Good morning, my name is Michelle and I will be your conference operator today. At this time I would like to welcome everyone to the Kohl's Q4 2019 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Mark Rupe, Vice President of Investor Relations of Kohl's. Please go ahead.

Thank you, Michelle. Good morning everyone. Certain statements made on this call, including projected financial results and the company's 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. Forward-looking statements relate to the date initially made and Kohl's undertakes no obligation to update them. In addition, during this call, we will make reference to adjusted net income and adjusted diluted earnings per share, which are non-GAAP measures. Information necessary to reconcile these non-GAAP measures can be found in our press release, which is filed as an exhibit to our Form 8-K with the SEC and is available on the company's Investor Relations website. Please note that this call will be recorded. However, 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 So, if you're listening to a replay of this call, it is possible that the information discussed is no longer current, and Kohl's undertakes no obligation to update such information. With me today are Michelle Gass, our Chief Executive Officer; and Jill Timm, our Chief Financial Officer. I will now turn the call over to Michelle.

Thank you, Mark. Good morning and welcome to Kohl's fourth quarter earnings conference call. I will start by discussing our 2019 performance with a particular focus on the areas that influenced our overall results. I will then touch on our fourth quarter, followed by our review of our 2020 priorities, and the initiatives we have in place to stabilize and position the business for future growth. Jill will then review our financial performance and 2020 guidance. As we look back at 2019, our results did not meet our expectations primarily due to three key factors home, Women's and gross margin. First, our home business had a tough first half driven by competitive pressures, pricing challenge and not enough newness. The team responded with agility by adjusting our pricing strategies in introducing new brands and category innovation. Together these lead to materially better performance in the second half. Second, our Women's business remained challenged throughout the year. We recognize that we need a much more significant reinvention in women to improve the trajectory moving forward. I will discuss some of the actions we are taking in a moment. Third, as it relates to margin, our performance was pressured due to a combination of category mix and aggressive promotional stance to protect market share, and a more pronounced shift to digital than expected which resulted in a greater cost of shipping headwind. Despite these challenges that we're actively addressing, we are encouraged with our progress in the following areas. We've seen improvement in traffic in our stores in the second half of the year, driven by our key initiatives. Our rate of new customer acquisition accelerated to double digits growing our overall customer base. We've enhanced our offering through new relevant brand introductions and partnerships. Our focus on creating a compelling digital…

Thank you, Michelle. I will first review our fourth quarter results, and then we'll discuss our 2020 outlook. Comparable sales for the quarter were flat, slightly better than the holiday period driven by a positive comp in January, which was aided by strong traffic in-stores. Digital sales remained strong, increasing at lower double digits rate, which was on top of a similar increase in the prior year. And geographically the Southeast, West, Mid Atlantic and Northeast were the strongest regions. Now let me share some details on how each of our lines of business performed. Footwear led the company with its strongest performance of the year. Growth was driven by Women's, Children's and Active. We saw strong results across a number of brands including Adidas, Vans, Koolaburra by UGG, Nine West and Clarks. Children's had another solid performance in Q4, outperforming the company average and was positive on the year. Children's was led to run the slide by another strong holiday performance in toys driven by Lego, as well as active and solid results on our private brands Jumping Beans. We also achieved a record year in license entertainment, with strong sales of Frozen 2 and Star Wars merchandise. Men's also outperformed the company average and continues to be a strong core category for us with six consecutive years of top growth. In Q4, men's was driven by Active Big & Tall and our team business, which benefited from our expanded Fanatics relationship. From a brand perspective, we saw strength in national brands such as Adidas, Haggar, Under Armour and Nike and in our private brands Sonoma and Apartment 9. Home with relatively in line with the company average and showed significant improvement in the second half of the year after a tough start. In Q4, we saw strength in…

[Operator Instructions] First question comes from Bob Drbul from Guggenheim. Your line is open.

Hey, good morning.

Good morning.

Good morning.

Just a couple of questions for you, first on the on the Women's business, can you give us a little more color on the – what you're exiting, how those brands in aggregate in a weighed on your Women's performance and just sort of how you think redressing that segment like how big of a percentage was that in terms of the Women's, just a little more color on that initiative? That will be pretty helpful.

