oliver. I’ll take the first one around holiday in the fourth quarter, and then I’ll hand it over to Bruce. Yes, I was just saying, I feel really really good about the holiday season. We’re bullish. I mean, we have most of the quarter ahead of us of course, but the initiatives I spoke to, I mean they really do all work together. Our product initiative is a lot of the things that have been working all year with the added plus up of key holiday items like I mentioned Cozy, we have other categories that do particularly well, like beauty and jewelry. But across the board from active, national brands and private brands, I feel like we’re really well positioned. And I think on top of that, as Bruce mentioned in his remarks the focus on inventory, in reducing choices, but increasing debt will serve us particularly well. So that’s product. Then I couple that of course with how we’re engaging with our customers and marketing and our Kohl's Cash initiative. The work we’re doing around engaging with the customer across all of our loyalty programs. We have more personalized efforts this holiday than we did last year. I feel like we are really well positioned from a marketing standpoint. And then of course digital, which has been growing all year in the mid-teens, that continues. And that will be particularly relevant as we head into the holiday season. Again, I feel really great there; we’re made more investments from a technology standpoint. The initiatives around things like Your Price, BOPIS and BOSS, which serve us well not only in shipping costs, but also importantly get those footsteps inside the store. We’re doing things like Smart Cart as I mentioned, which create that real time incentive with Kohl’s Cash to actually have them make the choice to come into the store, that’s all really good. And then I’d hit on stores, feel really great about how the teams are ready. We’ve hired well, they are fired up, again we’ve equipped them with more technology to so -- to ensure that they’re spending more time on the customer floor versus in the back room and you know we both mentioned the notion of the competitive store closures. So we think that will benefit us particularly in the store, but also online. So all that being said, feel like we’re incredibly well positioned and we’re bullish headed into the holiday season.

And then to hit on the second part of your question, Oliver, about digital fulfillment cost over the long-term. Our customers want a seamless omnichannel experience and our investments and strategies are guided by that customer want. Michelle mentioned BOPIS and BOSS as examples where in the long run we’re helping to fulfill on the digital side with easier pickups, which also drives attachment sales for us. Michelle mentioned, EFC 5 which has three times of productivity of our earlier EFCs. We’ve recently found land for our EFC 6 and are making investments into that. Our tech investments in stores are driving productivity and, of course, our operational efficiency efforts are reducing the cost of shipping in the long run. I would say in the very short run in Q3, we did see a regression back to the mean in terms of shipping costs, but as you saw, overall, our gross margin increased 25 basis points for the third quarter.

It's very helpful. Best regards. Lastly, what’s your take Michelle in how the customer is behaving this year versus last? Does the customers -- you ramp up on awareness of a lot of these digital options and customers continue to transform how they conduct shopping. Just curious about your characterizations of that kind of environment as well as the promotional atmosphere, you have a lot of data in personalization where you can drive specialized promotions to the extent that you need to. Thank you. Happy holidays.

Thank you. Yes. So, Oliver, I feel really good about where the customer is today. I think we’d say that the backdrop around the customer, consumer indicators are positive. They have been all year. So there’s certainly no reason to believe that will change as we head into the holidays and I think as I said earlier, I think, we are well-positioned. Holiday, of course, is already as always a promotional time and we do that, really, really well. So I’m anticipating like we’ve done in last years, that we’ll leverage our promotional know-how and shine this holiday like we have.

Thank you. Best regards.

Thanks.

Our next question is from Bob Drbul with Guggenheim Securities. Please so ahead.

Hi, good morning. I was wondering just on active, as you look into the fourth quarter, in terms of the level of promotions year-over-year into Black Friday and the momentum in that business, can you just talk about, you said it’s continued I think double-digit growth, but just the promotions and the marketing sides around the active piece and if that can continue. I was just wondering if you could also just address, when you think about the fourth quarter, the weather comparisons that you’re facing and how you’re planning forward versus last year's benefit from the weather?

