Good morning, and welcome to the Kohl's Corporation fourth quarter 2025 earnings conference call. All participants are in a listen-only mode. After the speakers' remarks, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Trevor Novotny, Director of Investor Relations. Thank you. Please go ahead. Thank you.

Certain statements made on this call, including those regarding our projected financial results, business outlook, and future initiatives, are forward-looking statements. These statements are based on current expectations and assumptions and are subject to certain risks and uncertainties that could cause Kohl's Corporation’s actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, the factors described in Item 1A, Kohl's Corporation’s most recent Annual Report on Form 10-K, and as may be supplemented from time to time in Kohl's Corporation’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 Corporation undertakes no obligation to update them. In addition, during this call, we may refer to certain non-GAAP financial measures. Please refer to the cautionary statement and reconciliation of these non-GAAP measures included in the investor presentation filed as an exhibit to our Form 8-Ks as filed with the SEC and available on our investor relations website. Please note that this call will be recorded. However, replays of the call will not be updated, so if you are listening to a replay, it is possible that the information discussed is no longer current, and Kohl's Corporation assumes no obligation to update such information. With me this morning are Michael Bender, our Chief Executive Officer, and Jill Timm, our Chief Financial Officer. I will now turn the call over to Michael.

Thank you, Trevor. Good morning, everyone. Thank you for joining Kohl's Corporation’s fourth quarter earnings call. Before I begin this morning, I want to express my sincere gratitude to the entire Kohl's Corporation team. 2025 was a year of substantial change and notable progress. I appreciate the way our teams adapted and committed to new ways of working. We are ending 2025 in a stronger position than we started, though important work remains ahead of us. Thank you for your continued dedication and belief in Kohl's Corporation. During this transformational time for our business, we are taking a long-term view. We take accountability for our performance each quarter, while making decisions for the long term with the understanding that progress will not be a straight line. Over the past year, our efforts have been focused on resetting our foundation. This focus is intended to stabilize the business and strengthen our operational ability to build for a stronger future. In 2025, we made meaningful progress and this aggregate work has us moving forward in the right way. While we have made progress addressing issues and strengthening areas of our foundation, that work will continue to be the focus for most of 2026. Addressing operational opportunities and modernizing our processes and ways of working is critical for what comes next for Kohl's Corporation. There are no shortcuts. We are confident that the work we are investing in now is essential to improving our business and getting back to growth. During today’s call, we would like to discuss three items with you. First, we will review our fourth quarter performance. Next, I will provide an update on how we will execute against our key initiatives in 2026, and lastly, Jill will give more details on our Q4 financial performance as well as give…

For today’s call, I will provide additional details on our fourth quarter results and outline our fiscal year 2026 guidance. Net sales declined 3.9% in the quarter and 4% for the year. Comparable sales declined 2.8% in Q4 and declined 3.1% for the year. The decline was primarily driven by a decrease of transactions, specifically in stores. Store sales declined mid-single digits for both the fourth quarter and the full year, primarily due to a decline in transactions. Additionally, as Michael noted, our stores experienced a negative impact in January due to unforeseen weather conditions. Digital sales grew low single digits in the fourth quarter and were flat for the year. This performance was primarily driven by higher traffic, offset by lower conversion. We are pleased to have established a critical point of stability, ending the year flat. However, our goal was to drive more substantial growth in Q4, following the headwinds of the previous year. Our digital business has a higher penetration of our Kohl's charge customer, and although we are seeing improvement in this customer’s performance, it is still down mid-single digits, pressuring our digital business. In addition, we need to further elevate conversion through better availability and findability, which are being addressed through the inventory strategies Michael outlined. Moving down the P&L, Other Revenue, which consists primarily of our credit business, declined 9% to last year in Q4, an improvement from the third quarter driven by better Kohl's card performance. For the full year, Other Revenue declined 10%. As a reminder, at the beginning of the year, we shifted certain credit-related expenses from SG&A against our Other Revenue line. For the upcoming year, we will lap this adjustment so our Other Revenue should normalize and reflect the relative performance of our Kohl's charge customers. Gross margin in…

Thanks very much. Can you just talk about the “By Kohl's” campaign that you are going to launch this spring, what it is going to involve, and then laterally, what is your expectation for comps in 2026 amongst your Kohl's cardholder given the recent improvement that you saw in the back half of 2025?