Sure. Bob, it's Michelle, I'll take that one. So we are making a pretty big decision to exit eight brands, as we said on the call or on the prepared remarks, and all of those are Women's brands, we aren't going to go into detail on this call, we're going to save that for Investor Day because I think it's important to talk about those brand exits in context of the overall Women's strategy. And also with some of the new brands that we're introducing some of which you're already aware of Nine West rebuilding on, Elizabeth and James an example. But we also have some new things to talk to you about. As it relates to the brands we are moving away from, I mean, these are brands that have been down trending for some time, and on a relative percent it's definitely an area we have our arms around and it won't be material as we navigate through the next 12, 18 months, we're going to exit them very thoughtfully. And like I said, really create that space to introduce and focus on some of the new brands. Just building on the Women's conversation, if you take a step back, we've introduced a lot of change into Women's, and this year was not the year we expected or anticipated. We've learned a lot, first order of business for the Women's team. And as we said, we have a new merchandising structure and a new team, is to drive inventory management, and reduce our choice count and increase depth. And we know when we do that, and then the best days of Women's is when we fulfill that really well. So that is their first order of business. We're rebalancing the brand portfolio. Like I said, we'll do that very thoughtfully. And then I'm really excited about the merchandising initiatives we have in place. We're introducing across many of our stores, heightened mannequin prominence, and then this Outfit Bar that we've seen not only resonate with our millennial audience, but with our female customers at large. It really does fulfill a solution for them on how to address head to toe and people aren't addressing head to toe in monobrands anymore. So it's an opportunity for us to leverage across all the great brands we do sell. And we saw – as I mentioned, we saw increased Women's basket. The last remark I'd make and what gives us encouragement on our brand strategy is the performance of Women's in our digital channel where we have actually seen Women's either meet or exceed the overall digital performance. So we know the brands are resonating. We really have an opportunity in our stores around clarity, inventory and merchandising.

Got it and I guess just a question on, I guess sourcing your supply chain. I was wondering if you could just give us some help on that. Are you seeing any disruption in the supply chain? And I guess when you think about – as you look forward to first quarter and the second quarter back-to-school, any concerns around that aspect? And I was just also wondering if – like your proprietary brands, your house brands, any numbers around how much you are sourcing from China in aggregate would be helpful?

Sure. I am going to take that one as well Bob. So obviously as we sit here right now, the impact of the coronavirus is very fluid and we're all paying very close attention. As it relates to our supply chain and receipts, spring goods, we do set a lot in February. So those are in great shape. We're staying close to understand if we'll see any impacts, as we continue to flow in goods. So far, we're in really good shape. We have tremendous relationships with our sourcing partners and with our vendors overseas, and we're in conversations quite literally daily to understand, but they've been terrific in stepping up in supporting our business. As it relates to our private brands which represent about 40% of our business and apparel in particular, China is not our number one sourcing market. We have pursued a diversification strategy for some time, which does give us flexibility in these types of situations, but we will stay close of it.

Great, thanks, Michelle.

Thanks Bob.

Your next question comes from Mark Altschwager from Baird. Your line is open.

Great. Good morning, thank you for taking my question.

Good morning.

So I just wanted to ask on the guidance. The initial guidance range implies I think an operating profit decline in the 10% ish range at the midpoint, which is more conservative than some of the initial range as you provided in recent years. So I was hoping you could just talk a little bit more about the process there beyond the gross margin pressure in the first half to address inventory or there is some more – some near-term headwinds you see is particularly intense. Is there more conservatism baked into the outlook versus prior years? And then without stealing some of your own thunder from the upcoming Analyst Day, just wondering bigger picture, do you see 2020 is the new earnings base from what you can grow and just any initial thoughts on how you're thinking about that algorithm?

Sure, Mark. I'll take that call. So first, I do think we look at 2020 is kind of a year of stabilization for us. And you're going to hear about that at Investor Day, but that's where we think 2020 puts us. From a guidance perspective, kind of, I look at the top line, the down one to one. Down one puts us where we performed last year. The midpoint of that really puts us where we were at the back half of last year when we were able to run slightly positive. And then obviously the upside on the one starts showing those initiatives taking hold. So that's kind of how the top line was done. Margin being down, I think there's three things there. One is you know cost of shipping continues to be a headwind for us. Digital actually represents almost 25% of all of our sales. So we continue to see that channel perform, which puts a little more pressure on margin. Second, we want to be able to address the elevated inventory levels appropriately, specifically in Women's, which as we mentioned will put more pressure in Q1 in that margin. And then third, we anticipate it's going to continue to be a promotional environment. We want to make sure that we're being thoughtful on how we go through those promotions to drive market share and new customer acquisition, which worked incredibly well for us in Q4 with a double-digit increase in new customers. We will take a much more surgical approach to those promotions and ensure they're productive for us as we move through 2020. But those are the big drivers from a margin perspective. SG&A, I think we've managed incredibly well. So we'll keep it in that 1% to 2% range. And then last thing I'll call out is really depreciation. You see that up about $20 million to $25 million versus last year, which did put some pressure on the operating margin. This is due to a couple of things. One is we spent about $100 million more in 2019 in capital, which comes into play for depreciation next year specifically around our sixth fulfillment center. And then also 40% to 50% of that spend happens in technology, which has a much shorter life. So it hits our depreciation faster.

