Morning and welcome to Kohl's 2026 Annual Meeting of Shareholders. Please note that this webcast is being recorded, and a replay will be available on this website 24 hours after the conclusion of the meeting. I will now turn the meeting over to John Schlifske, Independent Chair of the Board of Directors, who will act as chair of this annual shareholder meeting.
Thank you, welcome to the 2026 Annual Meeting of Kohl's Corporation. I now call the meeting to order. On behalf of the Board, I want to thank you for your continued investment in Kohl's and for the trust you place in us as stewards of your capital. Before we move to our formal agenda, I want to share a brief perspective on the board's work over the past year. Since I stepped into the role of Board Chair last May, my priority, and the priority of the entire Board, has been ensuring that we have the right leadership and the right strategy in place to drive sustainable long-term value.
Following an extensive search, we were proud to appoint Michael Bender as CEO this past November. Having served as a director since 2019, including 10 years as Board Chair and Interim CEO, Michael's institutional knowledge has allowed for a seamless transition. He brings decades of retail experience to the role. More importantly, he has already demonstrated an ability to drive results and strengthen our organizational culture.
We are energized by Kohl's future under his leadership. Alongside the leadership transition, we also conducted a focused evaluation of our own Board composition and leadership. Today, I can report that the Board is strongly aligned on our purpose. We have fostered a culture of constructive debate and clear accountability, ensuring that we are well-positioned to oversee the company's strategy and the progress we're already seeing on our near-term priorities. We're confident that our current composition provides the effective oversight required to move Kohl's forward. I want to emphasize our commitment to you, our shareholders.
The feedback we've received through our outreach this year, specifically on executive compensation and governance, is important to us and informs the decisions we make in the Boardroom, and we look forward to continuing that constructive dialogue as we move forward. Now I'd like to turn the call over to Jennie Kent, Kohl's Chief Legal Officer and Corporate Secretary, who will act as Secretary and conduct the official business of this meeting. Jennie?
Thank you, John. Kohl's is pleased to once again host our annual meeting in a virtual format. To begin, I would like to introduce the members of Kohl's Board of Directors who are standing for election at today's meeting. Joining us today are Michael Bender, Wendy Arlin, Yael Cosset, Chuck Floyd, Robbin Mitchell, Jonas Prising, John Schlifske, and Adolfo Villagomez. In addition to Michael Bender, Kohl's CEO, we are also joined by Jill Timm, our Chief Financial Officer.
We are pleased to welcome Leslie Plamann and [Lisa van Landeghem] of Ernst & Young, Kohl's independent auditor, who are also participating virtually. Finally, Angela Kellems from American Election Services will serve as the Independent Inspector of Elections for this meeting and is joining us virtually. The agenda has been posted on the meeting website, and the annual meeting will proceed in accordance with the published agenda.
Additionally, the notice of meeting was distributed to shareholders with the company's proxy materials on April 10th, 2026. Accordingly, notice of this meeting has been properly provided in accordance with Wisconsin law and our bylaws. To help ensure an orderly meeting, we have provided rules of conduct, which are available on the meeting website. Registered shareholders may submit questions using the Ask a Question box on the bottom left side of your screen.
We will address questions that are relevant to the meeting during the Q&A session. If multiple shareholders submit questions on the same topic, we may group and summarize these questions for a more efficient response. Please note that we will not address questions related to current or first quarter performance or trends. For information about upcoming events and presentations, including the first quarter earnings release, we encourage you to visit the investor relations section of our website.
The Inspector of Election has advised me that a sufficient number of voting shares are present in person or by proxy to constitute a quorum. We will now proceed with the business of the meeting. We expect that most shareholders joining us this morning have already voted by proxy. If you have submitted your vote by mailing in a completed proxy card or voting online or by phone, your vote has been received and counted, and there is no need to vote again today.
However, if you are a shareholder of record or a beneficial owner who has obtained a legal proxy from your bank, broker, or other nominee, and you have not yet voted or wish to change your vote, you may now do so using the ballot at the bottom of your screen. Please keep in mind that the polls will close following the presentation of each proposal.
The items to be considered at this meeting are described in the company's 2026 Notice of Annual Meeting of Shareholders and Proxy Statement, each dated April 10th. We will now proceed with the presentation of each proposal. The first item of business on today's agenda is the election of eight Directors, each to serve a one year term or until their respective successors are duly elected and qualified.
In accordance with Kohl's bylaws, shareholders must provide advance notice if they intend to nominate individuals for election to the Board. Since no nominations were timely received in accordance with our bylaws, I hereby declare the nominations closed. As outlined in the company's proxy statement, the board unanimously recommends that shareholders vote for the election of the eight nominees proposed by the Board.
