A N N U A L R E P O RT 2 0 0 5
N56 W17000 Ridgewood Drive
Menomonee Falls, WI 53051-5660
www.kohls.com
Financial Highlights
2004(1)
2005
Net Sales
up 14.5%
(In millions of dollars)
$ 13,402
$11,701
$ 1,416
$ 1,193
Operating Income
(In millions of dollars)
up 18.7%
Percent of Sales
Net Income
up 19.7%
$
(In millions of dollars)
Net Sales
9%
G
CA
12000
703
(In millions of dollars)
(2)
1000
R
16.
$
842
Net Income(1)
(In millions of dollars)
15000
10.2%
10.6%
$13,402
(2)
R
AG
$842
C
.7%
$11,701
19
$10,282
$9,120
800
$703
$601
$546
9000
600
$7,489
$458
$6,152
$343
6000
400
OUR PROFILE
3000
Kohl’s mission is to be the leading family-focused, value-oriented
specialty department
200
store offering quality exclusive and national brand merchandise to the customer in an
environment that is convenient, friendly and exciting.
0
Kohl’s operates from coast to coast. At the end of fiscal 2005, we served customers in
41 states through 732 stores and Kohls.com. In 2006, we plan to open approximately
80 to 85 stores.
00
01
02
03
04
05
00
01
02
03
04
(1) Results for 2000-2004 fiscal years have been restated to reflect expensing of stock options.
(2) Compounded annual growth rate.
05
0
LETTER TO SHAREHOLDERS
SHARE REPURCHASE PROGRAM
“In 2005, we made
significant strides
in bringing expect
great things to life.”
The Board of Directors has authorized a
$2 billion share repurchase program.
The program is expected to be completed
over the next two to three years.
Pictured: Arlene Meier, Larry Montgomery and Kevin Mansell.
Dear Shareholder,
and our own private brands further broaden the mix and set us
on how to create their own look. These initiatives not only make
Our customers will continue to receive the same great credit card
In our letter to you last year, we introduced our new positioning
apart in the market.
it easier to shop our stores, but also more exciting.
benefits. We will continue to handle all customer service functions
strides in bringing expect great things to life.
In 2006, we will build on our 2005 success and launch even more
Expansion: A Leading National Retailer
to our credit card customers. In return, we will receive ongoing
new brands. We will add Chaps in women’s, boys’ and footwear,
In 2005, we continued to bring Kohl’s into new markets and
payments related to the profitability of the program.
We differentiated ourselves even further in the marketplace and
Tony Hawk in men’s and boys’ and West End and AB Studio
expand our presence in existing markets. We opened 95 stores,
in women’s. In addition, Stamp 10 by Liz Claiborne will be introduced
operating 732 stores in 41 states at the end of the year. The new
In anticipation of the sale of the credit accounts receivable, the
in 300 stores in both women’s and men’s. We are also extending
store openings were split between new and existing markets.
Board of Directors has authorized a $2 billion share repurchase
our contemporary private brands including Candie’s, daisy fuentes
New markets included Buffalo, New York, and our entry into
program. The program is expected to be completed over the
and apt. 9 into other areas of the store. We will complete the
Florida with stores in Orlando and Jacksonville.
next two to three years.
Looking ahead, we plan to open approximately 500 stores over
We expect to use the initial proceeds from the credit card
statement: expect great things. In 2005, we made significant
provided our customer with a better-than-ever shopping experience.
We added exciting new brands and opened 95 stores in both new
and existing markets. These initiatives focused on one goal - growing
the company profitably.
Strong Financial Performance
2005 was a record year for Kohl’s. Net sales increased 14.5%
to a record $13.4 billion, while comparable store sales rose
3.4%. Net income increased 19.7% to a record $842 million or
$2.43 per diluted share. Our balance sheet remains strong and
we continue to generate significant cash flow from operations.
In February 2006, we repaid $100 million of our long-term debt.
and will be responsible for all advertising and marketing related
repositioning of our biggest private brands, Croft & Barrow,
Sonoma, and apt. 9, to appeal to three different lifestyles: classic,
updated and contemporary.
