Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kohl's Corporation Second Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press the star 1. Thank you. Mark Rupe; Senior Vice President, Investor Relations and Treasury, you may begin your conference. Thank you. Certain statements made on this call, including projected financial results and the company's future initiatives, are 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. In addition, during this call, we may make reference to non-GAAP financial measures. Reconciliation of non-GAAP financial measures can be found in the investor presentation, filed as an exhibit to our Form 8-K, filed with the SEC, and is available on the company's investor relations website. Please note that this call will be recorded. 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will not be updated, so if you're listening to a replay of this call, it is possible that the information discussed is no longer current, and Kohl's undertakes no obligation to update such information.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 this morning are Tom Kingsbury; our CEO, and Jill Timm; our Chief Financial Officer. I will now turn the call over to Tom. Thank you, Mark, and good morning, everyone. I am pleased to report that we continue to make progress in our efforts to significantly improve Kohl's business over the long term. Our second quarter earnings were in line with our expectations. We feel good about our performance, given the persistent macroeconomic pressures on our customers and that many of our strategic efforts are just underway. In 2023, we continue to focus on four strategic priorities, which are: enhancing the customer experience, accelerating and simplifying our value strategies, managing inventory and expenses with discipline, and further strengthening our balance sheet. We are confident that our strategies will drive sales and earnings performance. It'll take some time for the full impact of our efforts to be realized. However, our objective is to show incremental improvement in the back half of the year, with even more benefit in 2024 and beyond. As it relates to our outlook for 2023, we are reaffirming our guidance. Let me now turn to the second quarter. Net sales decreased 4.8%, and comparable sales were down 5%, with store sales outperforming the total company and flat to last year. Sephora at Kohl's continues to exceed our expectations, driving a total beauty sales increase of nearly 90% year-over-year. We opened nearly 200 Sephora shops in the quarter, and momentum in our existing Sephora shops continues to accelerate, with greater than 20% comparable beauty sales growth in the Sephora shops opened in 2021 and 2022. In our home business, which we've highlighted as a major long-term opportunity for Kohl's, showed strong relative improvement in the quarter. Beyond the top line, we were able to successfully manage gross margin and expenses to achieve an operating margin of 4.2%. We reduced inventory 14%, both of which were better than planned. I'll now turn to our longer-term initiatives and provide more detail on our four overarching priorities, which I just mentioned. Enhancing the customer experience in stores and online through our product and merchandising initiatives is our top priority. Getting back to growth is essential to achieving our goals. I want to be clear on how we are viewing the building blocks. We have an opportunity to improve the offering in our core business. In the coming years, we believe Sephora, gifting, impulse, home decor, and longer-term new stores will be the most significant contributors to our growth. Sephora at Kohl's continues to resonate with our existing customer base while also bringing in new customers that are shopping more frequently. The performance is exceeding our expectations, and we are driving considerable beauty share gains. We are seeing solid growth in our Sephora exclusive brands, including the Sephora Collection, Sol de Janeiro, and Rare Beauty, as well as national brands such as Fenty and Charlotte Tilbury. We feel good about our overall assortment, and this fall, we will further expand our gifting assortments, which were highly successful last year. During the second quarter, we opened nearly 200 Sephora shops, and this month, we are opening approximately 50 shops. These openings will complete the rollout of our 850, 2,500 sq ft shops. We are also opening a smaller format, 750 sq ft Sephora shop in the remainder of the chain. We opened five of these smaller shops earlier in the year, and they continue to drive solid beauty sales, exceeding our expectations. We will open an additional 45 in the third quarter, bringing us to 50 by year-end. In total, Sephora will be featured in more than 900 of our stores by the end of 2023, and we will expand the small format shops to the remainder of the chain over the next couple of years. Building our home business represents another major growth opportunity. We will optimize our existing offering and capitalize on significant opportunities in areas where Kohl's historically has not had a meaningful presence. These include gifting, impulse, decor, and pet. Many of these new assortments will begin to set in fall with a larger presence in holiday. During the second quarter, the home category showed strong relative improvement, as I noted. This was primarily driven by our existing offerings, such as housewares and cookware, as well as by encouraging early reads from our new growth initiatives. We continue to leverage register removals and additional in-aisle space to create a seasonal gifting destination, which supported strong sell-throughs during Mother's Day, Father's Day, Memorial Day, and the 4th of July. Currently, we are showcasing back-to-school items such as backpacks and dorm products, and later this fall, we