The next item of business is the advisory vote on the compensation of Kohl's named executive officers, as outlined in the Compensation Discussion and Analysis section of our proxy statement. Please note that this is a non-binding advisory vote. Approval of this proposal does not affect any officer's entitlement to compensation, nor is compensation contingent on the outcome of this vote. However, we value the opinions expressed by our shareholders through say-on-pay votes, and the compensation committee will review the voting results and consider future actions regarding our compensation policies and practices in light of these results.
Kohl's executive compensation program is designed to incentivize high performance and align pay with performance. We believe that the actions taken by the compensation committee in fiscal 2025 have led to appropriate compensation outcomes for our named executive officers. As detailed in the company's proxy statement, the Board unanimously recommends that shareholders vote for the approval of the compensation of the company's named executive officers. Proposal 3 concerns the ratification of the appointment of the company's independent registered public accounting firm.
The audit committee has appointed Ernst & Young to audit the company's financial statements for fiscal 2026. In making this decision, the audit committee considered several factors, including Ernst & Young's independence and objectivity, their expertise and experience within our industry, their historical and recent performance, and the reasonableness of their fees, both in absolute terms and relative to peers. Ernst & Young has served as Kohl's independent auditor since 1986. The audit committee and the Board believe that continuing this relationship is in the best interests of the company and its shareholders.
As outlined in the company's proxy materials, the Board unanimously recommends that shareholders vote for the ratification of Ernst & Young as our independent registered public accounting firm for fiscal 2026. Proposal 4 seeks shareholder approval of the Kohl's Corporation 2024 Long-Term Compensation Plan, as amended and restated effective May 20th, 2026. Upon recommendation of the Compensation Committee, the Board has adopted this amended and restated plan, which provides three primary updates.
First, we are seeking to increase the number of shares of Kohl's common stock authorized for issuance by 5.2 million shares. Secondly, the amendment extends the term of the plan for 10 years through 2036. Lastly, we are establishing a formal shareholder-approved limit of $750,000 on the total annual compensation, including both cash and equity that may be paid to any non-employee director. Equity compensation is a cornerstone of our pay-for-performance philosophy.
It is our most effective tool for aligning the interests of our executives, Directors, and associates with long-term shareholder value. We are seeking these amendments now because our current share pool is expected to be substantially depleted within the next year. Without this approval, we would be required to rely more heavily on cash compensation, which we believe is less effective at driving long-term growth and retaining the high-caliber talent necessary in today's retail environment.
The amended and restated plan maintains all of our existing governance protections, such as no repricing rules and clawback provisions to ensure we remain disciplined stewards of your capital. As outlined in the company's proxy materials, the Board unanimously recommends that shareholders vote for approval of the amended and restated Long-Term Compensation Plan. That concludes the proposals to be voted upon. The polls are now officially closed.
We have received the preliminary voting results from the Inspector of Elections, which are subject to final tabulation. These preliminary results do not include any shares voted online during today's meeting but include all the votes cast prior to the meeting. Election of Directors. With respect to the election of Directors, each of the eight Director nominees has been elected to serve on the Board until the company's 2027 Annual Meeting.
Say-on-pay. As to say-on-pay, shareholders approved the advisory proposal related to the compensation of our named executive officers for fiscal 2025. Auditor ratification. The proposal to ratify the appointment of Ernst & Young as our independent registered public accounting firm for fiscal 2026 has been approved. Amended and restated 2024 Long-Term Compensation Plan. Finally, the proposal to approve the Kohl's Corporation 2024 Long-Term Compensation Plan, as amended and restated effective May 20th, 2026, has been approved.
Official results will be disclosed via a Form 8-K filed with the SEC within four business days. That concludes the formal business of Kohl's 2026 Annual Meeting of Shareholders. Now, we will turn to the Q&A session. I invite John Schlifske, our Board Chair, Michael Bender, Kohl's CEO, and Jill Timm, our Chief Financial Officer, to join me in addressing some of the topics of interest and questions raised by our shareholders.
While our team is organizing the questions submitted by shareholders, Michael, it might be helpful for shareholders to hear how our priorities and foundational reset are stabilizing the business and strengthening the operational ability as we move further into 2026. Would you mind providing some additional color on our priorities and approach to 2026, as discussed during our fiscal 2025 earnings call?
Happy to, Jennie, thank you. As we shared in March 2025 was a year of substantial change and a foundational reset for Kohl's. We focused on three key initiatives to stabilize the business and allow us to enter 2026 in a much stronger position. Starting with our first initiative, offering a curated, more balanced assortment. We're focused on delivering more relevancy and clarity across all categories.
Our goal is to invest in key styles and categories while reducing redundancy to ensure we have a purpose behind each product and brand. By exiting out of unproductive styles and offerings, we're reinvesting into higher turning items to drive a more balanced assortment. This work is currently underway across several key areas of the business.
