Q2 2020 Kohls Corp Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to that Q2, 2020 course Corporation earnings Conference call.
Time, all participate true listen only mode.
The speakers presentation will be a question and answer session asked a question. During this session you need to press star one on your telephone if you require any further assistance. Please press star zero I would like to hand, the conference over to your speaker today Mark. Please go ahead.
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Thank you good morning, certain statements made on this call, including projected financial results in the company's future initiatives are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Coals intends forward looking terminologies such as believes expects may will should anticipates plans or similar expressions to identify forward looking statements.
Such statements are subject to certain risks and uncertainties, which could cause cold 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. One ankles. Most recent annual report on form 10-K, and most recent quarterly report on form 10-Q.
And as may be supplemented from time to time in calls other filings with the FCC all of which are expressly incorporated herein by reference.
Forward looking statements relate to the date initially made in calls undertakes no obligation to update them.
In addition, during this call we will make reference to non-GAAP measures, including adjusted net income adjusted EBITDA adjusted earnings per share and free cash flow.
Information necessary to reconcile these non-GAAP measures can be found in the investor presentation filed as an exhibit to our form 8-K with the FCC and is available in the company's Investor Relations website.
Please note that this call will be recorded however, 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 It is possible that the information discussed is no longer current in Kohl's undertakes no obligation to update such information.
With me today are Michel Gosser, Chief Executive Officer, NGL, Petchem, our Chief Financial Officer.
I will now turn the call over to Michelle.
Thank you Mark good morning, and welcome to call second quarter earnings Conference call I, certainly hope you and your families continue to be safe and healthy.
Kogan 19 continues to present, a formidable health and economic challenges the entire world.
While our business has not been immune to these challenges I am pleased with how our organization has responded and his navigating the crisis.
We are executing against our short term priorities of protecting our associates and customers and preserving the financial position of the company well also looking to the future.
Our team showed great collaboration in preparing our stores with best in class Health and safety measures and subsequently reopening all of our stores over a 10 week period.
I want to express special gratitude to all of our associates that helped us take start our rebuilding process over the past few months.
We also further strengthened our financial position during the second quarter.
We achieved positive adjusted EBITDA generated positive free cash flow and increase our cash balance to over $2.4 billion.
A key part of running our business is how we reinforced our purpose.
To inspire and empower families to lead to sell by.
And how we live our values every day.
With that land, we are motivated to take action to a Dan racial equity.
Gold is committed to making progress and fostering greater diversity and inclusivity Barr associates customers and communities we serve.
Some recent actions to deliver on that commitment include providing unconscious biased training for all associates by the end of the year.
Focusing on increasing in developing our diverse talent.
Enhancing our marketing efforts with a cross cultural approach.
Increasing diversity in our supply chain.
Supporting nonprofit organizations that serve and benefit people of color in our communities.
Before deal and I get into the results of the corridor I want to first take a step back and remind you like holes will be successful over the long term.
We are a well disciplined operator, leveraging our strong financial position to effectively navigate through this crisis.
We have a strong foundation from which to build solidified through years of investment in our digital and omni channel capabilities innovative store experiences.
Loyalty enhancements and new brand introductions.
And we are uniquely positioned and our evolving our strategies to capitalize on changing consumer behaviors and the significant disruption of the retail industry.
So first we are a well disciplined operator.
We transformed our store operations in a matter of weeks reopening our entire fleet with new safety and operating procedures and training for all of our associates.
This showcased our flexibility and agility in responding to new conditions, and our proactive measures for associates and customers safety that had been recognized among the best of all retailers.
We also had a long history of prudent capital management and cash flow generation and we take pride in managing our business efficiently, it's part of our DNA.
In the worst retail environment in our nearly 60 year history, we have delivered positive free cash flow.
This is a direct reflection of our costs and cash flow focused culture in action.
We will continue to manage the business with great discipline, knowing that the environment is expected to remain challenging in the near term.
And we will make decisions through the lens of our long term objective of maintaining our investment grade rating.
A status we've held for more than two decades.
Second we had a strong foundation, which has been solidified through our investments in digital omni channel stores loyalty and our brand portfolio in recent years.
These efforts are paying off and continue to differentiate calls.
A record 65 million customers shop this last year.
They shop us because we offer a relevant categories and brands for the entire family.
