Core Insights - The opening of the Suzhou High-speed Rail Wuyue Plaza store marks the third "Fat Donglai" model store for Yonghui, reinforcing its strategic layout in the Suzhou market and enhancing regional commercial service upgrades [1][9]. Store Location and Concept - The store is located at No. 3188, Xiangcheng Avenue, Suzhou High-speed Rail Wuyue Plaza, and aims to create a comfortable, convenient, and quality shopping space for consumers, particularly family customers in Xiangcheng District [2]. Product Offerings - The store features a comprehensive product renewal, including highland specialty vegetables and over 40 types of organic vegetables, all sold in packaging to save customer selection time. New ready-to-eat items such as fruit cuts, juices, and cold brew tea have been introduced, alongside partnerships with high-end fruit and vegetable brands [3]. - The prepared food section employs a professional chef team to offer a variety of dishes, including traditional items and modern snacks aimed at younger consumers. The store also includes dedicated brand zones for both Fat Donglai and Yonghui's private label products, covering a wide range of categories [5]. Shopping Environment and Services - The store has improved its shopping environment by lowering shelf heights and simplifying the layout to enhance comfort and accessibility. New customer service areas have been added, including rest zones and various amenities to cater to diverse customer needs [6]. - Food safety measures are strictly enforced, including a "468 principle" for fresh-cut fruits to ensure quality and freshness [7]. Employee Development - Yonghui has launched a "Craftsman Plan" to enhance employee skills and service awareness, aiming to cultivate a professional workforce and improve service quality in stores [8]. Strategic Vision - The Suzhou High-speed Rail Wuyue Plaza store's opening is seen as a significant milestone for Yonghui, reflecting its commitment to consumer needs and continuous improvement in product and service offerings. The company plans to further strengthen its presence in the Suzhou market [9].

Financial Data and Key Metrics Changes - Net sales declined by 4.1% and comparable sales decreased by 3.9% in Q1 2026, attributed to the closure of 24 stores [24][25] - Gross margin increased to 39.9%, up 37 basis points year-over-year, driven by category mix benefits and inventory management [27] - SG&A expenses decreased by 5.2% to $1.2 billion, leveraging approximately 32 basis points compared to last year [27] - The company reported a net loss of $15 million, with earnings per diluted share of negative $0.13, a 46% improvement from the previous year [27] Business Line Data and Key Metrics Changes - Jewelry sales increased by 10% in Q1, primarily driven by Kohl's card customers, following the reintroduction of jewelry and the rollout of 200 fine jewelry shops [14][15] - Women's apparel underperformed, prompting a focus on delivering more depth in essentials and improving assortment clarity [15] - The Sephora business saw net sales up 6% and comparable sales up 1% in Q1, contributing to a nearly $2 billion beauty business [16] - The petites business performed well, up in the high teens, driven by new brand introductions [15] Market Data and Key Metrics Changes - Digital sales declined by 7.7% in Q1, with the digital business over-penetrating in the home category, which underperformed [25][26] - The store channel outperformed with a comparable sales decline of 2.6% [25] - The company continues to see strong sales from new and non-Kohl's card customers, while Kohl's card customer performance lags [26] Company Strategy and Development Direction - The company is focused on three key areas: offering a curated assortment, reestablishing itself as a leader in value and quality, and enhancing the omnichannel shopping experience [12][17][21] - Plans include the rollout of 105 Sephora small format shops and the expansion of impulse queue lines to nearly all stores by Q3 [16][21] - The company aims to improve proprietary brand penetration, which is currently at an all-time low of around 30% [50] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges faced by middle-income customers and emphasizes the need to focus on value to restore customer confidence [36][61] - The company is navigating a fluid environment with uncertainties, particularly regarding tariffs, but remains committed to achieving its financial guidance for the year [40][32] - Management expressed optimism about the initial results from recent strategic changes and expects to continue momentum throughout the year [23] Other Important Information - The company ended the quarter with $153 million in cash and cash equivalents and expects inventory to be down by high single digits by year-end [28] - Capital expenditures for the quarter were $110 million, with expectations to spend $400 million to $425 million for the year [28] - The company completed a private offering of $360 million in senior secured notes to refinance upcoming debt maturities [29][30] Q&A Session Summary Question: Any adjustments to strategic priorities and what will it take to return to comp growth? - Management indicated no major changes to the strategy and emphasized the need to align the business with customer needs, particularly focusing on value [35][36] Question: Insights on quarter-to-date trends and tariff impacts? - Management noted consistent performance with improvements in regular price selling, while holding guidance due to uncertainties in the environment [38][40] Question: Breakdown of gross margin increase and private label performance? - The increase in gross margin was attributed to a mix benefit and improved inventory management, with proprietary brands expected to enhance margins [47][48] Question: Assessment of store footprint and potential closures? - Management stated that the store base is healthy, with ongoing evaluations for potential closures and relocations based on lease expirations [56][58] Question: Update on Sephora collaboration and operating environment? - The rollout of Sephora is complete in all stores, with positive performance noted in fragrance and hair care categories [68][70] Question: E-commerce performance and profitability outlook? - Digital sales are expected to improve progressively, with profitability impacted by shipping costs, but overall management is pleased with expense management [76][78] Question: Margin pressure from tariffs and guidance assumptions? - Management believes they can mitigate most tariff pressures and has factored this into their guidance for the year [80][82]