Maybe I will take the first half of the question, Charles, and Jill can handle the second part. As far as the “By Kohl's” campaign, we have actually launched that already, and it is a continuation of our effort to make sure that the power of our proprietary brand portfolio is showcased and emphasized. So there is a marketing element to it that brings some of our most important proprietary brands together like FLX and others. It is also an opportunity for us to continue down the path, as we have been talking to you over the last three to four quarters, about the importance of the proprietary brand portfolio to our customers in general, but in particular to those that are Kohl's card-carrying members. It is a mouthful, sorry. And so it is an important next step for us to be able to showcase those brands in a way that elevates them and allows us to tell stories in an inclusive manner across both of our platforms of stores as well as digital.

In terms of the Kohl's charge holder, you know, obviously, it has continued to lag our performance this year, but showed stepped improvement from down mid-teens to down single digits at the end of the year. I would expect this to continue to improve based on a lot of the efforts that we are putting forth. First, they do over-penetrate in proprietary brands, so as we are making that investment back into those brands, it has resonated with that customer, one, because it provides incredible value. It is opening price point. We also need to restore the trip assurance with this customer, so investing back into depth will help with that as well, so when they come in they can find what they are looking for. A couple other key things that we have done is the coupon eligibility resonated with this customer as well as, as we have bought back into jewelry and petites. So I think you are going to see a build in this customer. It will probably still lag in the front half of the year. I think it will catch up in the back half of the year. The good news is our non-Kohl's charge customer has been running positive, and we continue to see new customer acquisition up as well. So those are definitely driving our business. We just need to get this customer back into parity with our comps, and I think that will happen more in the back half of the year as some of these new strategies start resonating more with that customer.

Okay. Great. And then just on the credit revenue line, you are guiding down 4% to 6%. Is there any geographical shift across the P&L that is happening? Or just maybe explain why you expect it to be down? And then just bigger picture, is there a way to size up how much of an impact the shift away from your proprietary brands over the past handful of years has actually had on your credit business given that I believe that the cardholders likely over-index to owned brands versus nationals? Just trying to understand the implications on some from credit because of the shift away from mix in recent years, and I guess the opportunity that that indirectly presents.

Yeah. I would say it is going to lag, so that is why we are down and lagging from a sales perspective. We are coming into the year with less accounts receivable, which is what really generates that interest revenue and the late fee revenue for us. So it is always going to lag. You make your purchase in month one. We do not start billing you till 30 days later. You do not start getting accrued into interest for 30 days, and then it really builds and accumulates. So it is always going to lag top line just given the lag of those purchases. I would agree. As we move into proprietary brands, they definitely over-penetrate into that category. We were really void of an opening price point in our store over the last couple years because we had not invested into proprietary brands, and this customer was finding that value elsewhere. The good news is she continued to shop us. We just got less frequency from this customer. So as we brought back coupons, we have brought back proprietary brands, we are starting to see that reaction to our customer, which is really what is driving that 120 basis point improvement in that comp from Q3 to Q4 and really moving from down mid-teens to down single digits by the end of the year. So big improvement. We continue to expect to see improvement, but it will lag on that credit revenue line just because of how the interest and late fees accrue the balances.

Got it.

Thanks a lot.

Our next question comes from Mark R. Altschwager from Baird. Please go ahead. Your line is open.

Thank you. Good morning. Michael, you outlined several initiatives today. Which of these do you view as the most immediate catalyst for recapturing market share in 2026? Furthermore, how should we think about the scaling here, where these assortment pivots and other initiatives provide enough lift to drive a return to comp growth?