Our marketing strategies go hand-in-hand with our merchandise
content and are designed to raise our visibility among both loyal,
long-term customers and first-time shoppers who want to see
what all the excitement is about. A successful combination of
integrated fashion-focused advertising and the continued use of
Company Initiatives
our newspaper inserts helped to drive increases in transactions
We made excellent progress on our 2005 initiatives. These initiatives
per store in 2005. Our advertising continually reminds our
focused on merchandise content, marketing, inventory management
customers that they can expect great things at Kohl’s.
and the in-store shopping experience.
In 2005, better inventory management, along with continually
From a merchandise perspective, we broadened our customer
introducing fresh and exciting new content into our stores,
reach by introducing new brands and categories into the
contributed to our sales increases and helped to improve
merchandise mix. We focused on our customer’s lifestyles to
gross margin. We continue to focus on consistently buying
the next five years. This growth will come from a strategic blend
of new stores in both new and existing markets, along with
capitalizing on real estate opportunities that may arise as the
industry continues to consolidate.
In fiscal 2006, we plan to open approximately 80 to 85 stores.
We will enter the Northwest with stores in Portland and Seattle that
will be a combination of new builds and the takeover of former
store locations. Some of our new stores opening in October will
incorporate new design features both on the interior and exterior.
By the end of fiscal 2010, we plan to operate over 1,200 stores
all across the country. Our approach to expansion is very disciplined,
ensuring the consistent execution of our growth strategy. As part
of this strategy, we will continue to update our existing stores to
help drive meaningful gains in market share.
provide an assortment that satisfies her needs – whether she is
the right number of units, improving allocation accuracy,
shopping for herself, her family or her home.
streamlining the seasonal transition across our various
Capital Structure
geographic locations and ensuring that colors and sizes
In March, we entered into a strategic alliance with JPMorgan Chase
are in stock by store.
to enhance our credit operations. Chase will purchase Kohl’s private
Of course, Kohl’s means brands and this is where we continue
to excel. Kohl’s was built on the concept of emphasizing national
transaction to repurchase Kohl’s stock, fund our store expansion
and for general corporate purposes.
Our Vision
We are well positioned to continue to execute our growth strategies.
We have a strong and growing base of stores in many key markets
across the country, but there are many more markets where we
can expand. We are leveraging our core concept of brands, value
and convenience to satisfy existing customer needs, broaden our
customer base and improve our customer’s shopping experience.
We have a track record of strong financial performance. Most
importantly, we have a team of over 107,000 Associates who are
dedicated to serving our customers, as well as an experienced
Board of Directors and senior management team that are committed
to long-term profitable growth.
To our shareholders, customers, partners and most of all, our
Associates, thank you for another record year. We look forward
to building on this momentum in 2006 and beyond.
label credit card accounts and the outstanding balances associated
brands that project quality and value and have wide customer
The shopping experience is where everything we do comes
with the accounts under a multi-year program agreement. The total
appeal. National brands such as Levi’s, Columbia, Nike and many
together. We’ve organized departments by lifestyle for ease of
purchase price, which will be equal to the receivables balances
others across the store are the foundation of our merchandise
shopping, differentiated special sizes, added graphics that highlight
at the closing date, will be paid in cash and is expected to be
offerings. Exclusive national brands, available “Only at Kohl’s,”
key trends and presented merchandise to give customers ideas
approximately $1.5 billion.
Larry Montgomery
Chairman and
Chief Executive Officer
Kevin Mansell
President
Arlene Meier
Chief Operating Officer
1,232 Stores
by the End
of 2010 1,232
Continuing Growth from
Coast to Coast
In 2005, we continued to bring the Kohl’s brand into new markets and to expand
(projected)
in existing markets. We added 95 stores in 2005 and entered Florida for the first
time with stores in Orlando and Jacksonville. In 2006, we will expand into the
E X PA N D I N G O U R P R E S E N C E
Northwest with new stores in Portland and Seattle.
The story of Kohl’s is a story of profitable
expansion. We plan to open approximately
500 stores over the next five years,
operating more than 1,200 stores by
the end of 2010.
