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EXCEL - IDEA: XBRL DOCUMENT - KOHLS CorpFinancial_Report.xls
EX-31.2 - SECTION 302 CERTIFICATION OF CFO - KOHLS Corpexhibit312201410-k.htm
EX-21.1 - SUBSIDIARIES OF THE REGISTRANT - KOHLS Corpexhibit211201410-k.htm
EX-32.1 - SECTION 906 CERTIFICATION OF CEO - KOHLS Corpex321201410-k.htm
EX-32.2 - SECTION 906 CERTIFICATION OF CFO - KOHLS Corpex322201410-k.htm
EX-10.22 - EMPLOYMENT AGREEMENT - KOHLS Corpexhibit1022201410-k.htm
EX-12.1 - RATIO OF EARNINGS TO FIXED CHARGES - KOHLS Corpexhibit121201410-k.htm
EX-31.1 - SECTION 302 CERTIFICATION OF CEO - KOHLS Corpexhibit311201410-k.htm
EX-10.16 - SUMMARY OF OUTSIDE DIRECTOR COMPENSATION - KOHLS Corpexhibit1016201410-k.htm
EX-23.1 - CONSENT OF ERNST & YOUNG LLP - KOHLS Corpexhibit231201410-k.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ý
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended January 31, 2015
or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934          
 
For the Transition period from ____________ to ___________                    
          
Commission file number 1-11084
 
KOHL’S CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin
 
39-1630919
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin
 
53051
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (262) 703-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $.01 Par Value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
 
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes    X        No            .
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes                No    X    .
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    X        No            .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    X        No            .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    X   .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer    X    Accelerated filer            Non-accelerated filer            (Do not check if a smaller reporting company) Smaller reporting company            
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes                No    X    .
At August 1, 2014, the aggregate market value of the voting stock of the Registrant held by stockholders who were not affiliates of the Registrant was approximately $11.0 billion (based upon the closing price of Registrant’s Common Stock on the New York Stock Exchange on such date). At March 11, 2015, the Registrant had outstanding an aggregate of 202,802,328 shares of its Common Stock.
Documents Incorporated by Reference:
Portions of the Proxy Statement for the Registrant’s Annual Meeting of Shareholders to be held on May 14, 2015 are incorporated into Parts II and III.



KOHL’S CORPORATION
INDEX
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
Item 15.
 
 
 
F-1




PART I

Item 1. Business
Kohl’s Corporation (the “Company” or “Kohl’s”) was organized in 1988 and is a Wisconsin corporation. As of January 31, 2015, we operated 1,162 department stores in 49 states and an E-Commerce website (www.Kohls.com). We sell moderately-priced private label, exclusive and national brand apparel, footwear, accessories, beauty and home products. Our stores generally carry a consistent merchandise assortment with some differences attributable to regional preferences. Our website includes merchandise which is available in our stores, as well as merchandise which is available only on-line.
Our fiscal year ends on the Saturday closest to January 31st each year. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. The following fiscal periods are presented in this report.
Fiscal Year
Ended
 
Number of
Weeks
2014
January 31, 2015
 
52
2013
February 1, 2014
 
52
2012
February 2, 2013
 
53
As reflected in the charts below, our merchandise mix by line of business has remained consistent over the last three years.
Our strategic framework, which we refer to as "The Greatness Agenda," is built on five pillars - amazing product, incredible savings, easy experience, personalized connections and winning teams.

Amazing product provides a renewed focus on providing the right merchandise mix, being locally relevant and tailoring products to every customer across every shopping channel. We strive to offer the appropriate balance between the fashion that our customers want and the everyday basics that they need.

Our merchandise mix includes both national brands and private and exclusive brands which are available only at Kohl's. In 2014, we continued our emphasis on national brands as we believe they drive customer traffic and sales increases. National brands generally have higher selling prices than private and exclusive brands.

Most of our private brands are well-known established brands such as Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Life + Style. Selling prices for our private brands are generally lower than exclusive and national brands.

Exclusive brands are developed and marketed through agreements with nationally-recognized brands. Examples of our exclusive brands include Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang. Exclusive brands have selling prices which are generally lower than national brands, but higher than private brands.

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The charts below summarize the percentage of our sales which were national brands and those which were private and exclusive brands over the last three years.
We frequently add new products, brands and categories in order to maintain freshness in our inventory assortment and drive customer traffic to our stores and website. In 2014, we launched the Fitbit, IZOD, Juicy Couture, Gaiam, Nespresso and PUMA brands as well as various Jumping Beans collections featuring Disney characters.