Sure, well Bob, I’ll start on active and then I’ll let Bruce speak to the weather. As I mentioned in my remarks, active really for the last couple of years has been on a fantastic growth trajectory. Our customers and we have data to suggest this -- customer research we’ve done, continue to see us more and more as an active destination and like we saw last Q4, when people are out there shopping, they’re buying for gifts, but they’re also buying for themselves and active is here to stay, it’s part of people’s lifestyles, people are wearing actives for work out, they are also wearing it to run to the supermarket or the coffee shop. So I think given that Kohl’s is so kind of known for being a casual apparel destination, we’ve been able to extend that into being a destination for active. As it relates to how we think about active and focusing on active for the holiday, it will have a prominent place in our overall holiday portfolio just like it did last year. We feel great about the product both in terms of what we have with our national brand partners as well as with our private brands and categories like fleece, which I mentioned are part of kind of this overall Cozy strategy we have, I’m anticipating that we’ll have a great quarter in that regard. And I’ll hand it over to Bruce.

And then on the weather question, Bob, weather is less of an issue in Q4 than it is in some of our other quarters. Holiday shopping becomes the main driver in the fourth quarter versus weather. That said, cold is -- cooler temperatures is good for us and we know it’s supposed to be cool here in the holiday period. As it relates to Q3, the temperatures became more favorable year-over-year in mid-to-late September. We saw as the weather cooled, our sales picked up, we were positive in all three periods, but we were in large part the result of weather helped accelerate our businesses in the back half of the third quarter.

Got it. And Michelle, in terms of the POPSUGAR launch, two questions for you on that. Do you believe you’re bringing in that millennial customer and just within the items there is the POPSUGAR Teddy Bear Long Coat, are you having any success with that?

Bob, I love that you do your research. Well, first off, as it relates to the millennial customer, myself, the entire team, we are highly committed to that being a key strategy of the Company as we go forward and we have many initiatives aimed at that customer. Certainly POPSUGAR is a big one as we look ahead into next year. We’re going to be introducing Nine West, that’s also going to be we believe a great brand. And, in terms of, early days, we are beginning to see that it's pivoting to a younger customer. Like any strategy, this is going to take time, but again, given the level of commitment, not unlike the commitment we had to active four years ago, we’re fully expecting that we’re going to have a great impact with that key customer. Then, in terms of, what was it the Teddy Bear Coat? Yes, I would say on the outerwear in POPSUGAR, it's doing really, really well. So on that one in particular, I'm not sure as I sit here today, but overall, outerwear has been very popular. So thanks for the question, Bob

Thank you, Michelle.

Next, we’ll go to Lorraine Hutchinson with Bank of America Merrill Lynch. Please go ahead.

Thank you. I wanted to ask about the dynamics around the fourth quarter gross margin. Your guidance assumes some decline and I was just wondering what the factors are that drive that?

Yes, let me talk a little bit about that. So what I, let me first start with what I said. What I said was that our gross margin for the year, Lorraine, would be at the high-end of up 25 basis points to 30 basis points and in particular, our inventory initiatives, we believe, will continue to deliver good gross margin results. Just also though bear in mind that as the fourth quarter penetrates higher in digital sales that will increase our cost of shipping. In addition, the holiday time is typically more promotional and so we’ll react to that. So I think -- look I think the cost to shipping will be an impact. I mentioned just a second ago that it regressed back to the mean, which was what we expected.

Thank you.

Your next question is from Mark Altschwager with Baird. Please go ahead.

Good morning. Thank you. I wanted to ask about just traffic. It was encouraging to see transactions growth in Q3. Bigger picture, how would you gauge the success of your traffic driving initiatives specifically and is the level of store transactions meeting your expectations? That's my first question. Thanks.