We provide the best value to our iconic kohl's cash industry, leading loyalty and kohls charge programs.
And they appreciate the great experience, we deliver through our easy and convenient stores and digital assets.
And third we are uniquely positioned and our evolving our strategies to capitalize on changing consumer behaviors and significant disruption in the retail industry.
We will be a beneficiary of consumers adopting more casual lifestyle and shopping more digitally.
Cold is a known destination for casual apparel, and we have a large and growing digital business supported by our stores to our expansive omni channel capabilities.
We're also actively pursuing opportunities to capture dislocated market share from competitors and store closures.
Even in the midst of the pandemic, we're acquiring new customers and see great potential looking forward.
We are leveraging our past strategies and increasing our marketing investment in locations where competitors are closing stores.
I will now provide an update on how our business is recovering.
As we're all familiar with Covance impact on retail has been and then.
The crisis force chain wide store closures and its disrupted consumer spending behavior, both of which have directly impacted our business.
As you saw in this mornings release, our second quarter results reflected cobas impact.
During the quarter, our stores operated with approximately 25% fewer days than last year and with limited hours since our stores reopened.
May was the most challenging period in the quarter at the majority of our stores were closed for most of the month.
We saw a strong rebound in June with the vast majority of our stores reopened and digital's momentum remaining.
However in July we did experience some sales deceleration from June strength as cobot concerned heightened in areas of the country, where cases have been escalating.
We also say softer start to the back to school selling season, given increased uncertainty around kids returning to school.
So all in for the quarter store productivity for reopened stores was approximately 75%.
We're pleased that digital sales remained strong in the quarter increasing at 58%.
We continue to leverage our omni channel capabilities to support the overall business our customers are embracing the conveniences, we're providing at an accelerating rate in our investments have proven to be timely invaluable.
During the second quarter stores were instrumental in fulfilling nearly 50% of digital sales.
Customers picking up in the store accounted for 15% of digital demand with store drive up accounting for half of this.
Now, let me touch on how we're approaching the rest of 2020.
It's important to remember that we are still operating in the midst of a pandemic.
Consumer behavior has been profoundly altered given safety and spending concerns and we don't expect us to change in the near term.
Ken.
We continue to plan or business conservatively for the balance of the year.
As I just mentioned the back to school season has been impacted by the crisis as families navigate how their kids will return to school this year.
Fortunately a lot of our assortment for back to school is core product such as basics acted in denim and can sell your round.
Looking ahead to holiday it will be a holiday season like no other.
Cove, It is changing all aspects of customer expectations, and we are adapting our plans in response.
To start out with we've made the decision to not be open on Thanksgiving day, allowing more of our associates to be home with their families.
In addition, we expect many customers to get ahead of their holiday shopping and increasingly leverage our digital and omnichannel capabilities.
We are making adjustments to drive and capture anticipated early holiday demand beginning in October across all of our channels.
We had a compelling holiday assortment that speaks to how our customers are living today, we will emphasize cozy income Bert our home category and kids toys, we feel really good about the content and relevance of our key holiday items as well as our ability to chase demand.
So based on the continued cobot uncertainty it remains prudent to plan the business conservatively and chase any upside as it unfolds.
So now let me transition and discuss how we are positioning our business to capture market share in the short term and drive growth over the long term.
Colin has accelerated important movement that had been underway for some time.
[noise] customers are adopting more active in casual lifestyle and their shopping more digitally.
Cobot has also changed the competitive landscape, creating significant industry disruption.
Let me talk about the actions, we're taking starting with product.
Coal has always been known as a casual destination and we will take full advantage of growing customer trends living their life more casually.
Today more consumers are working from home.
Opting flexible work schedules and our dressing more comfortably and casually.
We believe these trends will carry on beyond cobot.
As a result, we are optimizing and evolving our assortment to reflect these trends.
And we will build our strength as a casual destination by providing more options to drive even greater relevancy.
We remain focused on driving our active business through our team National brand partners unwilling further into athleisure through both our existing brands as well as the expansion of the champion brand.
We will also dedicate more space to active and we are introducing new casual brands like lands end and Tom shoes.
In addition, we are using this period to make bold moves to improved clarity in our assortment.
We are significantly reducing our choice counts awkward across women's and men's to increase death and meet our customers' expectations.
For example, in the fourth quarter women's choice counts will be down over 40% with debt up 50%.