will highlight harvest and holiday products. In addition, we will expand our offering of impulse products in spring of 2024, which will include beauty, wellness, toys, snacks, and other items. In home decor, we are forming new vendor partnerships, building inventory with market buys on a weekly basis and enhancing our in-store merchandising across areas like wall art, glassware, botanicals, storage, and lighting, to name a few. In pet, we have expanded dedicated space to the category across the chain, following a successful 50-store test last fall. Our offerings in this space include things like dog beds, cat and dog apparel, and pet toys. Pet delivered a strong second quarter sales performance, driven by the additional space, and we expect to maintain a momentum moving forward. We are also committed to capitalizing on new store growth opportunities over the long term. In 2023, we remain on track to open seven new stores, including one relocation. Two of these stores opened in the first quarter, with the remaining five set to open this fall. Turning to our apparel and footwear offerings, we remain focused on optimizing our apparel assortment to reflect our customers' interests. Two areas that we have highlighted in recent quarters in response to customer demand are polished casual and dressy offerings, which continue to resonate with our customers across women's, men's, and children's. We are leaning into these areas in women's through key brands like Lauren Conrad, Nine West, and Simply Vera, Vera Wang, while also expanding our dress offerings in both special occasion and casual. In men's, we have seen strong results in areas like suitings, dress shirts, and dress pants, and we'll continue to amplify these areas moving forward. In children's, we are expanding Little & Co., as well as continuing to build on our core Jumping Beans and Carter's businesses. Active also remains an important piece of our business. While trends in the overall active space remain soft, we are focused on building on our recent success in outdoor and golf apparel, while also working with our national brand partners to bring in newness. In the second quarter, we were pleased with the sales trends in our Eddie Bauer offering in outdoor, as well as in Nike and Under Armour footwear. To summarize our top priority of enhancing the customer experience, we are focused on driving significant growth in Sephora, gifting, impulse, home decor, and longer-term new stores. We also see several opportunities to improve our core apparel and footwear offerings. Now, let me discuss our second priority, which is accelerating and simplifying our value strategies. We have many efforts underway to simplify how we are showing up to the customers, as we believe we can drive greater customer engagement and conversion. During the second quarter, we continued the work we began in Q1, reducing general promotions and eliminating online-only offers in favor of a more targeted offers and clearance events to clear slower-selling goods on a more regular basis. We are testing key value items, which is more competitive and consistent pricing on select merchandise within our private apparel and home brands. This is a continuation of our efforts to make our pricing more simplified. We are also evolving our marketing message with greater clarity around strong price points in our in-store graphics and in our digital and broadcast ads. While it remains early, we are very encouraged with the response we are seeing from customers. Our key value items are performing positively. This is a compelling opportunity for our business over the long term. Based on initial results, we are now planning to thoughtfully scale it in 2024. Lastly, we will continue to leverage our industry-leading loyalty program as a mechanism to deliver even more value to our customers. Kohl's has a strong loyalty foundation, which includes Kohl's Cash, Kohl's Rewards, and our private label credit card. Building on this, we launched a co-brand credit card with Capital One to select customers in the second quarter. While we expect the co-brand card to have only a small benefit to this year's results, it will grow and contribute more meaningfully in the years to come as we offer it to a greater number of existing and new credit customers in 2024 and 2025. I will now transition to our third priority, which is managing inventory and expenses with discipline. During the second quarter, we reduced inventory by 14% compared to last year, exceeding our goal of planning inventory down mid-single digits%. We operated with greater open-to-buy, which allowed us to stay agile as the demand environment evolved in the second quarter. As we implement new planning and allocation processes, we are becoming more responsive to the customer's demand, operating with additional open-to-buy to chase trends and minimize risk, maintaining better in-stock levels in core basics, and improving inventory flow from our distribution centers to the selling floor. Looking to the fall season, we feel good about our current inventory levels and our ability to continue to manage inventory with discipline. Turning to expenses, Kohl's has a history of managing costs with discipline. We are continuing to proactively capitalize on opportunities to drive efficiency across all areas of the company. A couple of examples include our goal of lowering our marketing spend ratio to 4% and embedding more technology into our operations to improve productivity, such as self-checkout kiosks in our stores and a higher level of automation to more efficiently flow goods in our newer e-commerce fulfillment centers. Lastly, our fourth priority is strengthening our balance sheet. Our focus remains on returning our balance sheet to its historical strength with a long-term objective of managing to a 2.5x leverage level. During