Good morning, and welcome to the Kohl's Corporation Q3 2023 Earnings Conference Call. Please note that this call is being recorded. All lines are currently in listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Mark Rupe, SVP of IR and Treasury.

Please go ahead..

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. 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So, if you're listening to a replay of this call, it is possible that the information discussed is no longer current, and Kohl's undertakes no obligation to update such information.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..

one, optimizing our current assortments and embedding new disciplines and processes; and two, adding new relevant products. While aspects of our future vision will be evident this holiday season, they will be even more visible in 2024.

I am proud of the work we've accomplished this year, and I'm anxious to see more of our efforts come to fruition in 2024 and beyond. And third, the holidays have always been important time for Kohl's, and this year, they carry even more significance given that our new strategies will be seen for the very first time by many of our customers.

I want to thank all of our Kohl's associates across the organization for their efforts to set us up for success this holiday season. I hope those listening today will get a chance to visit our stores over the coming weeks. I will now turn over the call to Jill to discuss our third quarter results and 2023 outlook.

Jill?.

Thanks, Tom, and good morning, everyone. I will provide additional details on our third quarter results and then discuss our updated fiscal year 2023 guidance. As you heard from Tom, we made additional progress against our strategic priorities and had strong gross margin and expense management in the quarter. Turning to our results.

Net sales declined 5.2% in Q3 and are down 4.5% year-to-date. Store comparable sales were down approximately 1% to last year, with continued strong performance from Sephora at Kohl's. Echoing Tom's comments earlier, stores are incredibly important to our business and have been a key focus of ours this year.

We are encouraged with the year-to-date store sales up slightly compared to last year. Digital sales declined 16.5% in Q3, with digital penetration of 26%. Digital continues to be impacted by our efforts to simplify our value strategies.

Other revenue, which is primarily our credit business, declined 6% in Q3, which was relatively in-line with our expectations. As we discussed on last quarter's call, we are seeing payment trends decline and loss rates increase as expected.

For Q4, we expect other revenue to perform in-line to slightly better than net sales as we start to benefit from our co-brand card. I will touch more on our credit business in a moment. Moving down the P&L. Gross margin in Q3 was 38.9%, an increase of 158 basis points to last year.

The year-over-year increase was driven by lower freight costs, reduced digital-related cost of shipping, and further progress against simplifying our value strategies. This was partially offset by product cost inflation. Although shrink remains elevated, it was in-line with our expectations during the quarter.

Year-to-date gross margin was 39%, up 56 basis points to last year. SG&A expenses increased 1.9% to $1.4 billion, slightly better than our expectation as we manage expenses tightly given the softer sales environment. The increase to last year was driven by continued investments in Sephora shop openings, wages, and other store-related expenses.

Partially offsetting these were efficiencies in marketing and distribution costs. Year-to-date, SG&A expenses have decreased 0.2% compared to last year. Depreciation expense of $188 million was $14 million lower than last year due to reduced technology capital spend. Year-to-date depreciation expense decreased $46 million to $562 million.

Interest expense of $89 million was $8 million higher than last year due to primarily increased revolver borrowings. Year-to-date interest expense increased $36 million to $262 million. Our tax rate was 13% in Q3, and year-to-date is 16%. Net income for the quarter was $59 million, and earnings per diluted share was $0.53.

Year-to-date, net income was $131 million, and earnings per diluted share was $1.18. Now, moving on to the balance sheet and cash flow. We ended the quarter with $190 million of cash and cash equivalents. Inventory at quarter-end was down 13% compared to last year, exceeding our commitment of a mid-single-digit decline.

As Tom shared earlier, we feel good about the level and composition of our inventory for the holiday season. Operating cash flow was $151 million in the third quarter and $379 million year-to-date. In Q4, we expect to drive strong operating cash flow as we move through inventory during the holiday season.

Capital expenditures for the quarter were $157 million. This included investments for five new stores, which opened earlier this month, and nearly 100 Sephora openings.

Based on our year-to-date spending and outlook for the remainder of the year, we now expect full year capital expenditures to be towards the lower end of our $600 million to $650 million guidance range.