Mark, I’ll take this one. As you know driving traffic and operational excellence, two key priorities across the Company we're highly focused on and we feel really good across the board of the traction that we’re getting. We think about traffic overall, so, we don’t break it out between stores and digital. We are an omni-channel retailer and so we’re pretty agnostic in terms of where they are shopping as long as they are engaging with Kohl’s. We believe our benefit is that we do have a very strong omni-channel strategy against many of the initiatives and the initiatives do touch largely both channels. So if we think of clearly from a product standpoint, all the new brands, innovations and then the speed to market that we're bringing with our proprietary brands, that’s about driving relevancy and driving traffic whether it’s Kohl's.com or into our stores. Our loyalty and personalization effort, big focus. As you are aware, we're still testing the loyalty pilots. We fully expect sometime over the next 18 months that we’ll be rolling some version of that out. We’re a test and learn culture. So we need to make sure it's absolutely right before we take it to full scale. I'm really excited about the progress on personalization. That’s giving us the agility through our digital means to be highly relevant and I think especially as we have both, as I said earlier, reaching out to a new millennial customer, but we have to be maniacally focused on protecting that core customer base and personalization gives us new muscles to do that. As it relates to our stores in particular, clearly, in the environment in brick and mortar, this is a focus for us. So we can leverage digital by initiatives like BOPIS and BOSS to bring them into the store. We are continuing our journey on right-sizing. So, as you know, it’s taking the opportunity of stores that we’ve already pulled out inventory out of. Now we have extra space, so leasing that space to partners who can help us drive traffic. We’re making very good progress on that. We’re talking to a number of potential partners and our goal is to find complementary businesses that can sit alongside us. We help drive the traffic to them and they help drive traffic to us. So I think across the board, Mark, we have a suite of initiatives and importantly, we have the whole organization focused, both in terms of driving traffic with our core business, product marketing et cetera as well as thinking about disruptive new ideas and you're familiar with some of those.

I might just add on to Michelle that we now have traffic counters in all of our stores. We report those measures to a third party as do many retailers and then we compare ourselves to the rest of those retailers and in that data, we both year-to-date and in Q3 are beating industry traffic measures.

That's really helpful color. And then separately just regarding operational efficiencies, what further opportunity do you have to take some cost out of the business to fund labor and technology? As we begin to look into 2019, just how should we be thinking about normalized SG&A growth rate? Thanks.

Yes, thanks, Mark for the question on OE. As you know, one of our executives, Jill Timm is leading that effort. She’s been doing that now for well over a year. We’re right on our path with respect to this first phase of OE savings. So we’re in our second year now. We’ll have yet a third year next year and we’re actually going to exceed the $250 million that Jill and the Company had proposed in its initial wave. We are now doubling down and starting a new effort, in large part because we know that there will be continued headwinds from wage pressures, continued investments needed to fulfill our customers' wishes with respect to our omni-channel strategies and so we know that we need to find more ways to find cost. So that effort is unfolding today. I'm sure we'll have more to say in the quarters ahead, but know that the things that we are doing today are going to make us more productive and more efficient, we have tech investments like smart fulfillment that Michelle talked about in her prepared remarks. We’re innovating as she mentioned two things like self checkouts and testing iPads for faster checkout. EFC technology is going to continue for us, EFC 5 is a good example of that where we have three times of productivity. So, all of those things are designed to create greater levels of efficiency and productivity. We know we need to remain focused on that and it is our number two priority.

Thank you and best of luck over holiday.

Thanks, Mark.

Next, we’ll go to Randy Konik with Jefferies. Please go ahead.

Yes. Thanks a lot. I guess for Bruce. I want to just dive a little bit deeper into the gross margin outlook for the fourth quarter because when I look at, it was mentioned that the transactions grew in the quarter, the last month of the quarter was the strongest and others are not seeing that as much. You’ve clearly got this momentum building into the fourth quarter and when you mentioned the fourth quarter gross margin guide assumes higher shipping expense and more promotional or assumes a more promotional environment, I guess more promotions from a seasonal perspective, how much of those two buckets is just an assumption versus something you’re actually seeing in the business because if I look at some of the BOPIS, the Smart Cart technology is being implemented, it would appear that the shipping expense should start to kind of I guess moderate or be controlled going forward and from a promotionality standpoint, it seems like you’re getting a stronger business going into holiday with your peers falling by the wayside and you’re seeing strength in key businesses like active. So I’m just trying to get a sense of what’s real versus assumed in the approach of the guidance for the gross margin in the fourth quarter??