This was in part driven by the previously announced exit of eight underperforming women's private brands.
Further we remain committed to growing or beauty business, which rebounded nicely in stores reopened.
As I've indicated in the past beauty is an area of growth for the company and our customers had been responding well to new innovations and brands that we've introduced them too.
Next let me talk about how we are elevating the experience.
As we discussed on last quarter's call. When we think about the experience. We think broadly on every touch point in interaction we have with our customers across all channels.
And cobot has presented us with many opportunities to accelerate how we are elevating experience.
As it relates to our stores, we're pleased with how our stores are operating.
Feedback from our customers has been positive with strong marks around safety and cleanliness.
We've made several move in the store to facilitate enhance safety measures such as installing plexiglass at checkout, requiring masks for both our associates and our customers.
Sanitizing carts, and Pos terminals closing fitting rooms, and adding agreed to welcome customers entering the store.
We've also widen aisles and removed fixtures.
In doing so we have created a better customer experience.
And based on these learnings we are taking the opportunity to do more low cost moves to improve the experience and you'll see these enhancements beginning this fall.
Driving newness and discovery with our customers continues to be important all the time and especially during the holidays.
As such we will be expanding our curated by cold platform to 300 stores featuring exciting interesting brands like paper source Candy club UBI imports of coal.
In addition to our merchandising efforts, we see our stores as an important asset that we can leverage and many other ways.
This is especially relevant given the consumer behavior shift we are seeing as customers embrace digital and our omnichannel offerings.
Our stores are increasingly supporting our digital business, serving as a critical fulfillment hub for ship from store and customer pickup.
As 80% of Americans live within 15 miles of an easy to access coal store, we are well positioned to be a leading retail and digital destination for the family.
Our launch Assort drive up had been particularly successful and will be an important capability. This holiday season.
We're also leveraging our stores to deliver innovative services like Amazon returns, where our customers continue to appreciate the ease and convenience we provide.
As we reopened stores, we moved to the Amazon returns area to its own outposts in the back of the store to allow for greater social distancing and to enhance safety.
We have seen traffic build the remain pleased with the overall performance of the program.
Turning to our digital experience our broad investment in site functionality personalization and Shopability have been important enhancements and were crucial and our ability to capitalize on growth in the current environment.
In addition, our digital marketing efforts have been a key enabler of growth, yielding a greater impact in a more efficient way.
Last fall, we brought digital surge in house and we are using machine learning to drive improved search results and media buying.
Loyalty is another important piece of our strategy.
We've spoken frequently about are incredibly strong loyalty program.
It has been recognized as an industry leader many times and has 30 million members.
It's a critical piece of the value equation, we provide our customers and as you know we had been working on a new foundational program.
I'm happy to share that next month, we'll be launching our new more integrated rewards program nationwide.
Bringing together all of our loyalty assets in a simplified structure with rewards earned in our iconic Kohl's cash.
We saw positive results in our pilot and are confident that this new program will further enhance our position as a leader in the industry.
And lastly, let me touch on our efforts around operating with excellence.
We are planning the business conservatively and we'll continue to seek out efficiencies.
Based on the trend we're seeing in digital acceleration.
We are putting even greater focus and resources on our supply chain to ensure that we are positioned to drive overall productivity and managed cost to shipping as effectively as possible.
While our work on this front has always been important it's priority has been validated.
Before I hand, it off to jail, let me summarize my comments today.
We continue to effectively navigate through a period of extraordinary change and uncertainty.
We made progress during the second quarter reopening our entire fleet accelerating digital growth.
And generating positive free cash flow to further strengthen our financial position.
While we are planning for the crisis to continue to present headwinds in the near term, we're very confident that we will not only weather the storm, but also take full advantage of the opportunities that emerged from it.
We are very well disciplined operator, we have a strong foundation and we are evolving our strategies, which together uniquely positions us to capitalize on the changing consumer behaviors and the significant disruption of the retail industry.
In closing I want to thank all of our associates around the country and across our business.
It's times like these when the value of an organization's culture becomes visible and tangible.
I am incredibly proud of Howard Kohl's Associates, and our culture has shine through and proven extremely valuable during this crisis.
With that I'll now turn the call over digital who will provide details on our second quarter results and financial position.
Thank you Michelle and good morning, everyone.
I will start by providing an update on our liquidity position I will then discuss our second quarter results and thoughts on our business for the remainder of the year.