Looking ahead to 2024, our initial view is that capital spending will be lower than 2023 levels given that much of the Sephora buildout is now behind us. We will provide more details on our fourth quarter earnings call. Now, let me provide an update on our capital structure and capital allocation priorities.

We remain committed to strengthening our balance sheet. Our focus in the near term is to pay down our revolver borrowings and rebuild our cash position. Over the longer term, our objective is to manage to a 2.5 times leverage level.

During the third quarter, we utilized our revolver to fund seasonal working capital build ahead of the holiday season as expected. At quarter-end, our revolver balance was $625 million. Looking ahead in the fourth quarter, we will take another step to strengthen our balance sheet, retiring $111 million of bond maturities.

In addition, we expect to significantly reduce our revolver borrowings. As it relates to shareholder returns, our current dividend remains a priority. We paid $55 million or $0.50 per share in dividends to shareholders in Q3.

And on November 7, as previously disclosed, the Board declared a quarterly cash dividend of $0.50 per share payable to shareholders on December 20. Now, let me share some color on our updated outlook for 2023. As you've heard today, we continue to feel good about the progress we are making against our strategic priorities.

Based on our performance to date and our outlook for the remainder of the year, we are updating our fiscal year guidance range. We currently expect net sales for the full year to decrease between 2.8% and 4% versus 2022 as compared to our previous guidance range of a decrease of 2% to 4%.

As a reminder, this outlook includes sales from the 53rd week, which is worth approximately 1 percentage point of growth. Operating margin for the full year to be approximately 4%, which is unchanged from our prior guidance.

For EPS, we currently expect full year earnings per diluted share to be in the range of $2.30 to $2.70 excluding any non-recurring charges. This compares to our prior guidance of $2.10 to $2.70.

Before turning it over for Q&A, I would like to discuss our credit business in the context of recent regulatory developments surrounding credit card late fees. As many of you are aware, the Consumer Financial Protection Bureau, or CFPB, has proposed lowering the late fees credit card companies can charge.

If enacted as proposed, it would have an impact on credit card revenues if unmitigated. We are actively pursuing various initiatives to mitigate the effects of this potential ruling. One thing unique to Kohl's is that we just launched our co-brand credit card, which is more reliant on revolving interest fees.

Our co-brand card is off to a good start, and as we scale it over the next couple of years, it will serve as a key opportunity to drive credit revenue. In addition to scaling our co-brand card, we are also working on various other initiatives with Capital One, our credit partner, to mitigate the potential loss of late fee revenue.

Through these efforts, we feel good about our ability to quickly offset any potential impact within a couple of years. We are closely monitoring developments on this issue, and as you can appreciate, there are a lot of unknowns at this time. We, like everyone else, are waiting on the final rule.

I want to make it clear that we believe in our ability to offset this regulatory headwind to our credit business over time. In the meantime, we are not going to speculate on this topic as the scale and timing of our mitigation efforts will depend on the final ruling.

To the extent appropriate, we will provide an update on our fourth quarter earnings call. With that, Tom and I are happy to take your questions at this time..

We will now open the line for questions. [Operator Instructions] Our first question comes from Mark Altschwager with Baird. Please go ahead..

Good morning. Thanks for taking my question. I guess to start out, Tom, how are you currently thinking about the path back to positive comps? Given the longer lead times, you've been somewhat constrained through 2023.

What is the timing of some of the bigger changes you expect to take hold in 2024 to drive improved sales momentum?.

Good question, Mark. We're working hard to really see much more progress in 2024. I've said all along that 2023 is really rebuilding the company, repositioning the company. As you know, it can't be done overnight. But we have a lot of really good things in place right now.

And what I always go back to is the fact that we do have a positive comp for the year in our stores, and our stores really reflect a lot of the new strategies. I mean, our home business is doing well in stores right now. Obviously, the beauty business is doing very well in stores right now.

So, I think that's evidence that in 2024, potentially, we can have a positive comp. And the digital business, it's really what's bringing us down. And as I've mentioned before, we had some things we were doing online that was really not reflective of what an omni-company would be doing; a lot of online-only promotions, et cetera, online pricing.

And we felt that for our customers it was important that we have one view on pricing and obviously in 2023, that hurt our digital business. But again, a lot of the actions we've taken will be behind us as we go into 2024. So again, I'm confident, about the fact that we are doing well in stores. And I think it's going to be a good setup for 2024..