That's very helpful. And then if I could just follow up on the recent restructuring announcement, curious how you see the changes to the product development organization – organizational structure impacting lead times and speed to market, and I'm wondering what will be the first season to be fully impacted by some of the changes that you've announced.

Yeah. So Michelle here, I'll take that one Mark. So I'm really excited about the new structure that we've put in place. On the merchandising side it's – one of the key objectives is exactly what you're speaking to, which is to enable speed to market. As you know – that has been a strategy for some time. And while we've made good progress, we recognize we need to accelerate it, especially given the performance we talked about relative to our Women's business and I'd say overall proprietary brands. Structurally, what it does is really drives accountability and empowerment on our category teams. So we are now embedding our product development resources right into the merchant organization, removing redundancy, like I said, creating clear accountability empowerment and speed of decision-making. We are still maintaining a center of excellence in our design area as well as in our planning and sourcing, which will also put greater focus on those key areas, which are key for our success. So I'm looking forward to a really great impact on speed and agility from this new structure.

Thank you. See you in a couple of weeks.

Great. Thanks Mark.

Your next question comes from Oliver Chen from Cowen & Company. Your line is open.

Hi, thank you. Regarding traffic and in-store traffic, how would you prioritize key factors for driving the sustainability of that going forward? And also regarding the choice count discussion, I would love your thoughts on managing that and managing risk in the context of making those decisions as well as thinking about UPTs and ensuring that you're surgically processing thoughts around which choice count decisions to make.

Great. Thanks Oliver, Michelle here. I'll answer your questions in sort of the order you shared them. So first, as it relates to traffic and I'll speak with regard to, as we look forward into 2020, obviously driving traffic and sales is the number one priority of the company that continues to be the case. Traffic and customers is the lifeblood of any retail organization and it certainly our top priority. So I would say a couple of things and point to really five things as we think about driving traffic into 2020 and beyond. First of all, it's addressing the areas we just spoke to. So Women's and inventory are key areas of opportunity. And as we get those things working, that will drive the top line. Second, it's around newness, innovation and relevancy as we continue to bring fresh things and interesting things for our customers to buy. That also will drive traffic, and we've seen that play out. Third, our strategic bets around active and Beauty, both of which continue to perform in the positive territory. You'll see us continue to support those areas. Fourth, directly tied to traffic in our stores is Amazon returns and as we spoke to, very pleased with the program. We saw that accelerate into January that enabled positive comps in January, and we're seeing both the newer markets that we brought inline as well as our pilot markets, which are now close to entering their third year, they continue to build on the momentum. So that's a key one for us. And then lastly, in terms of driving traffic, I would say both of our channels of business. We're investing in the experience. So from a digital standpoint, we tested the new site experience on a limited way on growing sort…

Thank you and lastly, regarding thinking about the new customers, you've had really encouraging progress there. What's your hypothesis for ensuring, retaining and engaging the new customers and also minimizing churn as you look to broaden and stay relevant to a younger and different and diverse generation?

Yeah. It's a great question. We're putting a lot of focus in that area. From a marketing standpoint, I'd really point to two things. One is our personalization efforts and the second is our loyalty efforts, both of which are gaining a lot of traction. From a personalization standpoint, this has been a journey we've been on now for several years, enabling the data and analytics and now driving that really across every channel of business. We're driving in our digital channel, our e-commerce platform. We're driving in things like our emails, and we're also driving in social media. And we are seeing a higher conversion rate, both in our stores and online. So that will be a very big focus as we now convert these new customers. I'd also say that when we spoke earlier to the new customer acquisition, it grew our overall customer base, and our customer retention is stable. And that's a direct result of these personalization efforts. And then on loyalty, we've been testing and piloting the next-generation loyalty program for some time now. We've had a few different iterations. We're a test-and-learn culture, feel very confident that we're now on the path for the program in the future. So we'll speak to you about that at our Investor Day.

Thanks Michelle. Best regards.

Thank you, Oliver.

