A N N U A L R E P O RT 2 0 0 5
N56 W17000 Ridgewood Drive
Menomonee Falls, WI 53051-5660
Net Sales up 14.5%
(In millions of dollars)
Operating Income up 18.7%
(In millions of dollars)
Percent of Sales 10.2%
Net Income up 19.7%
(In millions of dollars)
Net Sales Net Income(1)
(In millions of dollars) (In millions of dollars)
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.
00 01 02 03 04 05 00 01 02 03 04 05
Kohl’s operates from coast to coast. At the end of fiscal 2005, we served customers in
(1) Results for 2000-2004 fiscal years have been restated to reflect expensing of stock options.
41 states through 732 stores and Kohls.com. In 2006, we plan to open approximately (2) Compounded annual growth rate.
80 to 85 stores.
LETTER TO SHAREHOLDERS SHARE REPURCHASE PROGRAM
The Board of Directors has authorized a
“In 2005, we made
$2 billion share repurchase program.
The program is expected to be completed
in bringing expect
over the next two to three years.
great things to life.”
Pictured: Arlene Meier, Larry Montgomery and Kevin Mansell.
Dear Shareholder, on how to create their own look. These initiatives not only make Our customers will continue to receive the same great credit card
and our own private brands further broaden the mix and set us
it easier to shop our stores, but also more exciting. benefits. We will continue to handle all customer service functions
apart in the market.
In our letter to you last year, we introduced our new positioning
and will be responsible for all advertising and marketing related
statement: expect great things. In 2005, we made significant
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
strides in bringing expect great things to life.
In 2005, we continued to bring Kohl’s into new markets and
new brands. We will add Chaps in women’s, boys’ and footwear, payments related to the profitability of the program.
expand our presence in existing markets. We opened 95 stores,
Tony Hawk in men’s and boys’ and West End and AB Studio
We differentiated ourselves even further in the marketplace and
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 women’s. In addition, Stamp 10 by Liz Claiborne will be introduced
provided our customer with a better-than-ever shopping experience.
store openings were split between new and existing markets. Board of Directors has authorized a $2 billion share repurchase
in 300 stores in both women’s and men’s. We are also extending
We added exciting new brands and opened 95 stores in both new
New markets included Buffalo, New York, and our entry into program. The program is expected to be completed over the
our contemporary private brands including Candie’s, daisy fuentes
and existing markets. These initiatives focused on one goal - growing
Florida with stores in Orlando and Jacksonville. next two to three years.
and apt. 9 into other areas of the store. We will complete the
the company profitably.
repositioning of our biggest private brands, Croft & Barrow,
Looking ahead, we plan to open approximately 500 stores over We expect to use the initial proceeds from the credit card
Sonoma, and apt. 9, to appeal to three different lifestyles: classic,
Strong Financial Performance
the next five years. This growth will come from a strategic blend transaction to repurchase Kohl’s stock, fund our store expansion
updated and contemporary.
2005 was a record year for Kohl’s. Net sales increased 14.5%
of new stores in both new and existing markets, along with and for general corporate purposes.
to a record $13.4 billion, while comparable store sales rose
capitalizing on real estate opportunities that may arise as the
Our marketing strategies go hand-in-hand with our merchandise
3.4%. Net income increased 19.7% to a record $842 million or
industry continues to consolidate. Our Vision
content and are designed to raise our visibility among both loyal,
$2.43 per diluted share. Our balance sheet remains strong and
We are well positioned to continue to execute our growth strategies.
long-term customers and first-time shoppers who want to see
we continue to generate significant cash flow from operations. In fiscal 2006, we plan to open approximately 80 to 85 stores. We have a strong and growing base of stores in many key markets
what all the excitement is about. A successful combination of
In February 2006, we repaid $100 million of our long-term debt. We will enter the Northwest with stores in Portland and Seattle that across the country, but there are many more markets where we
integrated fashion-focused advertising and the continued use of
will be a combination of new builds and the takeover of former can expand. We are leveraging our core concept of brands, value
our newspaper inserts helped to drive increases in transactions
Company Initiatives store locations. Some of our new stores opening in October will and convenience to satisfy existing customer needs, broaden our
per store in 2005. Our advertising continually reminds our
We made excellent progress on our 2005 initiatives. These initiatives incorporate new design features both on the interior and exterior. customer base and improve our customer’s shopping experience.