Yes. Thanks for the question, Mark. I would say, just carrying on Jill’s comment around proprietary brands, that has been a significant focus for us in the past, call it, eight to nine months or so in terms of restoring what we believe to be the proper balance. Again, we are not targeting a specific number that we are looking for from a mix perspective, but proprietary brands, for a number of different reasons, are really a focus for us in bringing and restoring the activity that we need with our customer. Jill mentioned the importance of the Kohl's credit card-carrying customer. They index heavily toward proprietary brands, so that will be a big focus for us. I think also beyond that, making sure that the continuation of the brands that we will be pushing forward, both national as well as proprietary, will be a big part of that. Our focus right now also is on making sure that we provide, I will say, maximum value to our customers. And so you are seeing us offer more in the way of, call it, $10 and under items. So look at toys as an example. We have a toy tower that we are rolling out to stores that has price points $4.99, $7.99, $9.99. Then the Deal Bar, which we have recently rolled out as well, which, if you walk into the entry of our store, provides another impulse opportunity and a pickup for customers, beyond what you can see as you are checking out in our queue line. So those are just a couple of examples of where we are focused right now. And more to come.

Thank you. And Jill, to follow up on the EBIT margin guidance, calling for about 50 basis points of compression at the low end. What specific headwinds are captured in that lower end, that 2.8% floor? What are you incorporating in terms of changes to tariff rates, if any, and just any further color you can provide on the expected cadence for the year on EBIT margin would be helpful.

Yeah. I think the biggest thing from an EBIT is on the down two it is just harder to leverage our SG&A costs just given the fixed-cost nature of our business. So I think we have done a really incredibly good job of bringing down our expenses over the last couple of years. We will continue to operate with that discipline into 2026 as well, but I think it just puts pressure on the EBIT expansion. Obviously, at flat, we are expanding the margin. So I think that shows our discipline in terms of how we are managing expenses, that we are able to have some expansion on the top end of the guidance. From a margin perspective, I think we have managed our tariffs incredibly well. We have actually offset that. So I do want to give a shout out to our sourcing and buying teams on how they have managed this dynamic environment in terms of still being able to expand our margin this year by over 30 basis points and 25 basis points in the fourth quarter. Next year, really, we are going to manage it the same way. So we think we have the right mitigation tactics to manage through tariffs. The big thing that we want to make sure that we are going after is value. We know we serve the middle- to lower-income customer. We know they have to be choiceful with their discretionary spend. And so a lot of what we are talking about today is how we can stand for value, whether that be through our proprietary brand portfolio, through the price points that Michael indicated with the $10 and under, also making sure that we are going to be able to break through with our promotional values as well. We want to give ourselves some room to be able to do that. We know our proprietary brand will be a tailwind in the mix as we definitely move more into sales there. But we also see digital as a growth opportunity. We were happy to get to a point of stability and putting a flat comp for the year, but we really think this can be a growth engine for us as well into 2026, which will then add some pressure to margin. So those are kind of some puts and takes. So margin, I would say, is not going to be a driver of the EBIT expansion, but rather it is going to be around our expense management and then obviously getting to that flat comp allows you to expand it on the top end.

Thank you.

Our next question comes from Robert Drbul from BTIG. Please go ahead. Your line is open.

Just a couple of questions from me. On the women's business, as you think about this year and I think the progress that you made last year, where are the biggest opportunities ahead? And I guess on the same line of questioning would be just in home, I think you think about what you have learned sort of Q4 in home, soft home, tabletop. Can you just talk through that category as well? And just curious on sort of online versus in-store, how you would merchandise that category? Thanks.