the second quarter, we generated solid cash flow, which allowed us to reduce our revolver borrowings by $205 million. Returning capital to shareholders remains a commitment of ours. Jill will discuss our overall capital allocation priorities, including the dividend, which continues to represent a healthy yield at the current share price. In closing, I am pleased with our second quarter earnings. I am confident that the work we have underway is positioning Kohl's for long-term success. Our organization is operating with strong disciplines and efficiency, and many of our growth-driving initiatives are just beginning to take shape. As it relates to our more recent trends, our August-to-date sales are off to a good start, driven by back-to-school and our fall seasonal items. I want to thank the entire Kohl's team, and especially our store associates, for their hard work and adaptability to position us for improved future performance. I hope you'll get a chance to visit our stores to see all the good work underway. I will now turn over the call to Jill to discuss our second quarter results and 2023 outlook. Thanks, Tom, and thank you everyone for joining. For today's call, I will review our second quarter results and provide details on our fiscal year 2023 guidance. As Tom shared, we made additional progress against our strategic priorities and delivered earnings in line with our expectations. Turning to our results, net sales declined 4.8% in the second quarter and are down 4.1% year-to-date. Store sales were flat to last year in Q2, driven primarily by strong Sephora sales growth, with sales at home showing the most improvement versus Q1. Digital sales remained pressure in Q2, down 17% to last year and penetrated at 25%, though both are up versus pre-pandemic levels. We are seeing customers shift back towards stores, and sales were impacted, as expected, by the elimination of online-only promotions as we work to simplify our value strategies. From a product perspective, national brands outperformed private brands in the quarter. Our top-performing national brands included Nike, Under Armour, Haggar, Izod, Hurley, and Eddie Bauer. While our top-performing private brands were Apt. 9, LC Lauren Conrad, and Jumping Beans. Accessories was our best performing category, up 25% to last year, driven by Sephora at Kohl's. The increase in beauty sales was partially offset by displaced sales in jewelry. As it relates to some of our other categories, as previously noted, Home showed the strongest improvement in trend from Q1, with encouraging early reads in our new growth categories. Footwear also showed trend improvement, driven in part by increased Nike and Under Armour sales in the category. Other revenue, which is primarily our credit business, declined 3% in the second quarter, an improvement in trend versus Q1. Moving down the P&L, Q2 gross margin was 39%, a decline of 61 basis points to last year, driven by product cost inflation and higher shrink, offset partially by lower freight expense and digital-related cost of shipping. Year to date, gross margin was 39%, flat to last year. SG&A expenses increased 1.6% to $1.3 billion. The increase was primarily due to higher store expenses, driven by Sephora openings, wage pressure, and store experience investments. This was partially offset by lower marketing and distribution costs. Year to date, SG&A expenses have decreased 1.3% compared to last year. Depreciation expense of $186 million was $20 million lower than last year due to reduced technology capital spend. Year to date, as compared to last year, depreciation expense decreased $32 million to $374 million. Interest expense of $89 million was $12 million higher than last year, due primarily to increased revolver borrowings. Year to date, interest expense increased $28 million to $173 million. Net income for the quarter was $58 million, and earnings per diluted share was $0.52. Year to date, net income was $72 million, and earnings per diluted share was $0.65. Turning to the balance sheet and cash flow. We ended the quarter with $204 million of cash and cash equivalents. Inventory at quarter end was down 14% compared to last year, exceeding our commitment of a mid-single digits decline. As Tom shared, we feel good about how we managed inventory in the quarter and how we are positioned entering the fall season. operating cash flow was $430 million in the second quarter, and free cash flow was $176 million. We continue to expect inventory to be a source of cash during the remainder of the year, which will drive strong positive cash flow generation in Q3 and Q4. capital expenditures for the quarter were $244 million. We are still planning for approximately $600 million-$650 million of capital expenditures in 2023. Now, let me provide an update on our capital structure and capital allocation priorities. Strengthening our balance sheet is one of our top priorities in 2023. It is important that we continue to rebuild our cash position, and it remains our longer-term goal to manage this business at a leverage target of 2.5x. In the second quarter, as planned, we reduced our revolver borrowings by $205 million. Looking ahead, we will continue to utilize the revolver in Q3 for seasonal working capital build related to holiday receipts. However, we continue to plan to be out of the revolver by year-end, inclusive of retiring $111 million of bonds in December of 2023. As it relates to returning capital to shareholders, we will continue to prioritize our current dividend, which represents a healthy yield for our shareholders. During the second quarter, we paid $55 million, or $0.50 per share, in dividends to shareholders. In addition, as previously disclosed on August 8th, the board declared a quarterly cash dividend of $0.50 per share, payable to shareholders on September 20th. Now, let