Peter Boneparth: Thank you, Mark, and thank you for joining us this morning. I'm going to provide some brief introductory remarks, and then I'll turn it over to Jill to review our third quarter results. We will then take some Q&A. As we shared last week, Michelle Gass decided to step down as CEO to become the successor CEO at Levi's, a valued brand partner of ours. On behalf of the Board, management and all of our associates, I want to thank Michelle for her contribution to Kohl's during the past nine years. Her efforts to strategically transform Kohl's through brand introductions and partnerships like Sephora and her focus on building an inclusive and collaborative culture will benefit the Company for years to come. Michelle is an outstanding leader, and we look forward to continuing to work with her in the future.

We have plans in place to facilitate a smooth transition. The Board appointed Tom Kingsbury as interim CEO. Many of you know Tom from his leadership and success at Burlington. He's highly regarded as an exceptional operator with a keen focus on inventory management. I knew Tom from his early days at Filene's, and I personally have always had a great deal of respect for his professionalism, retail acumen and integrity. Tom is no stranger to Kohl's. He calls Milwaukee home. He's been on the board since 2021 and has been intimately involved in working with Michelle and the team. He is the perfect fit to lead the Company during this interim period, and we greatly appreciate his willingness to serve in this capacity. We expect him to hit the ground running.

Given the recent volatility in our business and consumer behavior, the significant macroeconomic headwinds, along with the unexpected CEO transition, we will not be giving guidance for the fourth quarter and are withdrawing our prior outlook for the year. We also want to make sure that the Company has the flexibility to take the actions necessary in the fourth quarter to best position the business for 2023. We continue to have strong conviction in our strategies and it is our intent to resume providing guidance on our Q4 call in late February for the new fiscal year 2023. Now, let me spend a few minutes on our next steps. The Board last week formed a committee to oversee the search for a new CEO. Michael Bender, our current Chair of the Nominating and ESG Committee will be leading our efforts with help from Christine Day, Margaret Jenkins as well as Tom and I.

Kohl's is a great company with bright prospects, and this is an attractive role and opportunity in the retail industry. We are excited to engage with candidates. Let me share with you some of the key characteristics we are looking for in a new CEO. Kohl's has always been known for brands, value and convenience. So, it's important that we land a candidate that has great brand-building experience, understands our go-to-market value proposition and has deep omnichannel expertise. In addition, we are looking for a leader that can build great teams and drive stellar results while furthering the innovative spirit and conclusive and collaborative culture. We don't have a time line for you on how long it will take, but we know that the process is underway, and that Tom has agreed to remain interim CEO until a permanent successor is named.

This company has been through a lot over the last couple of years. I want to thank our shareholders for the time you've invested in engaging with us as well as thank you for your continued support during this transition period. We are committed to finding the next great CEO to successfully position Kohl's to drive sales, grow earnings and create shareholder value. This Board is also committed to supporting Tom, the management team and the entire associate base during this interim period. I will now turn over the call to Jill to discuss our third quarter results.

See also 10 Best Uranium Stocks To Buy and Dividend Champions List By Yield.

Jill Timm: Thank you, Peter, and good morning, everyone. Before I get started, I too want to thank Michelle for her leadership and partnership over the past decade. Let me now review our third quarter results and business performance. As we shared last week, sales were down approximately 7%. Our operating margin was 4.7% and diluted EPS was $0.82. Our performance during the third quarter was relatively in line with our expectations as the organization continued to manage the business effectively in a challenging macroeconomic environment. Persistently high inflation continues to dampen consumer spending and our business, given our exposure to discretionary categories, like apparel and home goods, which are facing disproportionate pressure.

During the quarter, we saw our middle income customers continue to purchase fewer items per trip and trade down to our value-oriented private brands. From a channel perspective, store sales outperformed digital and improved sequentially in Q3 due in part to having more Sephora shops open and our investment in labor to enhance execution across the store. Digital sales were down 8% to last year, but still up nearly 20% to the third quarter of 2019. Digital accounted for 29% of sales. From a product perspective, sales of our private brands increased slightly to last year, with strong performance in our top private brands, including Sonoma, Croft & Barrow, Jumping Beans, Nine West, Tek Gear and Lauren Conrad. Accessories with our best-performing line of business up mid-teens percent, driven by strong performance from Sephora Beauty sales.

We continue to see mid- to high-single-digit percent sales lifts in stores with Sephora relative to the balance of the chain. This was partially offset by lower sales of jewelry, driven by in-store displacements. Our core women's business outperformed the Company average and excluding juniors was flat to last year. We maintain momentum in dresses though experienced weakness in juniors and intimates, which we are working to improve. As it relates to some of our other categories, active underperformed in Q3 versus the Company driven by continued softness in active footwear. Our outdoor business continues to outperform with growth from Eddie Bauer and Land's End. In footwear, we are pleased with the growth achieved in our dress casual business, especially in boots.

And lastly, men's performed in line when home and children's underperformed the Company average. Now let me turn to the rest of the income statement. Q3 gross margin was 37.3%, down 263 basis points from last year. The decline was driven by an ongoing increase in freight costs, which pressured margin by 150 basis points, product cost inflation, which was a 50 basis-point headwind as well as elevated shrink levels. Our margin continued to benefit from our pricing and promotional optimization strategies. SG&A expenses decreased 3.3% to $1.3 billion, benefiting primarily from the lack of holiday-based retention incentives this year and lapping last year's Sephora roll out expenses. And through disciplined expense management, we were able to offset some of the continued wage headwinds.