Thank you for that. I appreciate the color. Maybe just a follow-up as well.

Tom, could you give us any additional color on the leadership changes that were announced this week?.

Sure. Over the past year, I've had an opportunity to evaluate and better understand what the best leadership structure was for the organization moving forward to best execute against our strategic priorities. Some of this organizational structure that was in place really was developed early in my time at Kohl's.

I've been very, very involved in the move to reestablish our stores as a focal point of the company's strategy. And based on this, I wanted a closer reporting relationship to the stores organization. Similarly, I felt it was important to have the supply chain organization reporting directly to me.

Fred Hand, who is now leading the stores, he and I have worked together for over 20 years. We know what each other needs in order to really run the stores organization. So, just being closer to him and closer to just the overall stores organization is key. We are removing this layer. There will be no backfill for this position.

Stores and supply chain will now report to me, with other executive leaders assuming oversight of other functions, real estate, purchasing, risk management strategy. We are confident that we have the right leadership team going forward and the right structure in place to best execute against our strategy.

And I think it will give us more speed in terms of doing the things that we want to accomplish. And if we want to get back to positive in 2024, we have to move with a lot of speed. So, I just feel that now that I've been on the job for a year, I understand what we need as a company and I decided to execute it..

Thank you. Best of luck, and happy Thanksgiving..

Thank you. Happy Thanksgiving to you as well..

Our next question comes from Bob Drbul with Guggenheim. Please go ahead..

Hi, good morning. Just a couple of questions..

Good morning..

Good morning. The first one is just on beauty.

Can you give us a little bit more data just maybe around some of the older stores and newer stores, cross shopping, how they're performing? And then, on the EDLP, the key item strategy, just in terms of the traction that you're getting, like how big do you think that could become in the next few years? Thanks..

Well, we're performing very well and, obviously, in the anniversary stores overall. We have a 30% comp, which is obviously significantly good and our overall beauty business is up 70%, if you include the -- obviously the newer stores as well.

But, right now, we have like -- we have 900-plus stores -- shops, excuse me, in Sephora, which is very exciting. I mean, it's exciting in many different ways. One of which is the fact that, going into holiday now, we'll have 50 more Sephora shops than we had last year. And as you know is that beauty is a really important category in the fourth quarter.

So, we really feel good about that overall. We really expect to hit the $2 billion mark by 2025. Very confident about that based on what we're currently doing. Good news also, it's accretive to operating margin. 40% of the Sephora baskets have an additional category purchase in the basket.

Customers returning for additional purchases for Sephora, shop two times more often than Kohl's base. Our return on investment, all the capital that we spent, obviously, is very significant overall.

And what's interesting is, I mean it's really across -- the performance is doing well across all the categories, especially the fragrance business, but we're still doing well with skincare and makeup. And as I mentioned on last -- the last call, excuse me, 30% of the customers that shop Sephora at Kohl's are new to Kohl's.

I mean, that is a significant number. And obviously, it's a newer -- new customer, obviously. It's younger, more diverse. It's really very important to bring a new customer into the store overall. And there is some ancillary businesses that are performing better than they have. Our Junior business is doing better than it has before.

So, we're capturing some additional sales there overall. But the partnership with Sephora is phenomenal. And we really feel that the numbers we put out there will be achievable in the near future. So, KVIs, your second question, so far we've done very well with KVIs.

It's a small subset of our private brands in apparel and in home, but we've seen a positive comp on that. So, we plan to -- in 2024, we plan to roll out more high-volume price items, KVIs, and it'll be primarily from our private and proprietary brands overall. But so far so good, and -- but we're going to be watching it.

We're going to be watching it very, very closely just because we want to make sure whatever we do, it's the right thing to do for the long run. So -- but it's good so far. So, feel good about it..

Thank you..

Thank you..

Our next question comes from Oliver Chen with TD Cowen. Please go ahead..

Hi, Tom and Jill.

Within guidance, what's assumed in terms of promotions in merchandise margins? And do you expect traffic to continue to be fairly volatile? And Tom, as you've made some nice strides in footwear and apparel, what might be the timing of that impact with the initiatives you're taking -- you're putting forward? And also, how they may interplay with what's happening at Sephora, which is quite remarkable and successful? Thank you..