customers that they can expect great things at Kohl’s.
focused on merchandise content, marketing, inventory management
We have a track record of strong financial performance. Most
and the in-store shopping experience. By the end of fiscal 2010, we plan to operate over 1,200 stores
importantly, we have a team of over 107,000 Associates who are
In 2005, better inventory management, along with continually
all across the country. Our approach to expansion is very disciplined,
dedicated to serving our customers, as well as an experienced
introducing fresh and exciting new content into our stores,
From a merchandise perspective, we broadened our customer ensuring the consistent execution of our growth strategy. As part
Board of Directors and senior management team that are committed
contributed to our sales increases and helped to improve
reach by introducing new brands and categories into the of this strategy, we will continue to update our existing stores to
to long-term profitable growth.
gross margin. We continue to focus on consistently buying
merchandise mix. We focused on our customer’s lifestyles to help drive meaningful gains in market share.
the right number of units, improving allocation accuracy,
provide an assortment that satisfies her needs – whether she is
To our shareholders, customers, partners and most of all, our
streamlining the seasonal transition across our various
shopping for herself, her family or her home. Capital Structure
Associates, thank you for another record year. We look forward
geographic locations and ensuring that colors and sizes In March, we entered into a strategic alliance with JPMorgan Chase
to building on this momentum in 2006 and beyond.
are in stock by store.
Of course, Kohl’s means brands and this is where we continue to enhance our credit operations. Chase will purchase Kohl’s private
to excel. Kohl’s was built on the concept of emphasizing national label credit card accounts and the outstanding balances associated
The shopping experience is where everything we do comes
brands that project quality and value and have wide customer with the accounts under a multi-year program agreement. The total
together. We’ve organized departments by lifestyle for ease of
appeal. National brands such as Levi’s, Columbia, Nike and many purchase price, which will be equal to the receivables balances Arlene Meier
shopping, differentiated special sizes, added graphics that highlight
others across the store are the foundation of our merchandise at the closing date, will be paid in cash and is expected to be Chief Operating Officer
key trends and presented merchandise to give customers ideas
offerings. Exclusive national brands, available “Only at Kohl’s,” Chief Executive Officer
approximately $1.5 billion.
Continuing Growth from
by the End
Coast to Coast
of 2010 1,232
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 Seattle
expansion. We plan to open approximately Portland 732
500 stores over the next five years,
operating more than 1,200 stores by
the end of 2010. 320
Over the last 10 years, we’ve grown from 128 stores Our merchandising strategies, which are designed to New State
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
1995 2000 2010
New in 2006 Mid-Atlantic Region (77 stores)
strategy that includes both new builds and takeovers with our distribution network, we have the infrastructure
Kohl’s will grow from 128 stores in
Midwest Region (243 stores) Southeast Region (85 stores)
of existing retail sites. With our three store formats – to support our continued growth.
1995 to an estimated 1,232 stores
SouthCentral Region (93 stores) Southwest Region (117 stores)
suburban, small and urban – we have the flexibility to
by the end of 2010.
Northeast Region (117 stores)
add stores in markets of all sizes. We remain committed to long-term profitable growth,
which provides continuing opportunities for our Associates.
A Leading Number of Stores by Region
National 3% 1% 1%
These charts show Kohl’s evolution 51%
over the past 10 years from our
Midwestern base to a coast-to-coast 16% 16%
national retailer. At the end of 2005,
Kohl’s operated in all regions of the
1995 2000 2005
country except the Northwest. We will
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, Our collection of national brands is
guidance and style at great value strategically evolving to meet the
that lets our customer transform the desires of our customers and the
way she looks, lives and feels in the “Only at Kohl’s” exclusive brand
many roles she plays. 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 Polo Ralph Lauren exclusively for Kohl’s, or our In 2006, we will launch Tony Hawk in young men’s
is in tune with those changes. Our strategy is to encourage our customer to 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
Our portfolio of national
and exclusive brands
continues to grow with
the names our customers
know and trust.
