1. Matt Alstad
Fire 371
11/18/2012
Kohl’s
The company I am doing my financial report and analysis on is Kohl’s. The reason I
chose to do Kohl’s is because I have worked there for 3 years and I am interested to learn about
how they are doing financially. When looking at the history of Kohl’s we will go back to 1962
when the story of Kohl’s all began and ultimately became a reality. Max Kohl opened the first
Kohl’s Department Store in Brookfield, Wisconsin. It started as a small grocery business and
was later developed into the largest supermarket chain in the Milwaukee area. After this he
decided to go to retail and created Kohl’s Department Stores which he positioned between
higher-end department stores and the discounters, selling everything from candy to engine oil to
sporting equipment. In the early 1980s A company known as BATUS (British American
Tobacco of the United States) acquired control of the company and the Kohl family withdrew
from operations of the company. Within 10 years it expanded from 10 stores to 39 stores in
Wisconsin, Illinois and Indiana. The next takeover of the company happened in 1986 when a
management-led group of investors formed Kohl’s Corporation and bought Kohl’s Department
Stores from BATUS, Inc. The management team spent the next year and a half absorbing the
buyout, and refocused the product lines. They wanted to continue the concept of “a value
oriented retailer selling moderate-priced merchandise.” They had 40 stores with annual sales of
$300 million and over 5,000 associates. From 1988-1992 Kohl’s sales increased from $388
million to $1 billion dollars one of their greatest growths at the time. In 1992 Kohl’s took a big
step towards growth and decided to go public. The offering that was made was 11.1 million
shares allowing them to expand their distribution center and open many more stores at a faster
rate. From 1992 to 1999, Kohl’s tripled the number of stores they had to 259, while revenues

2. quadrupled, from $1.1 billion to $4.56 billion. Currently Kohl’s is operating in a big world and is
not done growing. As you can see throughout the years their growth has been substantial and the
amount of sales and revenue they have is overwhelming. Doing this financial analysis for this
giant public company is going to be fun and will prove to show you records you may not have
seen. As part of the retail industry it is not going away anytime soon and continues growing
every year.
When looking at examining five ratios I decided to look at the 5 ratios (1 from each
category) that I found very important to a firm and that help explain a firm’s financials the best.
The first ratio to examine comes from liquidity and is known as the current ratio. The reason I
chose it is because it is one of the best-known and most widely used ratios. To solve the current
ratio a firm will take its total current assets divided by total current liabilities. Since both assets
and liabilities will be converted to cash after a year the current ratio measures short-term
liquidity. When examining Kohl’s we can see that their current ratio for the most recent year is
1.84. This means that for every $1 Kohl’s will need to pay in the next month, they will have
$1.84 cents to cover it in assets. In general this is a good current ratio and staying above 1 means
a company can cover its liabilities. The next type of ratio we will look at is a long-term solvency
measure. This will show what a firm’s finances should look like in the long run. The ratio we are
examining will be the total debt ratio. The total debt ratio takes into account all debts of all
maturities to all creditors. I chose this ratio because it shows how much debt a firm has vs. how
much equity they have per dollar. For Kohl’s the total debt ratio is .54 in the most recent year.
This means that for every 54 cents they have for debt they have 46 cents in equity. Generally this
is not a very good total debt ratio because you usually want more equity than debt. The next
category we want to look at is asset management/turnover measures. The measure to be

3. discussed here is inventory turnover. Inventory turnover shows how many times in one year a
company will sell of their inventory. The reason this is important is because the more inventory
they can get rid of in a year the more money they can make and the more they can rotate
inventory. Inventory turnover for Kohl’s in 2011 was 3.63 times which means in one year they
sold all of their inventory 3.63 times. This is actually a pretty decent number and the fact that
they always keep some inventory in store helps them. Now we will go into profitability measures
which help show how profitable a firm is in any given year. The ratio we will want to use in this
cause is profit margin. Profit margin will tell us how much profit a firm will generate compared
to its sales. Usually a firm will desire to have a higher profit margin since this gives them more
money. Kohl’s profit margin for 2011 is 6.21% which is on the lower side. The reason it is on the
lower side is because their prices are so low that they do lose some money on items they sell, but
they make it up in volume. The last category to look at is market value measures. These
measures will help determine the market value of a company based on their stock price for that
year. The ratio we will examine will be the price to earnings ratio (PE ratio). The PE ratio
shows how many times shares sell versus earnings or how much investors are willing to pay per
dollar of current earnings. Higher PEs usually means the firm has significant prospect for future
growth. In 2011 Kohl’s had a PE ratio of 8.48 which is a decrease from recent years. All though
they did decrease from 14 to 8.5 this still shows good signs for growth since the company is
staying in the higher PE range.
When doing a peer analysis with Kohl’s some interesting data was found after
researching the financial information and comparing it to the industry. The first ratio to look at
when comparing Kohl’s to industry benchmark data is the profit margin. Kohl’s profit margin for
the most recent quarter was 37.22% while the industries margin was only 28.79%. This shows

4. that all together Kohl’s makes a bigger profit compared to the average for the industry. The next
ratio to examine is the P/E ratio. Kohl’s has a low 12 while the industry is sitting at 20.4. This
just means that the retail industry in general has a much greater chance for growth while Kohl’s
at 12 still has a good growth prospect. The current ratio is proven to be very close between
Kohl’s and the industry with Kohl’s having 1.6 and the industry having 1.5. The fact that both
ratios are over 1 show that Kohl’s and the industry both have enough to cover their liabilities.
Next we take a look at the debt to equity ratio. This ratio shows how much debt you have versus
how much equity you have. It explains whether a firm finances its growth with more debt or
more equity. Having a high debt to equity ratio can mean that you finance your growth with debt,
but if you do it right you can increase your earnings over debt and make a higher profit. Kohl’s
has a debt to equity of .75 while the industry has .4. This shows that Kohl’s finances its growth
with more debt than equity all though this is still a somewhat low number. The industry in
general uses the approach of financing with more equity and does not use as much debt for
financing of operations. The last ratio to look at is inventory turnover. Kohl’s has an inventory
turnover of 2.7 while the industry has a turnover of 5.8. This shows that the industry turns its
inventory over 2 times that of Kohl’s in a given quarter. This means that the industry is much
better at getting rid of inventory.
After reviewing all of the financial data and discovering what Kohl’s Corporation does as
a company we can discuss prospects. Kohl’s has a great prospect for growth in the future and
based on all of the ratio analyses and industry benchmark comparisons you can see that it is a
company that won’t be going away anytime soon. While keeping their profit margins consistent
every year and maintaining a good P/E ratio this proves to show that they will keep growing as a
company. With a strong history behind them and many years of operations this company knows

5. what it is doing and will not be going away anytime soon. Kohl’s is a strong company and works
very hard at maintaining its finances and keeping them at reasonable ranges. All together I think
they will have a great growth in the next 10 years with their customer base increasing every year
and their profit margins getting bigger. This will prove to be a great advantage for Kohl’s in the
future.

6. Bibliography
Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan. Essentials of Corporate Finance.
Boston, MA: McGraw-Hill/Irwin, 2007. Print.
Kohl's history. (2011, January 23). Retrieved from http://www.kohlscareers.com/aboutkohls/history/
http://finance.yahoo.com/
http://money.msn.com/