Gaby Carbone: And just a quick follow-up. So you mentioned your private brands a flat for the quarter, which is encouraging. Just curious how you’re thinking about leveraging your private brands portfolio moving ahead, especially as consumers are continuously seeking more value.
Jill Timm: Yes. I think, obviously, this is — you said it value. And I think in this environment, value is very important to the customer, and they’re seeking that out. And we’ve seen for the last several quarters, they’ve leaned more into our proprietary brand portfolio because it brings to them that value. But we’ve also seen great performance by Sephora and some of our new brands like Tommy Hilfiger and Eddie Bauer in outdoor. So I think value goes across the chain and bringing them a quality product for a price they think is good. And I think that’s where you can see them making those trade-offs sometimes given the wallet in the middle income customer is being more stretched. And of course, we sell discretionary items. So I think having that dual portfolio of the private brands with the national brands has worked well for our consumers to be able to make that pivot given the constraints on their wallet today.
So, we’re taking advantage of that. And we’ll lean into it, again, based on what Tom has mentioned, being much more in a chase model. So really working on how we can bring a faster model through those proprietary brands to life, and we have a lot of people working on that right now by using more West Coast suppliers and doing more direct to — or direct vendors as well. So I think there’s ways that you’ll see us continue to feed into that private brand portfolio and doing that with the inventory discipline Tom indicated.
Tom Kingsbury: Yes. I think that the — I think that the private brands are really important part of our business. But we’re going to spend a lot of time in 2023 improving our performance in the national brands as well. We need to do both. We stumbled a little bit in the national brands in €˜22. But our goal is to have both national brands and private brands perform at a high level.
Operator: We’ll go next to Mark Altschwager at Baird.
Mark Altschwager: So, Tom, your commentary about utilizing the domestic marketplace is interesting. Is that strategy primarily focused on home décor and gifting, or do you see an opportunity in apparel and other categories as well? And I’m curious if there are — if you need to make incremental investments in merchandising or the buying teams in order to build that muscle within the organization.
Tom Kingsbury: We’re really looking at chasing goods across all categories of business, to be honest with you. There’s always ample product that we can chase. I’ve experienced that before in another place where I work that you can do that pretty readily. We do have the right structure in place to do that. We have the right buying teams, the right GMM structure to do that. There’s nothing really, I think, that could prevent us from doing that. But managing our inventories, that’s the key. I mean, we have to make sure that we have open to spend. That’s the only thing that could hurt us in that pursuit. But in general, I think it’s across the board that we can do it.
Mark Altschwager: Thank you. A quick follow-up for Jill. Just with gross margin, any more color you can give us on the first quarter? I guess, specifically, the clearance headwind was obviously very large for the fourth quarter. It sounds like that activity continued into the early first quarter. So just relative to that 750 basis points, how should we be thinking about the headwind early in the year here? Thank you.
Jill Timm: Yes. I think what we’re seeing is freight is moderating. That’s going to happen throughout the year. We’re going to get some product cost benefits starting with our back-to-school. Obviously, we took a lot of clearance into Q4. The selling is continuing to benefit us into February, like I had indicated, but the marks happened in the fourth quarter. So it’s not as punitive into Q1. I think the thing with the clearance markdowns that we’re looking for is just taking them much more timely when they’re more relevant to get better sell-throughs. And so the one quarter that I would say will look different will be Q2 because we typically haven’t done clearance in Q2. We waited till Q3. So, we’re going to move those up. So you’ll see Q2 be a little more margin pressured because of that change, and then that will offset into Q3. And of course, Q4, we don’t expect to have a repeat of this year. So, you’ll see a large benefit into Q4.
Operator: We’ll go next to Matthew Boss at JP Morgan.
Matthew Boss: So Tom, maybe help us to think about the time line needed for — in the release and what you’ve talked about is refining the strategy, reestablishing the merchandise disciplines. Maybe larger picture, how do you view this turnaround opportunity relative to your past retail experience? And then at a micro level, how should we think about the market share opportunity as we think about spend from existing customers relative to new customer acquisition that might be needed?
Tom Kingsbury: Time line, we — it doesn’t happen overnight. It really doesn’t happen overnight. But we’ve already made some progress. Obviously, we’ve got our inventories at the level they should be. And we’re planning our inventories for the first and second quarter appropriately. But it’s going to — we’re going to make progress in 2023, but we feel — as any business, it takes a while for it to really get traction. But a lot of our — a lot has already gotten — we’ve already done a lot of things so far. Excuse me. So even in my previous experience, we — it took us a while to get things going in the right direction. But it’s just something you can’t do overnight. But I want to make something very clear. It’s not — the Kohl’s is a different company than my previous company.
And we have a lot of really good things already in place in the strategy, so it’s not an overhaul. There are some things that we need to be doing, and we’ve already started working on it, but it’s not a total overhaul. I just want to make sure that people understand it. I think there’s a lot of good things in place already today. As far as market share, I think that if we can execute, we can gain market share from many different places.
Operator: Next to Dana Telsey at Telsey Advisory Group.
Dana Telsey: As you think about the merchandise mix, Tom of Kohl’s, active has always been a big portion of where they were driving to. What is your ultimate goal in the merchandise mix? And what do you think would be most effective? And then also, Jill, in terms of omnichannel and delivery expense and some of the headwinds there, how do you see that impact on margin in 2023 and the framework of whatever is happening with freight expense and supply chain? Thank you.
Tom Kingsbury: Well, we’re going to let the customer tell us what they want. I think establishing targets in terms of businesses, I don’t think that’s in the best interest of our customers, overall. So, over time, our mix will evolve to what the customer is looking for. Right now, we feel that the active business is really important, but we also feel like outdoor is important as well. So we’re going to integrate into some of the presentations, some of the outdoor products. We’ve already done that. But I’m not going to set targets in general, because we have to be agile. We have to do — we have to build the assortments relative to what the customer wants, not what targets we set. You will see more — in the home store, more gifting product, more impulse product going forward, it’s something that I believe in a lot and the customer is already telling us, that’s what they want based on the sell-throughs, we had in the fourth quarter in gifting and our Valentine’s assortments did very well because it was repositioned in the front.
So — but that’s just following what the customer wants, and that’s what we’re going to continue to do.