Your next question comes from Lorraine Hutchinson from Bank of America. Your line is open.

Thank you. Good morning. I wanted to follow up on the gross margin point. Jill, you laid out the three key headwinds for gross margin this year and talked about the first quarter being a little bit below the guidance. Can you just maybe elaborate on the offsets to get this gross margin flat or maybe up into positive territory by the second half of the year?

I think the biggest key enabler for us Lorraine is going to be the inventory management that Michelle had just discussed. If you look back in '17 and '18, when we managed our inventory down, we're able to better chase sales and have better sell troughs', which led to a better gross margin result. So I think that's key number one. Key number two is operational excellence continues to be an effort that we put forth across the organization. Specifically, we focus a lot of that on our cost of shipping. So, we're leveraging our technology, when it comes to our inventory placement. So we're able to better source it both on a cost and a speed metric, so that will continue to deploy as well as we continue to highlight and market our Buy online, Pickup In Store, which, as you know, is my favorite because there is no cost to that as well at all. So I think those are two big initiatives that will continue to focus on, that will help us drive margins as the year progresses, knowing Q1, we want to address the elevated inventory levels, which is why it will start out a little later.

And where would you put the digital or shipping headwind for the year?

I think it maintains in that 20 basis point to 30 basis point range. I think a lot of the efforts that we put forth for cost of shipping maintaining that despite the increase in the penetration has been really a focus of ours and a result of the operational excellence efforts. So as we've been able to take costs out, it's helped mitigate that headwind becoming bigger as that business grows.

Thank you.

Thanks Lorraine.

Your next question comes from Dana Telsey from Telsey Advisory Group. Your line is open.

Good morning, everyone. Can you talk a little bit about the real estate plans for 2020 and how you're planning the side by side and how some of them have been performing so far, but it's either added to traffic or who you see a good partner? And then if you think about Amazon returns as it is around longer. Just the cost picture, are there synergies that come, are there efficiencies that come where we should see that cost picture of the Amazon returns business be different in 2020 than in 2019? Thank you.

Hi, Dana, Michelle here. Thanks for your questions. First off, as it relates to our real estate strategy, our store portfolio, I don't want to continue to push things to Investor Day. That's a very important topic for us. We've been spending a lot of time thinking about our future store strategies. So we'll add a lot of color on March 16. In particular to the – what we call the rightsizing initiative or the side by side, that continues to be an area that we're studying. We have some stores that are doing well. We have some stores that once we shrunk the footprint are not recapturing their sales, so it's been a bit of a mixed result here. And as we say we're big testers, we still believe there is an opportunity here for us. We've got about 20 of those by the end of the year. We have great partners, partners like Planet Fitness and Aldi and some others. And so, we do believe over time that this is an opportunity for us. I'd say we just don't have that model fully right at this point, but we'll look to address that at Investor Day, as well as our overall store strategy. I mean, we're highly committed to our store base. As you know, they're very productive, they generate a lot of cash and they're a great source of driving traffic and driving customer engagement. So we'll speak more to that. And then somewhat related in the spirit of driving traffic, your question around Amazon as we spoke to earlier, we're really encouraged. We're pleased with the program. We continue to learn a lot. We're getting the traffic. I'd say the focus areas for the team, is to continue to drive that momentum, the customer engagement. I made a remark earlier that we generated world-class net promoter scores, which is phenomenal. And that was actually done during the busiest time of the year as well. So it really speaks to what is part of the company around great customer service. In the spirit of learning a lot, we are learning about how to drive efficiencies in the program, and that translates into our operational excellence initiative. So we do have a team that's focused on that as we get more time under our belt. And I'd also say we have an opportunity with driving even more conversion. And so, we're focused on areas like how do we showcase newness to these customers coming in, drive more impulse, share our private brand story, et cetera. So there is a lot of opportunity and upside as we look forward to the Amazon initiatives.

Thank you.

Thanks Dana.

Your next question comes from Matthew Boss from JPMorgan. Your line is open.

Great, thanks. So on same store sales, maybe if we break down your 2020 guidance, where do you see the top improvement opportunity, if we were thinking about traffic versus AUR and how best to think about the progression of comps through the year? Meaning, have you seen positive comps from January continue through February?