Sure. Good morning, Oliver. I'll start with guidance. I think overall, as we head into holiday, we always know it's going to be promotional. Promotions are core to what Kohl's has done. And even though I think we've done some great editing throughout the year, you're going to see us really lean into promotions.

In the fourth quarter, I think we've talked about it, we aren't going to leave ourselves empty from a promotion perspective or do as many cuts as you've seen in the first three quarters of the year because we know how important it is in holiday, particularly with the uncertainty in the macro environment.

We're going to definitely make sure we're delivering the value our customers have known Kohl's for. That's all contemplated in the guidance. And I think when you kind of work through getting to that 4% EBIT, we are expecting to now be at the high end of the 36% to 36.5% range that we did give from a guidance perspective.

So, even with the promotional environment we've been anticipating this, we know we're going to be competitive, and that's definitely contemplated from a guidance perspective. In terms of traffic, I think we've seen our traffic improve in both channels as the year has progressed.

Obviously, a lot of the efforts that Tom has outlined, particularly Sephora being a traffic driving initiative, has helped us build that traffic back from a store perspective. We're also seeing a basket expansion, as well that customers are willing to spend a little bit more on that product. So, I think it's really a balance for us.

But as we've seen a little bit of volatility like you mentioned, that's more driven by weather patterns. And as we go into holiday, that becomes less of a factor as people really get into that gift-giving mode..

Yeah, I just want to piggyback on what Jill said. We are coming out on holiday very aggressively in terms of promotions. Obviously, it's really important time. It's important time to gain market share and we're working really hard on it. We did eliminate a lot of layered events in the first three quarters of the year.

This year, we're keeping it primarily intact in terms of our promotional efforts overall. So, we're well positioned. I talked about in the prepared remarks in terms of everything we're doing for holiday, not only in promotions, but also in gifting and impulse and Sephora, et cetera.

So, we're working really hard to do well in the fourth quarter overall. So, as far as apparel and footwear goes, Oliver, I would say in apparel, in Men's and Ladies, you'll continue to see more and more polished casual. It's doing very well.

In Ladies, you'll see a much bigger presence of dresses, starting really in the month of March, moving through the spring season. It's a category that we've always been underdeveloped in, so we're really making a conscious effort to grow that business. But it's beyond dresses. We really feel important to drive the jacket business et cetera.

Continue to get the balance right between the casual piece and the dress up piece, but we've made a lot of progress. I feel good what the team has done so far. We just need to obviously continue to push on that. In Men's, we've done well with tailored separates and dress shirts, and we see that continuing as well.

Also we feel that not only in Men's and Ladies, we feel that the polished casual is going to be important in the Children's business as well. You'll see a much stronger Easter dress presentation, boy's suiting presentation, et cetera. And one thing to connect the Sephora business with is my example in my prepared remarks about the Junior business.

We're -- we know that customer wants trends. Historically, we've gone out and used our proprietary and private brands to go out and buy goods in Juniors. And what happened was, we didn't have enough knowledge about what was going to work.

And so, we would go out and we would buy a lot of goods and it would come in 12, 14 months later, and it didn't perform very well. Now we're going to be using the marketplace, so that we can react to the business quickly, getting into trends, and we know there's a connection between the trend product and the Sephora customers.

So again, I mentioned in the prepared remarks, but something we're really working on. As far as footwear goes, we still need to work on footwear, to be honest with you. We do have a good -- we do have a pretty good position in the active footwear business, but we really need to broaden our assortment.

We need more -- both Men's and Ladies, we need more dress shoes overall and more casual shoes. We need a broader assortment of shoes for our customers overall..

Thanks. Happy holidays. Best regards..

Thank you..

Our next question comes from Gabby Carbone with Deutsche Bank. Please go ahead..

Good morning. Thanks for taking my question.

So, with gross margins up versus 2019 this year, I was wondering if you can dig into the structural gross margin opportunities you have kind of moving ahead and where you kind of see the biggest buckets still?.

inventory management, our simplified pricing, and then obviously continuing to look at the market for freight..