Axist New Balance
Briggs Nine & Company
Calphalon Norton McNaughton
Cuisinart ROYAL VELVET
Dockers Russell Athletic
Dyson Sag Harbor
Gloria Vanderbilt Speedo
Jockey Vanity Fair
Laura Ashley ZeroXposur
American Beauty grassroots
Candie’s Oh Baby!
daisy fuentes by Motherhood
FLIRT! Stamp 10
good skin Tony Hawk
apt. 9 Sonoma
Croft & Barrow Tek Gear
SO... 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
Fiscal Year 2004(a) 2003(a) 2002(a) 2001(a) 2000(a)
built to the latest Consumer
Summary of Operations (In millions)
Products Safety Council
standards. The playgrounds
$11,701 $10,282 $ 9,120 $ 7,489 $ 6,152
Net sales $13,402
are part of the Kohl’s Cares
4,114 3,395 3,139 2,565 2,096
Gross margin 4,763
for Kids® Safety Network
2,584 2,158 1,884 1,583 1,328
Selling, general & administrative expenses 2,964
49 47 41 33 36
Preopening expenses 44
288 239 193 159 128
Depreciation and amortization 339
1,193 951 1,021 790 604
Operating income 1,416
63 73 56 50 46
Interest expense, net 70
1,130 878 965 740 558
Income before income taxes 1,346
703 546 601 458 343
Net income 842
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
Diluted Earnings Per Share $ 2.04 $ 1.59 $ 1.75 $ 1.35 $ 1.02 (b)
Every day across the country, Kohl’s
Financial Position Data (Dollars in millions)
$ 2,187 $ 1,902 $ 1,776 $ 1,584 $ 1,199
Working capital $ 2,520
3,988 3,316 2,734 2,196 1,725
Property and equipment, net 4,544
is putting time, effort and funding 7,979 6,691 6,311 4,927 3,853
Total assets 9,153
1,103 1,076 1,059 1,095 803
Long-term debt 1,046
toward health and educational
5,034 4,212 3,532 2,803 2,217
Shareholders’ equity 5,957
15.2% 14.1% 19.0% 18.3% 17.6%
Return on average shareholders’ equity 15.3%
opportunities for children. Other Data
0.3% (1.6)% 5.3% 6.8% 9.0%
Comparable store sales growth 3.4%
$ 255 $ 268 $ 284 $ 283 $ 281
Net sales per selling square foot $ 252
637 542 457 382 320
Stores open at year end 732
49,201 41,447 34,507 28,576 23,610
Total square feet of selling space (In thousands)
Kohl’s is a strong partner in our communities through programs through the Kohl’s A Team. Associates volunteer their 56,625
involving our company and our Associates. In 2005, we time and talent to support youth-serving organizations and (a) Results for the 2000-2004 fiscal years have been restated to reflect expensing of stock options.
(b) Adjusted for stock split.
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
R E P O RT O F M A N A G E M E N T
Kohl’s Cares for Kids is not just a program. It’s a to raise money to purchase supplies and equipment. In 2005,
The management of Kohl’s Corporation is responsible for the integrity and objectivity of the financial and operating information contained in this Annual Report,
promise of hope for a brighter, healthier future for kids in Kohl’s supported more than 3,000 nonprofit organizations.
including the consolidated financial statements covered by the Report of the Independent Registered Public Accounting Firm. These statements were prepared
our communities. Throughout the year, Kohl’s sells special 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
firm performed a review of the Company’s system of internal controls and conducted such tests and employed such procedures as considered necessary to
nationwide. In 2005, we partnered with 75 children’s hospitals the contributions of Associates to the National Red Cross
render its opinion on the consolidated financial statements. The Company’s consolidated financial statements including the Report of the Independent
in 41 states to fulfill the health element of our Kohl’s dollar-for-dollar, for a combined contribution of more Registered Public Accounting Firm are included in the Company’s Form 10-K for the year ended January 28, 2006.