New States
in 2006
Seattle
Portland
732
320
Jacksonville
Over the last 10 years, we’ve grown from 128 stores
Our merchandising strategies, which are designed to
to 732, moving from our Midwest base to become a
maximize our existing customer base and attract new
leading national retailer. We will continue to build on
customers, will also help us to successfully capture a
this momentum through a well-defined expansion
solid share of the retail market across the country. And
strategy that includes both new builds and takeovers
with our distribution network, we have the infrastructure
New in 2006
Mid-Atlantic Region (77 stores)
of existing retail sites. With our three store formats –
to support our continued growth.
Midwest Region (243 stores)
Southeast Region (85 stores)
Kohl’s will grow from 128 stores in
suburban, small and urban – we have the flexibility to
SouthCentral Region (93 stores)
Southwest Region (117 stores)
1995 to an estimated 1,232 stores
add stores in markets of all sizes.
Northeast Region (117 stores)
We remain committed to long-term profitable growth,
Orlando
New State
in 2005
128
1995
2000
2010
2005
by the end of 2010.
which provides continuing opportunities for our Associates.
A Leading
National
Retailer
Number of Stores by Region
3% 1% 1%
5%
12%
16%
These charts show Kohl’s evolution
51%
12%
over the past 10 years from our
Midwestern base to a coast-to-coast
10%
95%
3%
national retailer. At the end of 2005,
13%
33%
13%
16%
16%
Kohl’s operated in all regions of the
country except the Northwest. We will
1995
2000
2005
expand into the Northwest in 2006,
Midwest Region
Northeast Region
Southeast Region
beginning in Portland and Seattle.
SouthCentral Region
Mid-Atlantic Region
Southwest Region
INSPIRING OUR CUSTOMERS
BUILDING OUR BRANDS
Kohl’s is the source of inspiration,
guidance and style at great value
that lets our customer transform the
way she looks, lives and feels in the
many roles she plays.
Our collection of national brands is
strategically evolving to meet the
desires of our customers and the
“Only at Kohl’s” exclusive brand
portfolio continues to grow.
Kohl’s appeals to a broadening customer base.
Regardless of her lifestyle, our customer is a smart
Our brands appeal to different customer lifestyles.
fashion-forward contemporary look, we offer daisy
Our customer can be a busy mom shopping for
shopper who knows there is more to value than
She may want to be “classic” during the day and
fuentes and apt. 9. We also balance our assortment
herself, her family and her home. She can also
price. She finds what she wants in a single trip
“updated” or “contemporary” at night. That’s why
of basics and wardrobe fundamentals with fresh
be a single woman looking for updated and
where compelling merchandise and in-store
we’ve focused on those lifestyles in our merchandise
styles, exciting silhouettes, new fabrics, trendy colors
contemporary fashions or a working woman
graphics help her put together the look she wants
mix. For a classic look, she can find the traditional
and unexpected pieces that surprise her.
without children. The styles and looks she wants
in a short amount of time.
styling she wants in Chaps for her, designed by
and needs are constantly changing and Kohl’s
is in tune with those changes.
Our strategy is to encourage our customer to
Polo Ralph Lauren exclusively for Kohl’s, or our
In 2006, we will launch Tony Hawk in young men’s
private Croft & Barrow brand.
and boys’ and West End and AB Studio in women’s.
shop more frequently and attract new customers
In addition, Stamp 10 by Liz Claiborne will be
to our stores by giving her great, new fashion in
The updated customer’s roots are in traditional
introduced in 300 stores in both women’s and
an exciting, easy-to-shop environment.
styling, but with modern fabrics and a more
men’s. Candie’s and apt. 9 will extend to home and
body-conscious fit. National brands such as axcess
we will launch the popular Yankee Candle brand.
and Nine & Company in women’s and axcess and
We will complete the repositioning of our biggest
Axist in men’s satisfy this customer. Our private
private brands, Croft & Barrow, Sonoma, and apt. 9,
brand, Sonoma, provides value for both our
to appeal to three different lifestyles: classic, updated
women’s and men’s updated customer. For a
and contemporary.