Got it. Then, I just have a quick follow-up. On the digital business, I was wondering when you expect trends to maybe normalize there, and what kind of initiatives you have in place to help drive growth..

As I mentioned earlier, we really feel with having a lot of the online-only promotions behind us as we go into 2024, we should see growth in the digital business. But other things we're working, we're working on the site -- functionality of the site overall.

We're also working on other things behind the scenes to improve the customer experience overall. I don't know if you want to weigh in at all on this, Jill..

Yeah, I would agree with you. I think once we can get past lapping the big moves we've made, particularly on the online offers that we've eliminated and make everything omni, but even just the clarity of pricing, so we show up better in search.

So, we continue to work on ways that we can show up better in search and, I think, not having the complicated pricing that we've had will definitely help us with those algorithms.

We continue to work with technology in terms of what those algorithms look like, how we are using those search terms so we can be much more productive in driving productive traffic to our sites. I think the site experience, like I mentioned, search relevance, better recommendations, personalization will continue. We have a leading loyalty program.

We know a lot about our customers, so continuing to capitalize on that and bring a much more personalized experience to our website.

And then just really using the product assortment and curating a much more assortment that's personalized to you and what you've offered so we can give you better recommendations on what you've searched for, what you've bought in the past, et cetera.

So, those are all things that are continuing to be in flight, but will help us really drive that productivity both from traffic and conversion. And I think those will play as we go into next year as well. But although it hasn't been great, we have benefited each quarter.

Our digital business has gotten smaller and smaller benefits through these efforts. So, I think as we get through Q4, you'll start seeing in the next year, it will not be as big of a headwind as what we experienced this year..

Got it. Thank you so much..

Our next question comes from Matthew Boss with JPMorgan. Please go ahead..

Great. Thanks.

So, Tom, as we think about your key outlined initiative, gifting, home, beauty and impulse, how best to think about these opportunities for holiday? And what do you see as the sweet spot for P&L results in 2024 as these initiatives scale just given the associated lead times?.

So, obviously, for the fourth quarter, as I mentioned earlier, beauty is really key. I mean, that's one of the obviously key businesses for holiday -- for the holiday season and beyond, all elements of it, especially gift sets. Also our entire gifting business, I came in here, a year ago.

The first thing I did was move gifting to the front of the store. It was in the back of the store. But we did it, like, mid-December. I mean, it was, like, very close to Christmas because, obviously, I started full time on December 2. So, by the time we got it organized, it was really close to Christmas, and we didn't buy into it.

I mean, we just pulled together what we had. This year, we bought into it as a strategy. We also removed the register bank, so that we had additional square footage in order to put gifting in the front of the store. We've also expanded the presentation into some of the apparel areas and et cetera.

So, hopefully, when you go into our stores, you see just a really, really strong presentation of gifting. So, that's really key. It's key not only -- I mean, not only now, but obviously, as we get closer and closer to Christmas. So that's really key impulse.

It's something that -- impulse is something we've had a little bit of that, but this year, we have a lot more, but we're just starting the impulse business to be honest with you. Right now, we have about 80 queuing lines set up in the company.

For 2024, we're expanding the queuing line presentations considerably, so that we have a more structured approach to impulse. We have a captain that's going to help us run the impulse business, really looking at the assortments, make sure that they're balanced overall.

You're going to see it in -- you're going to see improvement obviously in the fourth quarter, but a big improvement as we go into 2024. So, the other things that we're doing well in, again, if you go into our stores, we have a very strong presentation in holiday product, our St.

Nicholas Square product, and it really hits you as you come into the store by the impactful presentation we have.

So, to answer your question, it's really -- it's all about beauty, it's all about gifting, it's all about impulse and growing categories, especially in the home that we've really -- we've neglected over time and one of those is pet as well. I mean, we had a 40% increase in pet in the third quarter. So, feel good about that.

So, I will let Jill talk about P&L..

Yeah. I think, honestly, all these things are definitely going to be key drivers, but we're not going to be talking a lot about 2024. Obviously, in the next call, we'll give you guidance for that, Matt, but I hope from the message that you heard today, this is a build.

We're obviously repositioning the company, and we're building in all these initiatives that are really just getting started. And we've seen success from gifting throughout the year.