We have talked a lot about the long history of maintaining a strong financial position.
As Michelle indicated it's part of our DNA is at the forefront of our decision making.
So as the crisis unfolded preserving our liquidity continued to be a key priority.
I am pleased how we further strengthened our position during the quarter. Despite facing continued pressure from the Colgate crisis.
We reduced inventory by 26% manage expenses tightly with asked in a down 17% and lowered capital expenditures.
These efforts led to positive adjusted EBITDA of more than $200 million.
Operating cash flow of more than $250 million nearly $200 million of free cash flow.
In addition to further enhance our liquidity position, we completed the sale leaseback transaction for two of our 14 distribution centers.
We generated nearly $200 million of cash as a result, we ended the quarter with more than $2.4 billion in cash up from $2 billion at the ended the first quarter.
We also have an additional $500 million available under our revolver.
Now, let me discuss our second quarter results.
Net sales declined 23% due primarily to our stores being opened approximately 25% fewer days in last year and operating with limited hours.
Digital sales increased 58% and represented 41% of net sales in the quarter up from 20% last year.
Other revenue, which consists primarily of Netcredit revenue declined 26% due to lower accounts receivable balances associated with the lower sales.
This was expected as stated in the last quarter's call.
Importantly, while we expect credit revenues remain under pressure in the near term due to lower expected sales. We are encouraged about the overall health of the portfolio.
From a line of business perspective, it's important to acknowledge that the crisis has impacted some categories more significantly than others.
We've seen strong demand for home active until drums.
However have experienced softness in apparel, such as mens and womens dress is higher.
Our home business remain very strong during the second quarter with sales up double digits overall and up over 90% digitally.
Our customers increased their purchases for the kitchen with strong demand for cookware food preparation and kitchen electrics as well as for their living spaces with bedding furniture and Dcor outperforming.
Our active offering also outperformed in the quarter with sales increasing more than 70% digitally.
We leveraged our three key national brand partnership and Nike under armour and indeed, it to deliver solid result, an active apparel.
We also saw really strong demand for champion a brand that we expanded last year and we'll continue to lean into in the future.
Also in active our investment in building out our assortment of inclusive sizes is paying off with significant growth in the quarter driven by the launches of under armour and Adidas plus earlier this year and under armour Big and tall last fall.
Lastly, our children's business performed above the company average, we saw double digit growth and toys and solid demand for baby gear and sleepwear.
From a brand perspective, legal and Carters outperformed as is our private brand jumping beans.
Turning to gross margin.
Gross margin continued to be impacted by coal that during the second quarter.
Decline of 569 basis points was driven by two primary items.
Approximately 295 basis points related to the increased promotional activity and next as home continued to outperform.
And 275 basis points related to cost to shipping due to increased digital sales penetration.
As it relates to cost to shipping the 275 basis point impact to margins is slightly above our past commentary about 20 to 30 basis point headwind for every 200 to 300 basis point increase in digital penetration.
This was due primarily to the increase split shipments during the period as we work down inventory in stores.
We see this as a short term issue and expect the cost of shipping headwinds returned to the historical range in future periods.
Looking ahead, we continue to expect gross margin to be pressured due to increased cost of shipping as they expect digital penetration to remain elevated and the potential for a heightened promotional environment given the uncertainty around consumer spending heading into this year's unique holiday season.
Now, let me discuss SDMA.
In Q2, asking expenses decreased 17% to $1 billion, driven primarily by lower store payroll marketing and credit expenses.
Of note actually would've been down 19% excluding expenses related to covert 19.
As we look forward, we're planning estimate to continue to decline for the rest of the year.
However, we are not expecting the same level of decline in the second half as compared to the first half given a greater number of days our stores are planned to be open and as we capitalize on opportunities emerging from the significant retail industry disruption.
That said, we will continue to leverage our core disciplined operational excellence and look for additional opportunities to improve our overall efficiency.
Last let me touch on some additional financial items.
Depreciation was $9 million lower than last year, we expect us to continued due to the reduce capital spend this year.
We recorded a gain on sale of $127 million relates to the sale leaseback of our San Bernardino fulfillment and distribution centers.
Interest expense increased $25 million versus last year due to the $1 billion outstanding on our revolver and the $600 million of bonds issued in April 2020.