THE KOHL’S BRAND PORTFOLIO
Kohl’s has the exciting
styles that appeal to
the lifestyles of our
classic, updated and
contemporary customers.
Our portfolio of national
and exclusive brands
continues to grow with
the names our customers
know and trust.
National Brands
adidas
Aerosoles
Arrow
axcess
Axist
Bali
Briggs
Calphalon
Carter’s
Champion
Chaps
Cuisinart
Dockers
Dyson
Gloria Vanderbilt
Haggar
Jockey
KitchenAid
Krups
Laura Ashley
Lifestyles
Lee
l.e.i.
Levi’s
Mudd
New Balance
Nike
Nine & Company
Norton McNaughton
OSHKOSH
Reebok
Requirements
ROYAL VELVET
Russell Athletic
Sag Harbor
Speedo
Unionbay
Vanity Fair
Villager
Warner’s
ZeroXposur
Exclusive Brands
American Beauty
Candie’s
daisy fuentes
FLIRT!
good skin
grassroots
Oh Baby!
by Motherhood
Stamp 10
Tony Hawk
Private Brands
apt. 9
Croft & Barrow
SO...
Sonoma
Tek Gear
Urban Pipeline
TRANSFORMING OUR STORES
Finding everything she needs to fit her
lifestyle and having a great in-store
experience keep customers coming
back to Kohl’s.
For the Kohl’s customer, exciting shopping means
classic, updated and contemporary merchandise to
finding a well-edited selection of brands in an inspiring
guide her to the section of the store that best reflects
and hassle-free environment. In 2005, we organized
her lifestyle.
our stores to reflect the way our customer naturally
shops. Throughout the store, we added colorful,
Brands, value and convenience are compelling reasons
back-wall graphics that highlight trends and brands
to shop at Kohl’s. But what makes the Kohl’s shopping
and make departments easier to find. Strategically
experience really special is our friendly, knowledgeable
placed mannequins differentiate departments and
Associates. They are well trained to meet customer
show her how to put outfits together.
expectations and to provide friendly, helpful customer
service. Our customers indicated their satisfaction
In spring 2006, we reorganized the floor layout in
with the Kohl’s experience by giving us a #1 ranking
misses’ by lifestyle. Many of her items mix and match
in customer satisfaction for the fourth consecutive
– taking her from day to night – from the office to a
year on the American Customer Satisfaction Index
movie. Our new misses’ department will separate
prepared by the American Society for Quality.
This Kohl’s A Team worked
side by side with neighbors
to construct the first of five
new Chicago playgrounds
built to the latest Consumer
Products Safety Council
standards. The playgrounds
are part of the Kohl’s Cares
for Kids® Safety Network
program.
PA RT N E R I N G W I T H O U R C O M M U N I T I E S
Every day across the country, Kohl’s
is putting time, effort and funding
toward health and educational
opportunities for children.
Kohl’s is a strong partner in our communities through programs
through the Kohl’s A Team. Associates volunteer their
involving our company and our Associates. In 2005, we
time and talent to support youth-serving organizations and
donated more than $22 million to support our communities
Kohl’s supports their efforts with corporate grants. The
nationwide.
Kohl’s Fundraising Card program is a simple, effective way
for schools and other youth-serving nonprofit organizations
Kohl’s Cares for Kids is not just a program. It’s a
to raise money to purchase supplies and equipment. In 2005,
promise of hope for a brighter, healthier future for kids in
Kohl’s supported more than 3,000 nonprofit organizations.