me provide details on our outlook for 2023. As you've heard today, we are pleased with the progress we are making against our priorities. Our second quarter earnings were in line with our expectations, and as Tom indicated, August sales to date are off to a good start. Based on this, we are reaffirming our full-year financial guidance. For the full year, we currently expect net sales to decrease 2%-4% versus 2022 and includes the fifty-third week, which is worth approximately one percentage point of growth. Operating margin to be approximately 4% and diluted earnings per share to be in the range of $2.10-$2.70, excluding any non-recurring charges. Lastly, I want to highlight a couple of items about how we are thinking about the third quarter. We continue to expect our full-year gross margin in a 36%-36.5% range. For Q3, we expect it will be approximately 38%. Our full-year SG&A expense outlook is also unchanged, with slight deleverage expected. For Q3, we are planning SG&A expense to increase approximately 3% as compared to last year, driven by additional store-related investments and 45 Sephora small shop openings. With that, Tom and I are happy to take your questions at this time. At this time, I would like to remind everyone, in order to ask a question, press star, then the 1 on your telephone keypad. Your first question comes from the line of Bob Drbul from Guggenheim Securities. Your line is open. Hi. Good morning. Good morning. Good. A couple questions. You know, first, Tom, for you, when you think about, you know, the, the progress that you're making, can you just talk a little bit more, you know, around the learnings, the opportunity that you see now that you're sort of into it a few quarters, in terms of the, you know, the business and where you're taking it? The second question, Jill, can, can you give us some insight on credit, you know, just in terms of the, you know, the relationship, the, you know, the bad debt, the delinquency rate. I think the, the launch of the, the new program that you're, you're doing this year, just sort of how we should be thinking about trends in credit right now and as you look to the back half of the year. Thanks. Bob, to talk about what's going on with the strategy, we feel pretty good about what's been going on here. You know, we really look at the business, when we look at the stores business, you know, we have a positive trend in stores, that just really represents a lot of the work that we've been doing overall. Most of our decrease came from digital, and that was somewhat self-inflicted because, you know, we have reduced the amount of online-only general public offerings. We, you know, obviously moving more to omni, having this more simplified pricing strategy. You know, to have two different pricing strategies just wasn't good. You know, we're encouraged by August, the August business as well. You know, one of the things we've learned, the Sephora business has been incredibly good. You know, to have a 20% comp in the stores in from 2021 and 2022 is pretty remarkable. You know, it's bringing in a younger, more diverse consumer as well. It's been really, really a driver, and we're moving right along, and, you know, over the next couple of years, it'll be in all stores. You know, we're really moving on, bringing in more home product in the home decor category. We've been working with-- we've been working with the marketplace to secure goods in real time. We really feel that that's gonna pay dividends in the long run as more and more product comes into the company in those categories. You know, the impulse business is good. It's gonna get even better as we get closer to holiday, so that's very good. You know, the other thing that, you know, we're gonna look at down the road is obviously new, new stores. You know, we have, you know, we have not a whole lot this year, but maybe going forward, we'll be looking at expanding that, that effort, but that work is still underway. We just, you know, we're just really feel good about... You know, we see the product coming into the company, the stuff that we're underpenetrated with, and it's working well. You know, we feel that, you know, if we can, if we can continue to grow the Sephora business, if we can continue to, to make progress in home, you know, I think we'll be in a pretty good position. In terms of credit, Bob, you know, credit has obviously been a core component of our value equation over a long period of time, and we have a very stable portfolio in our credit. We have a partnership with Capital One. What I would say is, other revenue is a good proxy for what you saw with credit. We said it was going to be in line with sales. We still continue to expect that as we look to the out of the year. We did see payment rates drop as we expected. Those payment levels are still actually above 2019 levels. We did see more of a normalization of our credit losses. Those credit losses did increase over what was obviously a really low year last year. As anticipated, I think, you know, we've spoke to the fact that we did take early actions as we did anticipate the macroeconomic environment to worsen and, you know, to people to have less cash in their bank accounts. As we looked and worked with our partner at the risk, we did take back some of those risk sales to not continue to offer that. I think we're very proactive as we approach this. I would say it is performing as we anticipated, with payment rates down, losses up. Really, and it's coming in just as expected, and we continue to expect it to really go with sales. In terms of co-brand, you know, we're excited to be able to offer a new vehicle to customers who maybe didn't want a private label credit card. This really affords the opportunity to spread that value equation to customers that we think are younger and more diverse, really