Depreciation expense of $202 million was $8 million lower than last year, due to reduced technology capital spend. Interest expense of $81 million was $15 million higher than last year due to Sephora-related lease amendments and increased borrowings Net income for the quarter was $97 million. And as previously reported, earnings per diluted share was $0.82. Turning to the balance sheet and cash flow. Our inventory at quarter-end increased 34% to last year with our Sephora at Kohl's beauty investments contributing 5 percentage points of the increase. When compared to third quarter of 2019, inventory was flat. During Q3, we set the pack-and-hold merchandise on the sales floor and in transit normalized. We feel good about the progress we are making to reduce inventory and continue to expect further improvement by year-end, remaining agile and responsive to the demand environment.

Operating cash flow was $121 million in the third quarter. Capital expenditures for the quarter were $185 million, driven mainly by Sephora and new stores. We opened 5 new stores in 2022, 4 of which occurred in early November, and relocated another 4 stores. During the quarter, we paid $57 million or $0.50 per share in dividends to shareholders. In addition, as previously disclosed on November 9, the Board declared another quarterly cash dividend of $0.50 per share payable to shareholders on December 21st. Subsequent to the end of the quarter, we completed our $500 million accelerated share repurchase program. In total, we received 17.9 million shares, which resulted in an average price of approximately $28 per share. From an accounting perspective, we recognized 11.8 million shares in Q3 and we'll recognize the remaining 6.1 million shares in Q4.

Now, let me provide an update on our capital structure and capital allocation priorities. Starting first with our revolving credit facility. As expected, we increased our usage of the revolver during the third quarter, driven by our seasonal inventory build ahead of holiday and to execute the $500 million accelerated share repurchase program. At the end of the third quarter, our outstanding revolver balance was $668 million. Importantly, we expect to fully repay our revolver borrowings in early December, as we move through the key parts of the holiday selling season. We have consistently communicated that our long-term objective is to maintain our investment-grade rating, supported by prudent balance sheet management, and a leverage target of 2.5 times.

Our philosophy and objectives have not changed on this front. Looking forward, our capital allocation actions will prioritize the dividend, followed by returning our balance sheet to its historical strength. We plan to pay down our two bond maturities totaling $275 million in 2023. We are not planning on repurchasing any additional shares until our balance sheet is strengthened on a path towards our leverage target of 2.5 times. We used the recently completed $500 million ASR as a pull forward from 2023. And we recently completed a robust process where we engaged with dozens of industry participants to assess potential asset monetization opportunities for our owned real estate. This included robust engagements with large, fully integrated real estate service firms, specialty real estate advisory and brokerage firms, large institutional real estate investors and specialty real estate investment and private equity firms.

Given the market volatility and current rate environment, we have concluded that it's best to stay the course and continue with our existing process of regularly evaluating our real estate to maximize asset value, drive long-term profitability and optimize the portfolio with a focus on maintaining balance sheet health and financial flexibility. We will continue to take advantage of favorable opportunities as they arise, but not engage in a transformative sales-leaseback transaction at this time. Let me share a few comments on our forward outlook. For holiday, knowing how important value is to customers this year, we are amplifying our value messaging through our holiday brand campaign as well as by featuring our private brands more prominently in our marketing and leaning into our iconic Kohl's Cash and Kohl's Rewards programs across key promotional events.

Our key product focus areas include an expanded support gifting assortment, increased newness and greater exclusivity in toys, tech and pet, active and cozy apparel and special occasion outfitting such as holiday dresses. Gifting is an important theme in our messaging, and we look forward to serving our customers once again this holiday season, both online and in-store, including our now over 600 stores with Sephora at Kohl's shops. As it relates to our financial outlook, as Peter stated in his opening remarks, we remain committed to and confident in our strategy. However, we are not providing fourth quarter sales and earnings guidance at this time. It is the prudent thing to do given the recent unpredictable trends in our business, the significant macroeconomic headwinds, along with the unexpected CEO transition.

We also want to make sure that we have the flexibility to take the actions necessary to best position the business for 2023. Let me share a few qualitative comments on recent trends and select financial commentary. In recent weeks, the environment has become more unpredictable to forecast. Following fairly stable trends in August and September, sales decelerated in late October with softness continuing into November as compared to last year. We believe this is primarily a function of a later start to holiday shopping as compared to 2021 when customers were concerned about scarcity of inventory. Given our expectation that the challenging environment will continue in the short term, we're taking actions across multiple fronts to ensure that we are best positioned.

We are planning inventory commitments conservatively, executing expense savings opportunities and reducing capital expenditures. We will do this while continuing to invest in our key future growth initiatives. Our partnership with Sephora remains extremely strong, and we are both incredibly focused on building support at Kohl's to $2 billion in sales. In 2023, we'll open 250 additional Sephora at Kohl's shops, bringing the total to 850 as well as make progress on developing a smaller footprint concept for our remaining 300 stores. In closing, I want to extend a special thank you to all of our associates. I admire your commitment to putting our customers first each and every day and I greatly value your dedication to Kohl's. The holiday season is a special time for so many reasons, both personally and for our business.

I'm excited to see more and more of our customers experience the elevated store environment with Sephora and benefit from our value-driven holiday promotional strategies. With that, Peter and I are happy to take your questions at this time.

To continue reading the Q&A session, please click here.