We expect interest expense to continue to remain higher than last year as a result of these factors.
On a GAAP basis for the quarter net income was $47 million and diluted earnings per share was 30 cents per share.
Excluding nonrecurring items for the quarter adjusted net loss was $39 million, our adjusted loss of 25 cents per share.
Turning to the balance sheet.
We ended the quarter with more than $2.4 billion of cash and cash equivalents.
This was an increase from last year of $1.8 billion, largely driven by the $1.6 billion and higher debt outstanding.
Our inventory dollars at the ended the quarter were down 26% as compared to last year, driven by lower inventory receipts during the quarter and our ability to work through existing inventory at stores reopens.
As we look to the balance of the year, we'll continue to manage inventory tightly, but the opportunity to chase into demand.
Turning to cash flow, we generated positive operating cash flow of $304 million year to date, including $251 million and the second quarter as we reduced inventory and expenses.
Capital expenditures were $196 million year to date, including $34 million on the second quarter.
This is a significantly below last year as we reduce spending across technology, omnichannel and our store strategy due to covance.
As we look to the balance of the year, we're expecting Colgate to continue to impact the retail industry and our business.
The remains a significant amount of uncertainty around consumer behavior through the back half of the year, including the holiday season.
With this in mind as muscle spoke to earlier, we are adapting our marketing and merchandising plans to optimize our selling opportunity will be prepared to respond with agility as the season unfolds.
Further we will continue to manage our inventory inexpensive great discipline and ensure we are prepared to react to the ever changing environment.
In summary, we further strengthened our financial position. During this crisis, we have delivered our second consecutive quarter of positive operating cash flow and our second quarter results for cash generation accelerated from the first quarter.
While we expect the environments remain challenging in the near term, we continued to be well positioned to not only navigate the crisis, but also capitalize on emerging opportunities.
We are happy to take your questions at this time.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby, while we compiled acuity roster.
Your first question comes from Lorraine Hutchinson Your line is open.
Thank you good morning.
Can you quantify the recent sales deceleration and given that deceleration how are you thinking about both Threeq you sales volumes and also your inventory commitments for the back half.
Sure Hi, Lorraine Michel here.
Thanks for the question. So first let me add a little more context on Q2, and I will talk about talk about the back half.
So as we said in our remarks May obviously was our softest month, because we still had most of our stores closed we did see a very strong rebound in June as our stores came back online and digital maintained its strength and you heard us talk about the quarter digital I'm close to up 60%.
We did share that July did experience some sales deceleration from June strengthened we attribute that to some cold and hot spots, where we did see a sales correlation and soft start to back to school get to that in a moment.
Around store productivity I wanted to add a little more color around this so as we share deal our stores have stabilized right around 75% of their typical volumes, which you know when we think about it given that we're operating with reduced hours that theres still so much fear out there in the consumer on you know, we'll just continue to.
Maximize the demand but.
You know where of course, we're okay with operating at this level given all the headwinds that we're facing and again I'm operating in kind of this new new normal for now we do we do hope and expect that that will grow over time, but one data point around this on that I wanted to share was when we think about our stores being such a critical hub for our.
Digital business and that business has never been more important than it has been during this pandemic, we mentioned that 50% of our digital orders were filled by the stores. When you actually include that productivity.
Into thinking about our stores the productivity actually gets closer to 90%. So our stores are playing a critical role to not only handle the walk in demand, but also to support the very strong digital demand.
So you know back to called the exit rate of Q2, and we think about the back half I mean, I think it's really important to recognize that we are still operating in the midst of an unprecedented unprecedented pandemic with lots of variables and I think the important thing for US is to continue to stay very disciplined and agile and decisive and.
Maintain strong balance sheet nutshell shared we feel very very good about our cash position as we said over $2.4 billion of cash and positive operating cash flow.
So you know talking about back to school I'm kind of like the disruption of the pandemic has caused overall.
For parents and there's probably put parents listening on this call today, we can all recognize the level of disruption that's created with with kids and back to school back at school, obviously, a lot of spending going into technology for kids that are going to operate remotely and categories that we sell 'em have been impacted from back.
To school I'd say the good news is first of all we positioned our inventory very conservatively Jill shared inventory down 26% and you asked how we're planning the back half of the year. We are continuing to play on the back half of the year Conservative from an inventory position, but we are working very closely with our vendors to go after any any upside.