hitting on that customer that we're driving in for Sephora to say, "Can we bring them into a credit card?" Not necessarily they're open to a PLCC card. We've brought in about 700,000 of our credit card customers and migrated them over to the co-brand card, and we'll just kinda watch that and learn from that migration before we extend that out. Then we'll be expanding that out in 2024 based on those results. Thank you. Your next question comes from the line of Oliver Chen from TD Cowen. Your line is open. Hi, Tom and Jill. As we look ahead, what are some of the major catalysts for holiday in terms of your plans and inventory planning, as well as flow? Just highlights we would love there. Also, as we think about the online business, the comparisons will get easier. What should be the path ahead for a resumption of growth there? Finally, on the stores and traffic, would love your thoughts on traffic and transactions, and if you've seen a lot of volatility in what your forecast assumes for how traffic may move. Thank you. Well, the big catalyst for for holiday is really maximizing the gift business. You know, we did some of that last year by moving the gifting product to the front of the store, and it did very well. We're gonna be doing it again this year and making a major statement in the front. We do have some extra square footage because we removed some register bays for gifting as well. You know, I really feel that by making a strong gifting statement, we're gonna have a good holiday season. Digital, as, as far as digital goes, we see it improving as we progress through, you know, this year. Then, obviously, we anticipate back, back to growth in 2024, once we anniversary all these online-only promotions that we had. Then from a stores perspective, obviously, really excited that we're actually positive on the year of flat performance in Q2. A lot of the efforts that, you know, Tom had talked about, are really happening in our stores as we speak. It's the increased presence of home, where we re- at least got rid of the registers. It's having a stronger presence of gifting. We saw great sell-throughs through Mother's Day, Father's Day, Fourth of July, so we're excited as we move into back to school and especially the all-important holiday period there. Then, of course, clearly, Sephora continues to work for us as we open another, you know, 200 doors. We have 50 more doors going in August and 45 small in October. I think from a stores perspective, we're excited to continue to see that business do well and being an outperformance, which you haven't heard from us in some time. Just to reiterate on digital, I think we're seeing similar performances out of categories. It's just that the promotions is having an outweighted impact there, and so we know we have to get through that. It's really the right thing to do, as Tom said, just to reiterate, we want to have an omni-channel experience. Having specific offers online was counter to that, so we think this is the right thing to do from a long-term perspective, which is why we believe we'll get back to growth in 2024. Okay, great! Tom, a follow-up on the merchandise and brands around Sephora. What are the leading strategies to energize and get the pickup from the tremendous growth you're seeing at Sephora? Related to that, women's and younger women's clothing and apparel, would love your thoughts on rebalancing and the brands, and the strategy there about what will it take to get sustainable growth with that younger customer? As far as brands go, we've been looking at a lot of different brands that would complement the Sephora offering. We've been going... You know, Nick Jones, the Chief Merchant, and I have been going to New York pretty much every week now, looking for this. We haven't made any real decisions yet, you know, there's, there is opportunities out there to bring other things in. We think we can, we can, get some of the Sephora business with the brands we currently have, and we can, change, you know, the offering. We can have more prints, more, more color in the assortments. I mean, we don't have to radically change the vendor mix to capture this. We are looking at the young women's business. We really feel that that could be an opportunity for us, as well, as you just mentioned. There's plenty of things that we can work with, with in our current brand portfolio. You know, we're looking for other brands that, to add over time. You know, I think the other thing that could be very good for the Sephora customer is our expansion of home decor and gifting. We really think that's in line with that customer as well. Thank you. Best regards. Your next question comes from the line of Mark Marcon from Baird. Your line is open. Good morning. Thanks for taking the question. Tom, any change to your views on the macro consumer backdrop versus a few months ago? You're reiterating the guide. The environment's obviously pretty dynamic, and the guide allows for a range of outcomes. Just curious if you can share any additional thoughts there. Then, Jill, gross margin, I noticed you didn't call out the clearance shift as a factor impacting gross margin this Q2. That was a little bit surprising. Just, I guess, any color you have there would be helpful as well. Thank you. Well, I think the macro environment continues to be challenging for our customers, as I mentioned in the prepared remarks. You know, that's a reason why, you know, we're really, we're really focused on delivering as much value as possible because obviously, that customers, you know, has less money to spend. You know, we're doing the, the key value items, you know, bringing goods in at competitive high-volume pricing, to deliver more value to the selling floor as well. We're gonna just really work hard on making sure that we have as much value as we, you know, we can