Sure. So from a women's perspective, I would say one big callout is juniors, Robert. It was up 8%, really seeing momentum behind our SO proprietary brand. Which, as you know, juniors is our fastest-turning business. We are probably the most mature in that curve in terms of how we went after our proprietary brand portfolio. So I think that is kind of the litmus test for us and really what we are going to continue to chase after, and that is where women's will continue to lead to. I think there are a couple of opportunities if I think about women's. We are in a denim cycle. So you are going to see us leaning into our proprietary brands LC Lauren Conrad and Sonoma, but also great national brand partners like Levi's. So that is going to be coming to life in our store as well. We know we had a little bit too many choices on our floor, so they are really going to be curating that assortment and putting more depth in so we can be in stock on those basics that we need. We went a little too far, I think, this year into core knits and sweaters, so we know we have an opportunity to curate that better as we get to the back half of the year. I am really excited about our spring seasonal selling. A lot of the changes that we learned from our missteps in fall seasonal, we have corrected, and we are starting to see that momentum as we called out with our spring seasonal businesses, which will only grow in volume as we move into March and April. So we are excited about that opportunity in front of us. So I think that women's really has the right formula…

I guess, and if I could just ask a follow-up, which would be on the marketing expense, when you think about sort of how you are approaching reengaging with some of your credit customers, but also noncredit customers. Where did you end up in marketing, and can you just talk through the plans for 2026 in terms of, you know, leverage, not leverage, in terms of how much you are going to spend? Thanks.

Sure. I think marketing this year, we end up close to a similar ADAS as last year. Kinda that is my metric for how I look at the productivity. What I would say is we always look at opportunities. That team has done an amazing job of finding productivity and making our working media work harder for us. So it has been a way for us to save some money. However, we spend a lot of time with our Chief Marketing Officer about where and how we can invest back into drive sales. So if we see opportunities, we are definitely making those investments and making sure we get the return back off of the money. So even though there is some savings, I think if you look at that productivity factor, you will see it is pretty in line with where we have been. And it is a place that, if you look at versus where we plan to be, we will tend to invest back into because we know we can get the sales, particularly in digital. It is a very easy way for us to invest in, get some search terms, get some paid traffic in moving our digital business forward, and getting really good ROI out of it. So I think we have a very good system in terms of how we measure marketing, then how we make those investments to make sure we are getting the return back from an organization perspective.

Great. Thank you very much.

Our next question comes from Dana Telsey from Telsey Group. Please go ahead. Your line is open.

I know you have a very store base related to profitability. How are you thinking of openings and closings this year? And the small-store boxes? What is the game plan and remodels? And then, Michael, as you talked about the initiatives for top line growth, how do you see the framework of the store changing either by category, obviously at the impulse lanes? What does footwear and active mean for you this year? Thank you.

So I will try to take some of those questions. Thanks, Dana. The question around stores, and we have talked about this before, I think we have a store base of 1,150 stores roughly. The vast majority, well over 90%, are profitable. And as we look at that store base on an annual basis, we will continue, from a hygiene perspective, to make sure that we believe that those stores are positioned in the right spot and delivering what we need. So I would not anticipate any sort of grand plan of saying we are taking stores out or adding stores at this point. The focus for us is actually on optimizing what we already have, and we will be focused on making sure that we continue to push the stores’ productivity as far as we can going forward. We will look at stores like we do on an annual basis, like I said, and to the extent that there are opportunities for us to either relocate, those are opportunities for us. We can do that. But no major change in the store base expectation at this point.

I think, if footwear’s doing well from a dress casual perspective, we are seeing some green shoots there, particularly, like, in sandals. We knew boots was going to be tough. We bought that down just given the exposure to tariffs in that category. So that was an anticipated piece. I think the big piece of it for us, as you mentioned from an active perspective, is getting innovation and some movement from an innovation perspective in the footwear business. We have been working really closely with our top three partners. I think we do expect to see some momentum build in that category throughout the year, but I would say we would probably be set better from that perspective for back-to-school into fall, just because of the change that it does take to get there. So I would say, from a footwear perspective, I expect it to probably lag the front half of the year, but by the back half of the year, get back into parity from a comp perspective, just given we do have a big active footwear business and that will take some time to bring that innovation through from that perspective. And then in terms of, I think, your last question, if I wrote it down correctly, was the top-line framework for store changes. I think, you know, we have made some big changes in the last couple years. Obviously, Sephora coming in was a big moment for us. We had some missteps with the jewelry, so bringing jewelry back in, showing that and showcasing that, having accessories have a home behind the Sephora pad, and moving juniors back to the front of the store were some big showcases that we had in 2025. Clearly, putting juniors in the front was working. That cross-shopability with Sephora…

