科尔士公司（KSS）：仍有高山要攀登

Restricted - External Hale Holden+1 212 412 1524hale.holden@barclays.comBCI, USCarolyn Popelka+1 212 526 0935carolynanne.popelka@barclays.comBCI, US completed the four-year rollout of Sephora in the current quarter with beauty sales at a $2bnrun rate and 1Q net sales up 6% with comparable sales up 1%, expanding the number ofbrands that are eligible for the coupon and improving the digital/omni-channel integration.The company's aggressive lean into private brands represents the largest risk/opportunity inour view. KSS noted that proprietary brands are still underperforming the company averageand it remains focused on increasing the percentage (versus national brands) and newnessassociated with the proprietary brands. The company noted it was at an all-time low in termsof private brands penetration, which if improved should help capture a more value-seekingcustomer. Our concern is the company has had trouble finding the right balance over the lastnumber of years, and it is unclear that KSS can remain a thought leader here givenheightened competition.KSS noted that it has adjusted orders to managetariffrisk within its current guidance range.This would leave some potential upside shouldtariffsbe paused or struck down.Management noted at several points during the earnings presentation that their corecustomers "remain pressured," were "trading down" to lower AUR goods, and are "stretched."Our concern is that the continued pressure on KSS core consumers appears unlikely to abatein the near term and may be pushing their customers into mass or online channels. Regaininglost/lapsed customers has proveddifficultfor department stores historically.GuidanceQuarter to date, KSS noted that it has seen consistent performance with regular price selling inMay, with the exception of last week when weather trends (i.e., cold) caused a step down insales performance.For the second quarter, the company noted that on a two-year stack it would be similar to Q1with expected growth in the second half of the year driven by private brand expansion.KSSaffirmedits prior FYE 2025 guidance for comparable sales down 4-6% and EBIT margin of2.2-2.6%. Capex wasreaffirmedat $400-425mn.Quarter to date, Bloomberg Alt Data has adjusted sales down 9.7% with most weeks down8-9%, which would be worse than the guidance-implied run rate and what the companyreported in 1Q.Balance Sheet/Credit OverviewKSS ended the quarter with total debt and cash on hand of $2.1bn and $153mn, respectively.Net debt was $1.9bn and net leverage was 1.5x.The company used $92m in cash from operations and capital expenditures totaled $110mn.Operational Highlights1Q revenue down 4.1% y/y to $3.05bn versus $3.04bn forecast1Q comparable sales down 3.9%1Q GM 43.3%, +37bp y/y and versus 43.4% forecast2 •••••••••••• •1Q S&GA down 5.2% y/y••Adjusted EBITDA +1.7% to $235mn vs $229mn forecast•Summary of RatingsBloomberg U.S. High Yield 2% Issuer Capped Credit IndexU.S. HY RetailersKSS 10 06/01/30KSS 4 1/4 07/17/25KSS 4 5/8 05/01/31KSS 5.55 07/17/45Source: Barclays Research Analyst(s) Certification(s):We, Hale Holden and Carolyn Popelka, hereby certify (1) that the views expressed in this research report accurately reflect our personal views aboutany or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly orindirectly related to the specific recommendations or views expressed in this research report.Important Disclosures:Barclays Research is produced by the Investment Bank of Barclays Bank PLC and itsaffiliates(collectively and each individually, "Barclays").All authors contributing to this research report are Research Analysts unless otherwise indicated. The publication date at the top of the report reflectsthe local time where the report was produced and maydifferfrom the release date provided in GMT.Availability of Disclosures:For current important disclosures regarding any issuers which are the subject of this research report please refer to https://publicresearch.barclays.com or alternatively send a written request to: Barclays Research Compliance, 745 Seventh Avenue, 13th Floor, New York, NY10019 or call +1-212-526-1072.Barclays Capital Inc. and/or one of itsaffiliatesdoes and seeks to do business with companies covered in its research reports. As a result, investorsshould be aware that Barclays may have a conflict of interest that couldaffectthe objectivity of this report. Barclays Capital Inc. and/or one of itsaffiliatesregularly trades, generally deals as principal and generally provides liquidity (as market maker or otherwise) in the debt securities that are thesubject of this research report (and related derivatives thereof). Barclays trading desks may have either a long and / or short position in such securities,other financial instruments and / or derivatives, which may pose a conflict with the interests of investing customers. Where permitted and subject toappropriate information b