have. You know, we've already started that, it'll just continue through the third and fourth quarter. It's critical that we deliver the value for them. In terms of gross margin, I think we did actually take all the clearance marks that we anticipated. I think a couple of things that helped us set that, one is, as we talked about, we are able to take out the promotions, the ones that were really the stackable ones, the ones that we didn't see have a lot of impact to our top line. As we were able to benefit from less promotions, that helped us offset some of the clearance. I think the bigger factor is our inventory was down 14%. As we look at the content and the currency of the inventory, we feel very well positioned as we move into the back half of the year. We were able to clean up what we needed to. I think a lot of the efforts and disciplines that, you know, Tom has instilled in the merchant organization really took hold quicker than we anticipated, and the discipline around inventory management, receipt management, and just the agility to chase, really benefited us more than we anticipated into Q2. We expect that to continue to benefit us, you know, the rest of the year, which is why we're expecting our margin to grow both in Q3 and Q4. That's helpful color. Then just a quick follow-up, August to date, off to a good start. Should we read that as tracking ahead of the down 5% Q2 comp rate? I would say we're pleased. Obviously, if you look at the quarters, we had talked to you in May, and we used the word slightly, below. You can see that June and July, obviously, were better than that, and I would say we feel good with the start we have in August. Yeah, I would say, you know, we're definitely trending above that. Great. Thanks again. Mm-hmm. Your next question comes from the line of Matthew Boss from JP Morgan. Your line is open. Great, thanks. Tom, maybe given progress that you've made with inventory and the balance sheet, how best to think about category opportunities or the timeline you see from here to reach an optimal assortment? Or maybe said differently, do you see the opportunity to return to top line growth in 2024, as you just consider the macro versus all of these micro initiatives that you're putting in place? I would think that, in 2024, we could potentially get back to positive. That's obviously our objective overall. The categories, I really touched on a lot of the categories before, but the one thing about it, which makes, which makes it exciting, is the fact that, there's categories we're just underdeveloped in. If we can just capture that, those opportunities, it should help position us for growth in the future. You know, again, you know, home decor, pet, gifting, impulse, you know, all that, you know, things that we've been talking about will really help us get there. You know, if every business was in the, in the right penetration, it'd be a lot harder. We just have these really low-hanging fruit in terms of business, business that we can, we can capitalize on and really help us move it forward quicker. Great. Then maybe a follow-up for Jill. With first half of the year gross margin, I think more than 100 basis points above 2019, I guess, how best to think about gross margin structurally from here, if we think relative to 2019 levels, or maybe asked differently, is there a ceiling to the 36%-37% gross margin target longer term? I think right now we just feel very comfortable working within the 36%-37% range. Obviously, depending on where we see assortment moving in and out. Obviously, Sephora is a gross margin driver. We think home decor and impulse can definitely be benefits as well from an assortment perspective. There's definitely a mixed component to it, as well as then the digital growth. You know, we've been getting some tailwinds as digital has softened, if we can continue to grow that business, you'll see cost of shipping come out. I think we feel great that we're operating within the 36%-37%. That was really the long-term plan that we outlined, and I think that's really where we feel most comfortable, that we're able to still deliver the value that our customer is used to getting from Kohl's in that margin range, and then also bringing in some of these new white space opportunities that Tom has outlined to get the top line growing. I think, you know, our model works from a long-term operating margin with a small amount of top line growth. That's really the big focus. I think we feel great with the margin that we're putting out this year. Our SG&A disciplines are there, and we'll gain great leverage off of just a small amount of top line growth. That's really the focus, I think, from a long-term perspective. Great. Best of luck. Thank you. Your next question comes from the line of Dana Telsey from Telsey Group. Your line is open. Hi, good morning, everyone. Hi. As you think about the, what's happening with shrink out there, what are you seeing in your stores, and what investments are you making to deter shrink? Then, Tom, you mentioned about potential new stores. What are you thinking about in new stores, whether it's size, location, and how are you thinking about that in a store opening or closing program? Lastly, you talked about the home category and that opportunity. How do you see that opportunity with branded versus private label and the impact on margins? Thank you. Okay, I'll start with shrink. I mean, I think, Dana, you know, shrink is definitely a retail industry problem. It's definitely something that we, you know, we've called out in the last two quarters, has weighed in on our margins. We expect it to continue to remain a headwind in the second half. We have put a lot of efforts in place, really to prioritize the safety of our associates and our customers. We've taken different measures. We are, you know, cabling product to