And, Dana, just to add on to what Jill was saying, what you are hearing her talk about is trying to bring some fun and excitement back to particularly the store environment. So we talked to you before about the storytelling nature of—and what is important in being able to not only curate the right assortment, which is what our customers are asking for, but also do some storytelling. So whether it is the use of mannequins, the way we position an LC Lauren Conrad brand, like Jill just mentioned, in our stores, those are all important aspects of us being able to actually bring some fun back to the Kohl's Corporation environment and make sure that what we are offering is not just an item at a price but also a story around it, so that whether it is the entire outfit that we can display and talk to from a mannequin standpoint, those are the kind of things that are important for us that we think will help enhance the experience in-store for our customers as they engage with us. And then similarly online as well, telling that same story so there is a pull-through of that thread all the way through the experience that a customer can have where they want to engage with us online or in-store or all the different versions in between, like BOPIS and the rest.

Our next question comes from Oliver Chen from TD Cowen. Please go ahead. Your line is open.

Hi, Michael and Jill. Regarding trip assurance, what is the timing of that happening? And there are some things you can do sooner you have been doing than making happen. But how does it phase in quarterly? And as we also model Other Income, should we know about the comparisons and drivers throughout the year, as in profitability? Your company is quite sensitive to that line. It sounds like a lot is under your control, but what could be risk factors to the upside and downside on Other Income for us to consider? And third, you have been on an inventory management journey for many, many years. I think it is different now, but what is different in terms of breadth versus depth? It sounds like there are some decisions that were made that were self issues in terms of what you are choosing to do with basics and others. Thank you.

Yeah. So on the trip assurance question, Oliver, what I would tell you is that that work is well underway, and we have been focusing on that in large part in 2025 and it will continue into 2026 as well. The whole focus there is our customers count on us to actually have what they are looking for, whether it is online or in-store, particularly in-store. And what we have been doing is curating the assortment to the point where we have the appropriate level of choice and in many cases that means reducing the choice offerings that we have but at the same time actually going deeper on that so that, particularly in the basics area, and that work will continue. Our teams, collectively across the organization, have been working diligently on that over the last several months, and we feel like we are making good progress in that area. Jill, do you want to talk about the income?

Sure. I think when you reference Other Income, you are referencing the Other Revenue, Oliver. But it is going to be about our credit sales, and I think, you know, that is where it is going to ebb and flow. So as I mentioned, coming out of this year we have a lower accounts receivable balance just because it has been lagging. We need to build that back. So the guide of down 4% to down 6% will lag the comp just because of the ways that that build happens, the way that it revolves, and it generates that revenue. So I would say, you know, we are staying down flat to down two. We know our credit card customer needs to continue to improve. I think, you know, we can see that improvement more in the back half of the year, but it will still cause a lag on the Other Revenue line. So I think if you kind of look at that spread that we gave you, it is probably a good spread to use as we move into the current year. There are no reclassifications, so it is very pure this year. So it should be an easier way for you to be able to model that.

Has been a great new recruitment tool. What is your latest thinking on the best adjacencies next to that, and where are we given that there are lots of nice conversion opportunities? And lastly, Michael, this is simple but hard, but what do you think it takes to positive comp in stores? Like, there are a lot of great things happening, but what is your visibility or your thoughts on which ones will be the critical drivers just to get back to positive comps on multiple years of negative comps? Thank you.