®
our communities. Throughout the year, Kohl’s sells special
Financial Summary
Fiscal Year
2004(a)
2005
2003(a)
2002(a)
2001(a)
2000(a)
Summary of Operations (In millions)
Net sales
Gross margin
Selling, general & administrative expenses
Preopening expenses
Depreciation and amortization
Operating income
Interest expense, net
Income before income taxes
Net income
$13,402
4,763
2,964
44
339
1,416
70
1,346
842
$11,701
4,114
2,584
49
288
1,193
63
1,130
703
$10,282
3,395
2,158
47
239
951
73
878
546
$ 9,120
3,139
1,884
41
193
1,021
56
965
601
$ 7,489
2,565
1,583
33
159
790
50
740
458
$ 6,152
2,096
1,328
36
128
604
46
558
343
Diluted Earnings Per Share
$
$
$ 1.59
$ 1.75
$ 1.35
$ 1.02 (b)
$ 1,902
3,316
6,691
1,076
4,212
14.1%
$ 1,776
2,734
6,311
1,059
3,532
19.0%
$ 1,584
2,196
4,927
1,095
2,803
18.3%
$ 1,199
1,725
3,853
803
2,217
17.6%
2.43
2.04
Financial Position Data (Dollars in millions)
Working capital
Property and equipment, net
Total assets
Long-term debt
Shareholders’ equity
Return on average shareholders’ equity
$ 2,520
4,544
9,153
1,046
5,957
15.3%
$ 2,187
3,988
7,979
1,103
5,034
15.2%
Other Data
Comparable store sales growth
Net sales per selling square foot
Stores open at year end
Total square feet of selling space (In thousands)
3.4%
252
732
56,625
$
$
0.3%
255
637
49,201
$
(1.6)%
268
542
41,447
5.3%
284
457
34,507
$
6.8%
283
382
28,576
$
9.0%
281
320
23,610
$
(a) Results for the 2000-2004 fiscal years have been restated to reflect expensing of stock options.
(b) Adjusted for stock split.
R E P O RT O F M A N A G E M E N T
The management of Kohl’s Corporation is responsible for the integrity and objectivity of the financial and operating information contained in this Annual Report,
including the consolidated financial statements covered by the Report of the Independent Registered Public Accounting Firm. These statements were prepared
in conformity with generally accepted accounting principles and include amounts that are based on the best estimates and judgments of management.
merchandise in our stores with 100% of the net profit
In the fall of 2005, Kohl’s and our Associates rallied to
The consolidated financial statements and related notes have been audited by Ernst & Young LLP, independent registered public accounting firm, whose report
benefiting health and educational opportunities for children
support the victims of Hurricane Katrina. Kohl’s matched
is based on audits conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States). As part of its audit, the
nationwide. In 2005, we partnered with 75 children’s hospitals
the contributions of Associates to the National Red Cross
in 41 states to fulfill the health element of our Kohl’s
dollar-for-dollar, for a combined contribution of more
Cares for Kids mission.
than $500,000.
®
firm performed a review of the Company’s system of internal controls and conducted such tests and employed such procedures as considered necessary to
render its opinion on the consolidated financial statements. The Company’s consolidated financial statements including the Report of the Independent
Registered Public Accounting Firm are included in the Company’s Form 10-K for the year ended January 28, 2006.
The Audit Committee of the Board of Directors is composed of three independent Directors. The Committee is responsible for assisting the Board in its oversight
of Kohl’s financial accounting and reporting practices. The Audit Committee is directly responsible for the compensation, appointment and oversight of the
Our annual Kohl’s Kids Who Care® scholarship program
Kohl’s is also taking a leadership role in supporting a
is an opportunity for us to recognize and reward youth who
healthy, active lifestyle for kids as the official department
volunteer in their communities. In 2005, we honored more
store of U.S. Youth Soccer. In 2005, the Kohl’s
than 1,000 young volunteers. Also in 2005, Kohl’s
American Cup soccer tournament visited 36 states
Associates volunteered more than 20,000 hours of service
and welcomed over 40,000 youth participants.
Company’s independent registered public accounting firm. The Audit Committee meets periodically with the independent registered public accounting firm, as
well as with management, to review accounting, auditing, internal accounting control and financial reporting matters. The independent registered public
accounting firm has unrestricted access to the Audit Committee.