Cares for Kids mission. than $500,000.
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
Company’s independent registered public accounting firm. The Audit Committee meets periodically with the independent registered public accounting firm, as
Our annual Kohl’s Kids Who Care® scholarship program Kohl’s is also taking a leadership role in supporting a
well as with management, to review accounting, auditing, internal accounting control and financial reporting matters. The independent registered public
is an opportunity for us to recognize and reward youth who healthy, active lifestyle for kids as the official department accounting firm has unrestricted access to the Audit Committee.
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.
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).
Jay H. Baker Kevin Mansell
N56 W17000 Ridgewood Drive Retired President, Kohl’s Corporation (b) (c) President, Kohl’s Corporation
Menomonee Falls, WI 53051-5660
Steven A. Burd Arlene Meier
Chairman, President and Chief Executive Officer, Chief Operating Officer, Kohl’s Corporation
Web site: www.kohls.com
Safeway Inc. (b) (c)
R. Lawrence Montgomery
Transfer Agent and Registrar Wayne Embry Chairman and Chief Executive Officer,
The Bank of New York
Senior Advisor to the General Manager of the Kohl’s Corporation
Shareholder Relations Dept. 11-E
Toronto Raptors (a) (c)*
Frank V. Sica
P.O. Box 11258
James D. Ericson President, Menemsha Capital Partners, Ltd. (b) (c)
Church Street Station
Retired Chairman, President and
New York, New York 10286
Peter M. Sommerhauser
Chief Executive Officer,
Shareholder in the law firm of Godfrey & Kahn, S.C.
Northwestern Mutual Life Insurance Company
Web site: www.stockbny.com
(b)* (c) Stephen E. Watson
Annual Meeting Retired President and CEO,
John F. Herma
The Kohl’s 2006 Annual Meeting of Gander Mountain, L.L.C. (a) (c)
Retired Chief Operating Officer,
Shareholders will be held on Wednesday,
Kohl’s Corporation (a) (c) R. Elton White
April 26, 2006 at 10:00 a.m. at the
Retired President, NCR Corporation (a)* (c)
Midwest Airlines Center, Milwaukee, William S. Kellogg
Wisconsin. Retired Chief Executive Officer, (a) 2005 Audit Committee
(b) 2005 Compensation and Stock Option Committee
Investor Information/ (c) 2005 Governance and Nominating Committee
Quarterly Reports * Denotes Chair
For quarterly earnings reports and other
Common Stock Price Range
investor information, please visit our
Web site at www.kohls.com or direct F O R WA R D - L O O K I N G S TAT E M E N T S
Fiscal 2004 High Low
Fiscal 2005 High Low
your inquiries to the company, First Quarter $54.10 $39.59
First Quarter $53.86 $45.26
Second Quarter 48.83 40.10
Second Quarter 58.90 46.50
Attention: Investor Relations. Certain statements made within this report are “forward-looking statements” within the meaning of the Private Securities
Third Quarter 52.86 43.70
Third Quarter 57.44 43.63
Litigation Reform Act of 1995. Such forward-looking statements reflect management’s current views of future events and
Form 10-K Fourth Quarter 53.24 45.40
Fourth Quarter 50.96 42.78
financial performance. These statements are subject to certain risks and uncertainties which could cause Kohl’s actual results
Parts I-III of Kohl’s Annual Report on
Stock Listing/Shareholders to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not
Form 10-K, as filed with the Securities
limited to, those described in Exhibit 99.1 to Kohl’s annual report on Form 10-K and other factors as may periodically be
and Exchange Commission, are included Kohl’s common stock is listed on the New York Stock Exchange under the symbol KSS.
with this report for all shareholders. described in Kohl’s filings with the SEC.
As of March 1, 2006, there were 5,973 holders of record of Kohl’s common stock.