Sure. On the Sephora question, we feel very good about the partnership there. In terms of the adjacencies, you know, we have moved juniors across from Sephora. So we feel like that was a positive move and is paying dividends for us in terms of a customer coming in for a Sephora purchase and then turning out and seeing what is available. That is a younger, oftentimes more diverse, more digitally savvy customer that comes in to shop for Sephora, and we want to make sure that the product that they see outside of the Sephora portion of the store is consistent with what they are looking for, and that move with juniors has been a big part of that. As far as getting back to growth, I do not want to pinpoint a date and a time to say it is going to happen. But the kinds of things that we are doing in terms of the progression that we have been on over the past year in particular, but over the last couple of years, I would say, are, I think, indicative of the progress that we are making. We have mentioned proprietary brands. We have mentioned the culling of the assortment. Those are all things that we think are right. I talk to the team all the time here about—I use the analogy—that we have got to get the product right, because that is what people ultimately come for. Experience and all the other things that are wrapped around it are important as well, and we are working on those as well. But we have got to get the product right to make sure that that is what the customer continues to come back around for. So we will continue to focus on building that space to get back to growth eventually. What I would tell you is that if you look at the progression that this organization has been on over the last, call it, a couple years, we had a negative 6 comp two years ago. We produced a minus 3 comp this past year in 2025. We are giving you guidance, as Jill mentioned in her commentary, of being flat to down 2. We came out of the fourth quarter roughly around a 2% if you back out the weather impact of the 70 basis points that we mentioned. And so we are guiding on the low end of where we are already performing. And if you build these capabilities on top of that, that is what we believe will get at least back to flat. And we have the ambition, obviously, to get back to growth through this eventually. And that is what the aim is. We understand that that is the lifeblood of any business, to grow. But we also want to be measured and disciplined in the way that we get there, particularly against the backdrop of the environment that we are operating in from an economic standpoint.

Thanks for those details. Appreciate it. Best regards.

Our last question today comes from Michael Binetti from Evercore. Please go ahead. Your line is open.

Hey, guys. Thanks for all the detail here. Just on the comps, Jill, you suggested, you know, that we would be building to the flat to down 2% through the year. Maybe just a thought on trying to connect that to your comment on first quarter. Sounds like seasonal goods and some of the holiday decor was the headwind in fourth quarter, but the decor was stronger if the spring seasonals are getting better and the core was stable. How should we think—I am trying to think about trends in first quarter relative to the negative two to flat for the year. And then I am also curious. It sounds like, you know, with the coupon and shifting to expanding the coupon a little bit deeper, as you said, shifting to more of the entry-level price points to drive value, sounds like a good idea, very important. Can you just talk about how you are thinking about the range of outcomes for units versus AUR that could support the negative two to flat comp for the year?

Sure. So I think from a comp perspective, Michael mentioned it well. We anchored the low end on our current performance. If you look at fall, we exited the year down two. The flat shows that we are going to have progressive improvement throughout the year. So, really, by starting at the low singles that I guided for Q1, you would actually say your exit rate has to get positive to exit at a flat. So we do know we have to make some changes. Obviously, we had some missteps with fall seasonal. We made those corrections with spring. It started out great. It is a small portion of the business right now, so I think caution. I do not want to become overly optimistic. That is, you know, as you know, not my nature, but we feel good with that business. We feel good with our year-round business, which has actually continued to perform well even through the fourth quarter. So I think we are cautiously optimistic there, but there are a lot of macro headwinds. And we know our consumer is low- to middle-income. They are under a lot of pressure. Obviously, a lot of things happening today that are taking their discretionary income. So we also want to be mindful of the environment that we are operating in. We are kind of balancing that as we enter into this year. We also know a lot of these investments into depth are going to happen as the year progresses. We mentioned footwear. We know we have some new innovation, but we do not expect that till the back half of the year. So there are things that are happening, but it does take some time to make those moves. So we wanted to make sure we gave ourselves…

Okay. Thanks a lot for all the help, Jill.

Great. Thanks, Michael. And we are out of time for questions. This will conclude today’s conference call. Thank you for your participation. You may now disconnect.