So Matt, I'll take that. Let me start with your first question around on – kind of state of the state where we are right now. I mean, obviously, we're in the quarter. So we don't give a lot of color, but we are expecting the year to be generally within our guidance. And I'd say February met our expectation. So we'll see how the year plays out, but we're sort of sticking with our down one to up one. Obviously, we want to aim for as high as we can go. So we hope to do better than that, but we believe that we're being thoughtful and prudent on the sales comp guidance. And then, as it relates to the initiatives that we're betting on to drive the top line, I spoke to a couple of these earlier, but I'll go through them again. And I'd say first priority for us is around driving traffic, although I also believe we have an opportunity on our baskets, especially in the store. So I think inventory management will help with that. But in terms of driving the top line, one is improving the performance of what have been the weaker spots over the last year. So that's Women's first and foremost. And then across the board, I think as our inventory management disciplines kick in deeper that we should see a benefit across the board. So address those things that were a bit of headwinds for us in the last year and then amplify what is working and what we're seeing work, so amplify the newness and innovation, you'll continue to see that. I spoke to you in my remarks, the brands that we introduced in 2019. Those are in very early days. And I'd say from our experience as we've…

Great. Jill, just a follow-up on the SG&A, so for 1% to 2% SG&A dollar growth this year, any timing of investments to consider between the front half versus back half of the year and just any flexibility on the expense front, if needed?

Yeah, I would say it's going to be pretty consistent throughout each quarter. As a reminder, you do recall Q2 for us was a pretty good performance last year. So it's probably our hardest like-for-like as we go through the balance of the year, but I would expect us to stay within that range, given our leverage point is about 1.5 points and that rings throughout all of the year. This year is a little higher, but as you recall, 40 basis points of our performance this year was due to lease accounting standard. So without that we're back in that 1.5 points, which I think we've consistently shown that discipline. So I'd expect it to be pretty even performance across the quarters.

It's great, really helpful, best of luck.

Thanks Matt.

Thanks.

Your next question comes from Alex Walvis from Goldman Sachs. Your line is open.

Good morning. Thanks so much for taking the questions. So my first question is about Active. You called out strength in the quarter. I wonder if you could give any color on the growth rate in Active apparel and Active footwear. And then, as a follow-up to that, what are you planning in terms of Active growth for 2020 and will that be driven by more pad expansions or anything else?

Yes. Great, Alex. Thanks for the question. So we're very bullish on Active that from several years ago identified the white space for us to be the destination for Active across the entire family. As it relates to – and as I said, a positive comp throughout the year and in the fourth quarter. On the apparel side, we saw strength in the mid-single-digits, footwear a little bit lower that was really driven by one brand that's kind of being course corrected as we speak, but across the board, feel really good, especially about our national brand partnerships, Adidas, Under Armour and Nike. I mean these are obviously iconic brands. Our partnership has never been stronger and will continue to, so in the coming year 2020 to your question, allocate more space, drive innovation. We have new innovation coming across all areas of business, just to be specific around Nike since we've talked about that in the past. Apparel incredibly strong, really love what they've supported us on in special sizes, like men's, Big & Tall, Women's plus. Footwear has been a little softer for us, but they are actively addressing it and we're expecting a much stronger year ahead. I'd say as it relates to Under Armour, we've been very pleased with the partnership there. I think there is still tremendous upside in our Women's business with Under Armour. And so, we're looking forward to that growth and then Adidas has been exceptionally strong on all fronts supported by the shop-in-shops that we have in 175 stores, where we're able to create an even more enhanced and elevated assortment. We'll be driving that. So just know that, you'll see a great pipeline of newness and innovation across these three national brands. And then, we have some actions coming on the proprietary brand side, one in particular that we'll share at the Investor Day in a couple of weeks.

Great, thanks so much for all the color. And my second question is about the smaller store pilot. Any color on how that's going and plans for that going forward that may also be a topic for the Investor Day, so I understand if you prefer to wait until then.

Yes, I think I probably will wait until the 16th for that one. But let me just say the latest generation of our small store pilot. I'm feeling very good about. So we had to test and learn on how to operate in that 30,000 to 40,000 square foot space, but I'm feeling encouraged with what we're seeing to date. So we'll look forward to giving you more color in a couple of weeks.

Fantastic and then final quick one, on the Investor Day, it sounds like I'll be focused on the Women's private label strategy and real estate any other – on the active strategy any other focus areas that we should expect at the Investor Day.

Yes, I'd say, Alex, all of the above, but you can look forward to hearing about our entire category strategy. You've hit on a couple around Active, around Women's. I mentioned beauty earlier. So we'll have some things to share on that front. On the store portfolio, how we're supporting the experience and I think importantly, how we plan to continue to lead in loyalty and our credit business. That's an important part of our value proposition and so we look forward to adding more color on that front as well.

Fantastic, thanks so much and see you then.