Okay, thanks, Randy for the question. I’ll start and then Michelle feel free to jump in if you’d like. So here’s what I can tell you, here’s what I see from our teams. What I see from our teams is an incredible focus on inventory management that is driving significant benefit, in fact, a reduction in inventory for the past 11 quarters if you take effect of the fiscal shift here in the third quarter. So just a very significant focus by the management and our teams and they’re delivering on that focused effort. So it’s just been a tremendous benefit for us. Year-to-date we’re up nearly 40 basis points in gross margin. So that’s what I can tell you that I see with utter clarity as I look at our business teams today. It’s driven by standard to small, localization, the Speed initiative and then reducing customer count and increasing our depth and those are delivering really excellent results. From a cost of shipping perspective, the cost of shipping continues to be a headwind. It was a headwind in Q3 as expected. The cost of shipping regressed back to a more normalized level. As we penetrate more and more particularly in the fourth quarter around our omni and into the digital cycle, there’s going to be higher cost of shipping and that’s just a fact of life. We also know that in the fourth quarter, there is just generally more promotion that happens and so we’ll take effect of that in our gross margin outlook and so when we bundle that all together, we remain very confident, but at the same time we know that, as I mentioned that the gross margin will be probably at the high-end of the up 25 basis points to 30 basis points that we’ve talked about.

Yes, I'll just -- I'll build on that. I think that's absolutely right. Our responsibility is to both drive traffic and drive sales and then do that in a profitable way like operational excellence as Bruce spoke to earlier. So I think in particular to the fourth quarter I think to Bruce’s earlier comments, we’re guiding to the full year, we’re not calling out Q4 in particular. We’re not expecting anything unusual from a promotional standpoint or nothing worse than last year. It just is -- and so that's sort of our baseline. So we as an organization are focused, number one in maximizing the customer engagement, driving sales and then doing that in a profitable way. That's been the case all year. That will again be the case in the fourth quarter.

Great. And then if I’m moving away from the fourth quarter for a second. If I think about the strategies you talked about with reducing customer choice and focus on proprietary brands, supply chain speed. Is there any kind of specifics you can give us on what that benefit has done to perhaps inventory turns or margin differential because those strategies obviously can have a longer tail beyond the fourth quarter into 2019 and beyond. So I'm just kind of curious on what types of benefits you actually see on the turn side and on the incremental margin, gross margin side from those two different strategies thus far?

Sure, I’ll jump in here and Bruce can also add in. So, I mean, Speed is an absolute core strategy for us to drive sales and drive margin expansion. So to your earlier specific question, yes, we are seeing increases in inventory turn and that is a focus, it’s a multi-year focus for us, drive sales up, bring inventories down and then we get all kinds of benefits from that. I’d say I’d start with the customer, the customer is getting fresher, more relevant product and we get to chase into early in the season what’s working and in some cases, we’re getting more of things that are working in under eight weeks and we’ve built that muscle, we’ve built that capability. So number one, I get particularly excited because of the difference it makes with the customer. Number two, I’m equally excited in what it means to the P&L in that you are able to drive sales, of course, but then in terms of turn and then markdown reduction, those go hand-in-hand and a key reason why we're seeing the favorability in margin is because of our reduction in both permanent markdowns and promotional markdowns. It's worth mentioning that our aged inventory is down significantly versus last year with again, it's kind of a great cycle because the more you do that, the more you can bring in the fresh receipts. So number one I get particularly excited because of the difference that makes with the customer. Number two, I’m equally excided and what it means to the P&L and that you are able to drive sales of course, but that in terms of turn and then markdown reduction both go hand-in-hand and the key reason why we’re seeing the favorability in margin is because of our reduction in both permanent markdowns and promotional markdown. It’s worth mentioning that are aged inventory is down significantly versus last year with again it’s kind of a great psycho because the more you do that the more you can bring in the fresh receipts.