And obviously, we have a lot of that in front of us from the biggest holiday of the year as we speak, but we'll continue to learn from that and take advantage of that as we move into next year.

As Tom mentioned, we have 50% more Sephoras, so we'll be able to take advantage of that not only from a gifting perspective, but the traffic, the new customers that it brings in, and those continue to comp incredibly well.

So, I think a lot of the areas that we're talking about are white space, which will only help us as we move through '23 into '24, but more color to come on our Q4 call from that perspective..

Great. And then, Jill, just maybe a follow-up.

Could you elaborate on the structural changes that you've made with inventory management, as we think about inventory levels on hand moving forward, just relative to the pre-pandemic, maybe 2019 operating model?.

I think the biggest thing is we have a chase mentality. We're holding back receipts more from a reserve perspective instead of placing all of our orders upfront. So, it allows us really to be much more agile in reacting.

I think in the last two quarters, you saw that our inventory was down more than the mid-single digits that we had told you we were going to run this business with because we saw we had a little bit softer top-line, so we reacted appropriately. We didn't see the need to go and then run and chase after that inventory.

We feel good that we supported all the key initiatives that Tom has outlined, but we're able to pull back in some of the other areas where we're not seeing those trends.

And that would not have been something we would have been able to do as well pre-pandemic, because we just didn't have that reserve mentality so that we [could go out] (ph) and chase.

The other thing that Tom has brought to the table is really just leveraging the market brands, and we tried to illustrate that through the Juniors commentary that Tom had explained. But really being able to use those brands, it allows you to bring it in a lot more quickly.

So not being so reliant on long lead times, so really taking what's in the market and getting it into the store. And not having as much depth, but knowing that you have a much broader assortment of goods that the customer can come in for, particularly around fashion because we know that that can be an in and out.

And then that just not only raises sales, it also helps your margin structure. So, a lot of really good foundational changes that have been made that we're starting to take the benefit of, and you're seeing that through the margin expansion and the tight inventory management and our results today..

Yeah. Jill just mentioned, we've been buying such -- so deep in each SKU, and it's important in basics, but it's not important in fashion. You want to sell through the product. So, going forward in '24, you'll see a reduction in the units per SKU when you walk the stores.

And it will give us an opportunity to have more brands, more variety, that will also help the business and help us turn faster..

Great. Best of luck..

Thank you..

Our final question comes from Dana Telsey with Telsey Group. Please go ahead..

Hi. Good morning, everyone. As you think about national....

Good morning, Dana..

Hi, Tom. Hi, Jill..

Hi..

Hi..

Hi, everyone.

As you think about national and private label penetration, what are you seeing and how is it changing especially with what's going on with the updated chase mentality? And then, Jill, just on the other revenue side on credit revenue, any updates to the health of the consumer? What your -- how bad debt or delinquencies are trending? Thank you..

Well, we're going to change the mix slightly in terms of having more national brands versus our private label and proprietary product, and a lot is going to come from market buys. Nick and I have been in New York frequently, and really looking for different brands that we can carry.

A lot of it has to do with -- obviously, we're proud of our brand portfolio and we want to build upon that, but also we want to leverage the marketplace more often, really looking for really more interesting product to put on our selling floor than we had previously. So that'll change the mix.

We still feel our private and proprietary brands are important, but we also feel that we need to integrate into our assortments on the selling floor, things that are from the marketplace. So, we're working on that..

And then, in terms of credit, Dana, I think the other biggest thing is we do know the consumer is under pressure. Particularly, we serve the middle-income customer, which we see is definitely pressured.

We did take steps, I think, over a year ago in understanding where the market was moving and really taking on less risk in our portfolio anticipating that we were going to start to see loss rates move up, which we have seen, but they've been in-line with our expectations. So, losses are moving up. Payment rates are coming down.

The payment rates, though, are still ahead of 2019.

So, it does say that the customer is still healthy enough to make their payments and we're not seeing the loss rates above what we anticipated, but they are definitely deteriorating from what we had seen historically, all of which we've embedded into our guidance and our outlook for the rest of the year..

Thank you..

Thank you for everyone that was listening on the call today. Have a great Thanksgiving. Go shopping. Thanks..

This concludes today's conference call. You may now disconnect..