Larry Montgomery
Wesley S. McDonald
Chairman and Chief Executive Officer
Executive Vice President - Chief Financial Officer
Executive Committee Back row: Donald A. Brennan, Executive Vice President – General Merchandise Manager, Men’s and Children’s;
Jon Nordeen, Executive Vice President – Planning & Allocation; Gary Vasques, Executive Vice President – Marketing; Kenneth Bonning, Executive Vice
President – Logistics; John Worthington, Executive Vice President – Director of Stores; Telvin Jeffries, Executive Vice President – Human Resources;
Chris Capuano, Executive Vice President – General Merchandise Manager, Home and Footwear; Richard D. Schepp, Executive Vice President – General
Counsel, Secretary. Bottom row: Peggy Eskenasi, Executive Vice President – Product Development; Jack Boyle, Executive Vice President – General
Merchandise Manager, Women’s Apparel and Accessories; Wesley McDonald, Executive Vice President – Chief Financial Officer; John J. Lesko,
Executive Vice President – Administration. (Larry Montgomery, Kevin Mansell and Arlene Meier also serve on the Executive Committee).
Corporate Headquarters
Directors
Kohl’s Corporation
N56 W17000 Ridgewood Drive
Menomonee Falls, WI 53051-5660
(262) 703-7000
Web site: www.kohls.com
Jay H. Baker
Kevin Mansell
Retired President, Kohl’s Corporation (b) (c)
President, Kohl’s Corporation
Steven A. Burd
Arlene Meier
Chairman, President and Chief Executive Officer,
Safeway Inc. (b) (c)
Chief Operating Officer, Kohl’s Corporation
Wayne Embry
Chairman and Chief Executive Officer,
Kohl’s Corporation
Transfer Agent and Registrar
The Bank of New York
Shareholder Relations Dept. 11-E
P.O. Box 11258
Church Street Station
New York, New York 10286
(800) 524-4458
Web site: www.stockbny.com
Annual Meeting
The Kohl’s 2006 Annual Meeting of
Shareholders will be held on Wednesday,
April 26, 2006 at 10:00 a.m. at the
Midwest Airlines Center, Milwaukee,
Wisconsin.
Investor Information/
Quarterly Reports
For quarterly earnings reports and other
investor information, please visit our
Web site at www.kohls.com or direct
your inquiries to the company,
Attention: Investor Relations.
Form 10-K
Parts I-III of Kohl’s Annual Report on
Form 10-K, as filed with the Securities
and Exchange Commission, are included
with this report for all shareholders.
Senior Advisor to the General Manager of the
Toronto Raptors (a) (c)*
James D. Ericson
R. Lawrence Montgomery
Frank V. Sica
President, Menemsha Capital Partners, Ltd. (b) (c)
Retired Chairman, President and
Chief Executive Officer,
Northwestern Mutual Life Insurance Company
(b)* (c)
Peter M. Sommerhauser
Shareholder in the law firm of Godfrey & Kahn, S.C.
Stephen E. Watson
Retired President and CEO,
Gander Mountain, L.L.C. (a) (c)
John F. Herma
Retired Chief Operating Officer,
Kohl’s Corporation (a) (c)
R. Elton White
Retired President, NCR Corporation (a)* (c)
William S. Kellogg
Retired Chief Executive Officer,
Kohl’s Corporation
(a) 2005 Audit Committee
(b) 2005 Compensation and Stock Option Committee
(c) 2005 Governance and Nominating Committee
* Denotes Chair
Common Stock Price Range
Fiscal 2005
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$53.86
58.90
57.44
50.96
Low
$45.26
46.50
43.63
42.78
Fiscal 2004
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$54.10
48.83
52.86
53.24
Low
$39.59
40.10
43.70
45.40
F O R WA R D - L O O K I N G S TAT E M E N T S
Certain statements made within this report are “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements reflect management’s current views of future events and
financial performance. These statements are subject to certain risks and uncertainties which could cause Kohl’s actual results
Stock Listing/Shareholders
Kohl’s common stock is listed on the New York Stock Exchange under the symbol KSS.
As of March 1, 2006, there were 5,973 holders of record of Kohl’s common stock.
to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not
limited to, those described in Exhibit 99.1 to Kohl’s annual report on Form 10-K and other factors as may periodically be
described in Kohl’s filings with the SEC.