fixtures. We're going to just testers within beauty. We have more attendants in the fitting room. We have more presence in the front of store. We're doing everything we can to mitigate shrink, but really prioritizing the safety of our associates and customers. I think until, you know, it's really just it's gonna be a retail problem, until we see, you know, a bigger step up, I think legislatively. It's something we've planned for and have put in our expectations. I'll talk about the stores. We're looking at it, you know, very, very thoughtfully in terms of how we should expand. We're really just, you know, begun, the analysis, and, obviously in later earnings calls, we'll share more. One thing we, we know, we're gonna do is we're gonna open smaller stores. You know, the, the biggest store we'll open going forward is 55,000 sq ft. We'll be adding probably a lot of 35,000 sq ft. You know, we're still developing the seed points where we can have additional stores. Again, that, that, that analysis is being done, now. Mostly, you know, we, we're really looking at the size of the stores, and we're looking at the cost of the stores, and we're looking at, how we effectively can, can, add some additional stores, but we're gonna do it, you know, with a lot of analysis behind it. As far as the home goes, I think there's opportunities both in, brands and in private label. Maybe a little bit more in brands because of the fact that we want to chase product, and we've already do-- we're already doing that, and, going into the market and buying, buying the product in real time. As far as margin goes, I think it could be, you know, home decor is higher margin business, so the more we go after that, I think it could be a positive to the gross margin overall. Again, it's, you know, it's a lot of chase is gonna happen in this business because we wanna be able to react in real time. Thank you. Your next question comes from the line of Blake Anderson from Jefferies. Your line is open. Hi, good morning. Wanted to dig in a bit on Sephora. You had an impressive result there. Can you talk about the acceleration in the comp up to, you know, greater than 20%? What's driving that in terms of new customers versus transactions or basket? Then for the newer stores, are they still performing on a similar trajectory? Lastly, any beauty categories to call out that were stronger? Thank you. I think obviously Sephora has been a great performance for us. We continue to see it accelerating. I think it's just the fact that we're now getting those customers to come back repeatedly in terms of their replenishment. We continue to see an acceleration in that. I would say newer stores are performing actually better. We're smarter, I think, on the assortment as we open these stores. When we opened our first 200, we learned what our customer wanted, maybe relative to what Sephora had opened their stores with. Now we're getting smarter on how we're actually bringing those forward and really being able to be smarter on opening, but then even with replenishment, we're getting better in terms of how we're replenishing. I think we feel great with how the new stores are opening and the existing stores are performing. You can see they continue to accelerate on that. We do continue to bring new customers in. They're younger, they're more diverse, so I think that's a big opportunity that we talked about in terms of getting them to cross shop through the store. I think a lot of the areas that we indicated were white space for us, particularly impulse, gifting, and home decor. It's a quick add into the basket, so as we're able to have a stronger presence of that in our store, we can take advantage of that new store and those extra steps coming in, in terms of that. You know, top-selling brands, we talked about it, were Sol de Janeiro, as well as the Sephora Collection, which is an opening price point, but then Charlotte Tilbury, which is a really high price point. We're seeing that customer shop across all of the areas. Then I'd be remiss not talk about, we have men's brands, which is something you don't see in a Sephora store, and we're seeing, you know, Clinique For Men, Jack Black, performing incredibly well there as well. I just think we continue to learn, we continue to bring in new customers, and we just have an opportunity to convert those customers into our loyalty program and getting them to shop. We are seeing those customers shop, you know, 2x more often than our existing customer. Really, we're gonna have an opportunity to build on that as we build the assortment that Tom has indicated throughout this call. Yeah, and I think the other thing that's pretty exciting about it is the smaller format store, which we brought in five, or we set up five, and they've done very well. It gives us the confidence that we, we can have Sephora in all of our stores. That's super helpful. Jill, could you remind us how much expense is in each of the quarters this year for the new Sephora stores? I was just trying to figure out the impact to quarterly SG&A. Yeah, I think really the biggest thing in Q3, you know, the increase is gonna be. We have 50 stores, opening in August that are full-size shops, and 45 small shops that are opening in October. The Q2 numbers are up against Q2 numbers last year, so there wasn't a huge amount of increase from that perspective. I would just say the step up in Q3 will be mainly those investments. We're also putting in our self-checkout in Q3, which has expense related to it in about 250 stores. You know, we continue to see wage pressure, which you've just seen throughout the year, which is a build on that as well. Then I think, you know, we benefited in Q2, more than we had expected with the inventory reduction. Inventory being down 14%, we had said we were gonna work in the mid-single digit range, so