Kohl’s (KSS) Q2 2026 Earnings Call August 27, 2025 09:00 AM ET Speaker0Thank you for standing by, and welcome to the Kohl's Corporation Second Quarter twenty twenty five Earnings 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 Thank you. I'd now like to turn the call over to Trevor Novotny, Director of Investor Relations. You may begin.Speaker1Thank you. Certain statements made on this call, including proje ...

Financial Data and Key Metrics Changes - The company reported first quarter net revenue of $35.7 million, down from $47.9 million in the same period last year, reflecting the impact of 19 fewer retail locations [13][14] - Gross profit margin improved to 27.2%, up from 25.8% year-over-year, indicating a 140 basis point improvement primarily due to increased proprietary brand penetration [14][15] - The net loss for the first quarter was $9.4 million, or negative $0.16 per share, compared to a net loss of $8.8 million, or negative $0.14 per share, in the prior year [17] Business Line Data and Key Metrics Changes - Net sales in the cultivation and gardening segment were $30.9 million, down from $43.1 million year-over-year [13] - Proprietary brand sales accounted for 32% of cultivation and gardening sales, up from 22.6% in the previous year, reflecting strong growth in proprietary products [14][8] - The storage solutions segment remained flat year-over-year at $4.8 million in revenue, facing some margin pressure [10] Market Data and Key Metrics Changes - The company experienced softness in durables and consumable demand due to regulatory and tariff concerns, particularly noted in March [6] - The company anticipates revenue in excess of $40 million for the second quarter of 2025, while withdrawing full-year guidance due to macroeconomic uncertainties [12][18] Company Strategy and Development Direction - The company is transitioning from a legacy retail model to a more agile fulfillment-centric model, repurposing former stores into regional fulfillment centers [7] - The launch of the GrowGen Pro portal aims to migrate more commercial transactions from brick-and-mortar stores to a digital platform, enhancing operational efficiencies [9] - The focus is on transforming GrowGen into a high-margin product-centric commercial business powered by a digital platform and a simplified physical footprint [13] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing volatility in the market due to tariff-related uncertainties but expressed confidence in the company's ability to return to profitability [11][19] - The company is actively managing costs and exploring tuck-in acquisitions aligned with its brand portfolio, maintaining a strong liquidity position with $52.6 million in cash and no debt [10][18] - Management emphasized the importance of proprietary brand penetration and servicing commercial customers as key to future growth [30] Other Important Information - The company incurred approximately $1.1 million in restructuring costs during the first quarter, impacting operating expenses [16] - The company is evaluating the closure of an additional 10 stores to streamline operations and strengthen margin performance [12] Q&A Session Summary Question: Insights on tariffs and proprietary products - Management indicated that less than 10% of proprietary brands come from China, with efforts to diversify sourcing and negotiate pricing with vendors [24][25] Question: Potential for store closures - Management expects store closures to be spread out, primarily aligned with lease expirations, as consumer traffic has decreased significantly [29][30] Question: Incremental distribution opportunities for proprietary brands - Management highlighted efforts to expand distribution outside the U.S. and work with large stores for distribution, despite store closures [35][36] Question: Consumer pressures and market conditions - Management noted significant weakness in the cannabis industry, particularly in durable goods, while consumables remain strong [48][49] Question: Capital position and future acquisitions - Management emphasized the importance of maintaining capital on the balance sheet while actively seeking acquisitions that are accretive to shareholders [55][56]