And chase demand and you've seen US you know do that in the past I'd say the other thing about our assortment around back to school is a lot of it as core product and that does sell year round, so whether that active basics or denim.
And while back to school is an important part of our Q3. It actually is not the majority of our business. So we're selling lots of other categories. We talked about home as an example, being really really strong this past quarter positive overall home only become more important in the back half of the year. So you know while well back to school has.
I've been a little softer for US you know the way I think about the back half of the year as most of the businesses in front of US I think like back to school it will be a holiday like no. Other we anticipate it's going to start early we're lining up our campaigns in our product to meet the changing needs of consumers and like I said will be positions to be agile.
And go after all the demand that's out there for cold.
Thank you.
Great. Thank you.
Your next question comes from the line of Bob Durable Your line is open.
Hi, good morning.
Just two questions. The first one Jill on the gross margin and the shipping.
<unk> costs that you you've seen and we're seeing as you look to the back half for the year or they're shipping surcharges that you're looking at and considering it I just wonder if you can maybe.
Give us a little more color around your initiatives to manage that piece of it and then the second question Michelle when you think about like the mix of business, especially on the apparel side, we go into fall.
Denim as a category. It's important one for you you can you just talked through the demand that you're seeing sort of men's versus women's in and I guess, comparing contrast that against active a little bit more in terms of anything you're seeing.
From that perspective that would be helpful. Thanks.
Thanks, Bob I'll start with cost the shipping. So obviously it was a little bit higher of a headwind in Q2 for US just given the fact that our inventory placement wasn't optimized as the stores were shut for such a significant period of time, but we tried to work that inventory down it had a little bit more elevated cost is shipping I do expect cost the shipping to continue to be a headway.
And as digital will continue to out penetrate in the back half of the year I don't think the amount of penetration will continue to increase at the rate you saw on the front half of the arc has naturally digital as a higher portion of our business, especially during the holiday period, we do have some headwinds with surcharges that we're working through at this point, so we have great relay.
So the ships of both of the vendors that have announced see surcharges and our teams are working through with them. What the demand would look like how we can forecast. It now we can work through some of those Overages. We also expect for the holiday season to move earlier and so as we can move some of that demand in October that will help alleviate that we also have instituted.
Other carriers throughout the year, so we'll leverage that framework as well for delivery to avoid suddenly surcharges and then last you're going to see a huge marketing push for us to have a pickup in store opportunity, which obviously has no cost of shipping associated with it you know last year, we were vocal about it but I think you're going to hear a much more heightened message through our.
Marketing channels to have a pickup option and with the drive up initiative out there. It gives them a safe way to do that as well I think the biggest focus for us and we've talked about this their operational excellence lines is really we're working on an end to end supply chain to really help mitigate these future costs are shipping pressures. So we look at a very flexible integrated.
Supply chain, that's going to enable a very opposite inventory deployment, which will really drive down the split shipments, which is the biggest component of driving up cost to shipping. So overall, you'll see us working through that for the rest of this year into 2021 to help continue to offset those elevated costs.
Great and Bob and so to your question around the assortment as we commented on earlier the the trends around coded and sort of the casualization of America, we that was already happening pre coded it's accelerating through this environment as as people are working differently working from home, even if they're coming there.
Our office likely a little bit more casual and we are I'm very pleased with that because we believe it really plays into our strength the transformation, especially on the women's business began before co bid on and we spoken about that I'm, starting with a new organizational structure and merchandising and new leadership team and they've been hard at work.
And again on what's happened over the last few months has only accelerated the pivot into more casual more active more athleisure and we really do see that as a continuum. You know we mentioned in her remarks reiterated we've exited eight women's brands onto drive clarity and on the women's business specific.
Luckily, we expect by Q4, our choice count will be down upwards of 40% our depth will be increasing by 50% and I think in this environment. It's really important if a customer making the decision to go to a store given you know all the behavioral issues that we're facing during cold that you want to make sure you're in stock and serve.
Missing their needs. So this has been a real focus of the organization to your specific question around denim. We are a huge denim player we see that as an important category for us we have a great portfolio, both national brands like of course, Levis, our private brands and with this consolidation and driving.
Greater depth and driving down choices on denim will become even more important so we're feeling.
Good about the direction unplanned.
Half of the year.
Great. Thank you good look thanks.
Your next question comes from.