And I’d just add that there is four variables here that I mentioned, the localization, standard to small, the depth and choice, and then speed, all of those we believe are contributing, but it’s to disentangle the four variables in a dynamic ever-changing environment is difficult.

Appreciate. That help, guys.

Next, we’ll go to Matthew Boss with JPMorgan. Please go ahead.

Thanks. Michelle, maybe higher level; if you finish the year at a two comp or the high end of your guide for this year, I guess any structural reason you think the trend in your business should moderate next year? Maybe just any help by category where you see the most opportunity remaining?

Yes, great question. So we’ve guided the one to two. We’re all working hard to make sure that we are A, within it and would love to be at the high-end, but we haven’t come out there yet. We have a big quarter ahead of us. And the goal for the team is to drive positive growth. We haven’t yet as you know, provided fiscal 2019 guidance, but we have an entire organization focused on two key priorities driving sales and traffic and doing that with operational excellence.

Got it. And then maybe just a follow-up, Bruce to circle back to your comments on expense efficiency, any change to your ability to leverage SG&A at that one and a half to two comp going forward in the model?

Yes. We haven’t updated that Matt though, obviously in the third quarter we didn’t achieve it on a two and half shifted comp or one fiscal comp, but no update on that. We still expect to leverage in a typical quarter we expect to leverage on one to two comp.

Great. Best of luck.

Thanks.

We’ll next go to Alexander Walvis with Goldman Sachs. Please go ahead.

Good morning, thanks for taking the question. We have a few questions on some of the strategic initiatives in your stores. So, the first one was, we were wondering if you could give us an update on the athletic pilot where you’re expanding space in certain stores. How is that performing and is that likely to be expanded into further stores?

Sure. So, thanks for the question. As I said earlier, we continue to be very committed to our active business and our future active opportunities. We have great partnerships with the three key national brands Nike, Under Armour and Adidas. We are in pilot as you know in about 30 stores and we are rigorously studying those. As we've shared in the past, we significantly increased the space allocated inside the stores, so it is upwards of 25% of the real estate inside the store. We've increased customer choice quite significantly in the order of 40%. Like any test, there is things that are working really well, there are some opportunity areas, but my expectation going forward is that we will see some version of that active expansion going forward. We haven’t made that decision yet, but it’s a key part of our strategy going forward. So I’m looking forward to seeing how these stores do during the holiday season in the fourth quarter and then early next year, we’ll make a decision on the next steps.

Fantastic, and then a similar question on the Amazon pilot, thanks for the color on the number of stores that have those returns desks in them now and the numbers with the Amazon shop-in-shops, is there anything materially differed in the performance of those formats in the different regions as you’ve rolled them out and would you say that you have more confidence around or less confidence around the ability to roll that out to a larger numbers of stores in the fleet??

Yes. I think similarly to a number of tests that we’re running, it is kind of, core to our DNA that we like to test and assess these pilots especially ones that have significant consequence if we roll them out broadly so things like loyalty or active or even Amazon. As we said in kind of I think prior calls, we’re really pleased with the pilot. We’re driving a great level of customer engagement, customers love it. This quarter will be important for us because clearly, it’s a big time when people have a lot of packages to return. It is our first quarter where we have packageless returns, which is really a key point of difference in the whole returning process and we didn't go live with that till January. So this is our first -- fourth quarter as it relates to packageless returns. We now are across three markets. So that gives us a greater sense of scale in terms of the opportunity. So we and Amazon are continuing to assess that, but like I said, we feel really good about the customer experience, how it reduces friction for them and more to come.

Thanks very much.

Our next question is from Paul Lejuez with Citi Research. Please go ahead.

Thanks, it is Tracy filling in for Paul; I had a question on the standard to small strategy. I was wondering if you're seeing the same results out of the newest I think 200 that you rolled out this year. And then as you look at the fleet overall, how many stores do you think can be put in the standard to small format, and out of those stores, how many do you think have the opportunity to partner with another retailer or another company? Thanks.