obviously that benefited our SG&A, because we had less store payroll and less logistics costs to move those units. I would tell you that in the rest of the year, we're still planning to be managing inventory in that mid-single digit range. In fact, you know, we wanna make sure we're protecting ourselves in holiday. I would say mid-single digits, maybe a little bit better than that. Obviously, we're gonna react and chase appropriately given the demand that we're seeing. Thank you. Best of luck with the second half. Thank you. Your next question comes from the line of Chuck Grom from Gordon Haskett. Your line is open. Hey, thanks. Good morning. Can you just talk about the success you're having in Sephora, getting those shoppers to, to cross-shop into other parts of the store, and I guess, you know, over the past couple of years, how that's evolved? Sure. I think, you know, we talked about, I think, around 40% of our customers to 50% are shopping around the store. We continue to see that that's an opportunity. I think like I mentioned, the big opportunity is gonna be around these white space pieces. It's home decor, it's impulse, it's gifting. Those are easy adds to the basket, particularly in home decor, you're gonna see that in a much better opening price point, so it's gonna be easier for them to put into the basket. Then I think, you know, the bigger opportunity, Tom has spent some time talking about that, is really getting the woman to shop into the women's pad. I think we know we have some opportunities there in terms of brands and fashion. We're working through that. I think we feel great that we're in that 40%-50%, cross-shop rate, but we think, you know, we can do more with that, given the white space opportunities we've outlined, as well as women's and moving that into the right direction and getting her to cross, shop across that pad. Okay. Is there any way to, like, you know, think about how that 40%-50% has, has evolved over the past two years? Has it continued to improve, or has it been that way and just, just been stable? I think it's been, you know, pretty stable in that range for... since we've opened up the stores. You know, I'd say in some of the more mature stores, you know, the customer is coming in maybe more for a replenishment trip, so we don't get as much in that basket. In the newer stores, they are excited just to see what Kohl's has to bring because they're a new customer. I would say that has been a pretty stable range in totality, overall, but maybe the more aged stores, I think, hopefully, when we introduce some of this newness, we'll gain that excitement back. Okay, great. Another one for you, Jill. Just on, on the cadence, and phasing of, of the back half of the year, is there any way you can hold our hands on, on both the, the comp as well as the credit line? You know, the comp on a one-year basis is, is pretty similar last year, the, the cycle in 3Q and 4Q, on, on a multi-year, it's, it's a little bit more choppy. If you can, you know, maybe help us on that would be helpful. Yeah, I think overall, you know, let's not talk about the 53rd week, because obviously you get the 53rd week benefit in Q4. I think if you look at it on a... I did the two-year stack for you, Chuck, because I know how much you like stacks. I think you're gonna see a pretty consistent two-year stack, is what we're really outlining, ex the 53rd week. You know, you saw if we looked at it, the two-year stack would have fallen a little bit in Q2 from Q1, but we did see that stack improve as the quarter went on. I would say the exit rate was actually better than the two-year stack in Q1, and I'd expect to be around that level in Q3 and Q4, ex the 53rd week, if that helps you. It does. Great. Thanks, Jill. Appreciate it. Yep. Of course. Your last question for today comes from the line of Paul Lejuez from Citi. Your line is open. Thanks. It's Tracy filling in for Paul. I had two questions. The first is, I was wondering what your AUR and traffic looked like in the second quarter, and what you're expecting for AUR in the second half. I was wondering if you could tell us what the overall comps were in stores that had Sephora locations opened in 2021 and 2022. Thanks. Yeah, I would tell you, Tracy, the components, AUR has been a driver for us for some time. I think we've talked a lot about, we've seen AUR growth. That's really gonna be a function of the fact of the brands that we're bringing in. Obviously, Sephora has a higher ticket, which you would expect, which is driving our AUR up. Then on top of that, you think of Tommy Hilfiger, Eddie Bauer, we're seeing our Nike and Under Armour businesses do well. That all drives ticket, and I would say that's been pretty consistent over the last probably four or five years that we've seen our, our AURs moving up. I would say we're gonna expect that increase to continue, but I think more moderately now that we're comping some of these brand introductions and obviously continuing to be focused more on value. You know, we talked a little bit about our key value items, really focusing on driving the best, most competitive out-the-door price and focusing those in our private label, which we think could be really important to a customer in this uncertain and strained macroeconomic environment. That's really where I would say we continue to, to look and see. In terms of Sephora, I think, you know, we just feel good. It's up, you know, 20%. As you can imagine, it's definitely driving a benefit. Our stores were flat on the quarter. We're up one on the season in our stores, so obviously it is driving, much more productivity out of the box, which we're very, very pleased with. Thank you. Thanks. Thank you to everyone listening on the call today. This concludes today's conference call. Thank you for your participation. You may now disconnect.