Okay, sounds great. Thanks Alex.

Your next question comes from Paul Trussell from Deutsche Bank. Your line is open.

Good morning. Thanks for taking our questions. You spoke about really strong mobile growth, referred to the app as best in class. As we move through fiscal '20, what actions are you taking to sustain that great digital offering and to remain above your competitor set in terms of what they're offering?

Yes, great question, Paul. I will take. It's Michelle. So very encouraged with the ongoing acceleration and momentum we're seeing in the digital channel and the app in particular. I would say that from an app usage, I mentioned 16 million users and those tend to be our most loyal and engaged customers and so, we see greater frequency – purchase frequency and we see bigger baskets, so continuing to get people to adopt that is a key priority. One of the biggest initiatives we have for the digital experience is this new site experience where not only has it enhance the overall experience, but real sort of building blocks of things like personalization and filtering, which enhance that conversion. So that's a key priority for us. The thing I would also add is our digital marketing efforts. So this past year, in fact, just the past back half of the year, we brought some of our capabilities in-house from a digital search standpoint and that is driving good returns for us. We're getting greater impact, and it's more efficient. So we're encouraged by that. We also have tremendous partnerships with our digital partners on the West Coast, so with folks like Google, with Facebook, with Pinterest and they're innovating with us – along with us in terms of driving greater impact. I look ahead, I think the whole impact of social media and influencers, we're still in the early days of that, but we see that as a big opportunity to drive even more engagement in our digital channels and especially with that younger customer.

That's helpful. And kind of speaking to that, you mentioned double digit growth in new customer acquisition. Maybe just rank for us the drivers as we think about what you're doing from a new brand perspective or investments in price, the digital offering, Amazon, marketing, obviously a lot going on, but what do you think is really leading to that strong number in new customers?

So Paul, it's really difficult to force rank these because they really do build on each other and enhance. I will start with newness and innovation relevancy. I mean, that is so key for us for sustainable long-term growth. And we introduced this past year a record number of new brands and partnerships. And it's not just about the sales of those brands, but it's the halo that really does contribute to the overall relevancy of brand Kohl's. So to me, that's number one. Second, it's clear and we know this from a metrics that Amazon is bringing in a newer and younger customer and bringing it into the stores. Stores are critically important for us. And so we've been really encouraged to see that level of engagement and seeing net promoter scores like we're seeing, we know we're giving them a great experience. So I look at that program much more about the longevity of our customer base. We like the traffic, of course, short-term, but the whole intent is to widen our customer base and early days, but we're seeing that. And then around the experience, you're bringing the customers and you got to deliver a great experience. We deliver that day in and day out to the associates in our stores and then through the overall experience that a customer is having to our merchandising, I think some of the inventory initiatives we spoke to really going to drive greater clarity and then like I said, our digital and our marketing efforts to drive that relevancy that impacts our entire kind of end-to-end experience with the customer. So I feel like we have a lot of great initiatives. They're very focused and we're looking forward to driving that long-term sustainable growth.

Thanks for the color. And best of luck.

Great. Thanks Paul.

And our final question for today will be from Omar Saad from Evercore. Your line is open.

Thanks for squeezing me in. I wanted to ask my first question. Have you seen any impact on traffic from the coronavirus in Washington State or any markets in the West Coast where we know there's been some of the confirmed community cases, it's my first question? I also wanted to ask about BOPIS. I don't know that I heard you guys mentioned it on the call, how that fared in the quarter? And I'll leave it at that. Thank you.

Sure, Omar, Michelle here. Thanks for the question. One is to date. We have not seen a traffic impact on the coronavirus, but as I mentioned earlier, we're paying very close attention and the number one priority for us is the well-being of our people, our customers and our vendor partners. And then secondly, BOPIS is – it continues to be a top priority for us as it relates to fulfilling our digital business. We love BOPIS because, number one, it gets our customers in the store. And then secondly, as Jill mentioned earlier, it has a nice benefit to cost of shipping. And we are continuing to see both our Buy online pick up in store and buy online ship to store in combination grow year-on-year and I think there's more opportunity there. So you can expect in 2020 for us to be marketing that more aggressively and offering enhancements for our customers to be incented to come and do a Buy online pickup in store.

Thanks. Look forward to meeting in a couple of weeks.

Great, thank you, Omar. Thank you everyone for listening on the call today, and we look forward to seeing you in two weeks at our Investor Day in New York. Take care. Thank you.

Thank you everyone. This will conclude today's conference call. You may now disconnect.