In women's, we have broadened our denim assortment with more styles and fit through national partners such as Levi's, enhanced our proprietary brands such as LC Lauren Conrad and Sonoma, we continue to build on our juniors momentum with new casual and dress offerings. In men's, we've invested in key item programs for Tek Gear and Sonoma, expanded FLX with new golf offerings, and grown our dress category through an exclusive Haggar Hall of Fame launch.
In kids, we've differentiated our proprietary brands with an under $10 entry price point in SO and Sonoma, expanded Jumping Beans into Baby, and are completing the rollout of FLX Kids to all stores this quarter, following the successful Q1 launch of our new tween brand, Sea + Skye. In beauty, we're continuing to offer newness and discovery through Sephora at Kohl's, most recently with launching MAC in over 850 locations in March.
We're also building on proven brands like Tarte and Charlotte Tilbury with expanded offerings. In footwear, we remain focused on floor clarity by reducing overall choice counts and increasing inventory depth in the key styles our customers want. In home, we're delivering value through proprietary brands like The Big One, Miryana, and Hotelier, while leveraging innovation from national partners like Shark and Ninja.
In home decor, we're focused on improving our choice offerings within our seasonal decor. Our second initiative is reestablishing Kohl's as a leader in value and quality. We recognize that our core customer continues to face significant financial pressure, and when we lead with a strong, transparent value proposition, it clearly resonates with them. Our work in 2026 focuses on several key areas to deliver this value consistently.
We're building on the successful 2025 expansion of coupon eligibility and engaging our most loyal customers with more personalized real-time offers. We're focused on unlocking the power of our proprietary brands, which offer quality products at exceptional value to the customer. In addition to the investment in proprietary brand inventory, we're also supporting the brands with elevated in-store experiences and a By Kohl's marketing campaign.
We're also finding ways to introduce more value to our assortment. Recently, we implemented the Deal Bar and Impulse Toy Tower to capture incremental sales with toys and decor, all priced under $10. Our third initiative is delivering a frictionless omni-channel experience. Our 2026 work focuses on reestablishing trip assurance, optimizing inventory and fulfillment, modernizing our digital capabilities, and future-proofing our technology and data infrastructure.
We've made adjustments to our planning and supply chain processes to increase inventory depth in core basics by the high single digits while curating choice counts for better clarity. We've also made deliberate changes to our inventory allocation process, which led to a smoother transition into our spring categories and better in-stock levels, allowing us to better utilize efficient fulfillment options like buy online, pickup in store, and ship from store.
On the technology and digital front, we are leveraging generative AI to analyze customer interactions in real time, providing more personalized recommendations and better search findability. We're also actively modernizing our site structure and data architecture to ensure Kohl's is fully prepared for a future driven by AI and agent technology. Before we address shareholder questions, I would like to reinforce my perspective on the year. We've made meaningful progress in strengthening our foundation in 2025, and I'm confident that we are on the right path. We started 2026 in a measurably stronger position, and we're committed to driving continued progressive improvements.
Thank you, Michael. Our first shareholder question is, what leverage ratio are you waiting for before repurchasing shares? I'll ask Jill to answer that question.
Thanks, Jennie. We haven't targeted any specific leverage ratio. Our focus in 2025 was really solidifying the balance sheet, which we feel like we made great progress on. We ended the year with about $675 million of cash. We had no borrowings on the ABL, and we generated about $1.4 billion of operating cash flow. Our four priorities for capital allocation continue to be always first to invest back into our business through CapEx.
We expect to spend about $350 million-$400 million in 2026 on these efforts. We'll continue to fund the dividend, which we had approved already this year. Then we do debt buyback as well. We look opportunistically in the market to buy back some of our debt, which we did about $90 million in Q4 of 2025. Of course, we'll look at the share buyback when we're back to a sustainable cash flow measure.
Thank you, Jill. Our second question is, please provide information regarding what Kohl's has already done to receive tariff refunds and any insight into what Kohl's expects to receive from the refunds, including an approximate amount and date of refund. I'll also ask Jill to answer this question.
Thanks, Jennie. We have spent a lot of time on tariffs, specifically last year around our mitigation efforts. As you had seen, we actually were able to offset these tariffs and actually expand our gross margin by about 34 basis points last year. We diversified our countries of production. We leveraged our vendor negotiations. We looked for cost reductions in product sourcing. By doing all that, it afforded us the opportunity to expand margin and offset the tariffs. We have submitted our claims for a tariff refund, and we will provide updates on that as appropriate.
Thank you, Jill. That's all the time we have today. For any relevant and appropriate questions that we were unable to address during today's meeting, we will refer those questions to our investor relations team for follow-up. We thank you for your attendance today and your continued interest in Kohl's. I now declare this meeting closed.
That concludes today's webcast. You may now disconnect.