Was originally in I think it was 200 stores and then we obviously increased it to 500 stores. The same performance that we saw initially is unfolding in all of the stores that we've now moved to the standard to small and then I think another part of your question was whether or not what universe of those stores could be – work size with a partnership is that -- was that the other question?

That’s right and actually out of your broader fleet, how many stores can be in this smaller format and yes, of those, how many do you think are possibilities to have partners?

Well, we’re always evaluating the fleet. We know that some of the stores are too large and so -- but we haven't talked about beyond the 500, what that number would be and then in terms of the universe of those stores that could be partnered, we’d say that there is a good amount of those stores. We haven’t quantified that for ourselves yet, but we know that that's an opportunity set for us and to the extent that we can take advantage of it, we will.

Great. Thanks guys.

Our final question will be from line of Chuck Grom with Gordon Haskett. Please go ahead.

Hey, thanks, good morning. Clearly the elephant in the room for you and most of retail today is the tougher compare from last year and your ability to comp that comp. So given that concern and given that November was really good for you guys last year, curious if you could shed some color on what you’re seeing here in the first few weeks of the fourth quarter to alleviate that fear. And then just so we have our model set, Bruce, what’s the delta or spread you're expecting between shifted in fiscal comps in the fourth quarter and is it your expectation to have positive shifted comps here in 4Q?

Great. So Chuck, I’ll start. Thanks for the question. As I said earlier, we’re extremely confident as we move into the holiday season. The biggest thing we have right now is we have momentum. We have five quarters of consecutive growth. Our customers are engaged and we have every reason to believe that we’ll continue through the holiday season. Holiday is a really special time for Kohl's and for many customers it is -- their destination is part of their holiday tradition to shop Black Friday or Cyber throughout the holiday season. I do believe it's when Kohl's does show up at its best. So I think consistent with the strategies that we’ve had under way having a really thoughtful focused product strategy, a balance of active of our strong apparel business, national brands, proprietary brands, we have some new category extensions like toy with LEGO and FAO Schwarz. So I feel like we have an incredibly strong product portfolio. I think our marketing engine is fired up. We have a highly differentiated value proposition in Kohl's Cash, I think, coupled with the very significant, kind of, deep agile digital muscle that the team has been building all year and certainly the great opportunity to leverage it. I mentioned in my earlier remarks, but we are spending more this holiday season than we did last year, which I believe will also give us some tailwind. Digital and stores think omni-channel critically important, we have a number of enhancements on the digital channel, things like Your Price, I mentioned BOPIS and BOSS and getting more of those customers to come in the store to pick up, which is a really good thing, Smart Cart we had just introduced last Q4. So we have been able to kind of learn that model. So that’s largely incremental for us this holiday season as is BOSS. And then I think just really importantly is we have the opportunity to capture market share with competitive closures. So, Bruce mentioned earlier in his remarks around Bon Ton, that customer and those geographies are in the sweet spot for Kohl's. So I take all of that as we sit here a couple of days in front of Thanksgiving and Black Friday and we’re leaning in and I feel really, really good about the season in front of us.

And in relation to the shifted comp, I couldn’t be more delighted than to take another question on the shift. Like in Q3, we expect Q4 to be negatively impacted by the shift in the second half we’ve talked about the shifted comp being greater than the fiscal comp, which is the opposite of what occurred in the spring season. Remember too that you can take essentially the average of the first and second quarters, and know that that should wash itself out in the second half. And then the final comment I would say is, that the fifty third week last year for us was a – it’s always a weaker week, and it was worth about $170 million last year. And so hopefully that can help to check.

Do you think the shift will be about 200 basis points, is that about 7.5?

That would be the math I would use.

Okay. Thanks very much for the color. Best of luck.

Thank you, Chuck.

Thank you. Thank you to everyone listening on the call today and wishing you all a wonderful holiday season.

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