Another example of new products that customers can find in many of our stores and on-line is our new beauty departments which offer brands which were not previously available at Kohl’s. We expect to further expand our beauty offerings in 2015 when we launch Bliss beauty and apparel products. As of year-end, approximately half of our stores have newly-renovated beauty departments. We expect to have the new beauty department in approximately 900 stores by the end of 2015.
The goal of incredible savings is to help every customer get more from every dollar. For many years, we have offered special discounts during our Kohl's Cash promotions and for being a Kohl's-branded private label credit card holder. In 2014, we launched a nationwide loyalty program called Yes2You rewards. Customers who enroll earn rewards based on the dollar amount of purchases that they make. As of year-end 2014, approximately 25 million customers had enrolled.
We're able to offer incredible savings to our customers because of our ongoing commitment to a lean operating model. Critical elements of this low-cost structure are our unique store format; lean staffing levels; sophisticated systems which enhance productivity and support personalization, predictive analytics and real-time savings offers; and operating efficiencies which are the result of centralized buying, advertising and distribution.
We are also making significant investments to create an easy experience for our customers wherever or however they choose to engage with us. Whether they are shopping in one of our stores, from their mobile devices or from their laptops, we are creating a consistent experience to ensure that our customers can connect with us wherever and however they wish. In 2014, we focused on improving the tablet and smart phone shopping experience and tested buy on-line and pick up in store in approximately 100 stores. We expect to offer this shopping option in all of our stores by the second quarter of 2015.
Personalized connections is about building lasting relationships with our customers. To build personalized connections during the shopping experience, we are focused on localizing and tailoring what we sell and how we communicate our product. This ensures that our products and offers are personally relevant to each and every customer. At the same time, personalized connections is about contributing to causes such as children's health and education or the environment, so our customers know we are sensitive to the issues that are important to them.
The final pillar is winning teams, which focuses on building teams of engaged, talented, empowered and results-oriented management and employees.
For discussion of our financial results, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Distribution
We receive substantially all of our store merchandise at our nine retail distribution centers. A small amount of our merchandise is delivered directly to the stores by vendors or their distributors. The retail distribution centers, which are strategically located throughout the United Sates, ship merchandise to each store by contract carrier several times a week. On-line sales are shipped from four Kohl's fulfillment centers, from third-party fulfillment centers, from our retail distribution centers, directly by third-party vendors, and from a majority of our stores. We expect to have ship-from-store capabilities in all of our stores by the end of 2015.
See Item 2, “Properties,” for additional information about our distribution centers.

4


Employees
As of January 31, 2015, we employed approximately 137,000 associates, including approximately 32,000 full-time and 105,000 part-time associates. The number of associates varies during the year, peaking during the back-to-school and holiday seasons. None of our associates are represented by a collective bargaining unit. We believe our relations with our associates are very good.
Competition
The retail industry is highly competitive. Management considers style, quality and price to be the most significant competitive factors in the industry. Merchandise mix, brands, service, customer experience and convenience are also key competitive factors. Our primary competitors are traditional department stores, upscale mass merchandisers, off-price retailers, specialty stores, internet and catalog businesses and other forms of retail commerce. Our specific competitors vary from market to market.
Merchandise Vendors
We purchase merchandise from numerous domestic and foreign suppliers. We have Terms of Engagement requirements which set forth the basic minimum requirements all business partners must meet in order to do business with us. Our Terms of Engagement include provisions regarding laws and regulations, employment practices, ethical standards, environmental and legal requirements, communication, monitoring/compliance, record keeping, subcontracting and corrective action. Our expectation is that all business partners will comply with these Terms of Engagement and quickly remediate any deficiencies, if noted, in order to maintain our business relationship.
Approximately 30% of the merchandise we sell is sourced through a third-party purchasing agent. None of our vendors individually accounted for more than 5% of our net purchases during 2014. We have no significant long-term purchase commitments or arrangements with any of our suppliers, and believe that we are not dependent on any one supplier. We believe we have good working relationships with our suppliers.
Seasonality
Our business, like that of most retailers, is subject to seasonal influences. The majority of our sales and income are typically realized during the second half of each fiscal year. The back-to-school season extends from August through September and represents approximately 15% of our annual sales. Approximately 30% of our annual sales occur during the holiday season in the months of November and December. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the fiscal year. Revenues and costs associated with the opening of new stores may also affect our quarterly results.

Trademarks and Service Marks
The name “Kohl’s” is a registered service mark of one of our wholly-owned subsidiaries. We consider this mark and the accompanying name recognition to be valuable to our business. This subsidiary has over 180 additional registered trademarks, trade names and service marks, most of which are used in connection with our private label program.
Available Information
Our corporate website is www.KohlsCorporation.com. Through the “Investor Relations” portion of this website, we make available, free of charge, our proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, SEC Forms 3, 4 and 5 and any amendments to those reports as soon as reasonably practicable after such material has been filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
The following have also been posted on our website, under the caption “Investor Relations-Corporate Governance”:
Committee charters of our Board of Directors’ Audit Committee, Compensation Committee and Governance & Nominating Committee
Report to Shareholders on Social Responsibility
Corporate Governance Guidelines
Code of Ethics
Any amendment to or waiver from the provisions of the Code of Ethics that is applicable to our Chief Executive Officer, Chief Financial Officer or other key finance associates will be disclosed on the “Corporate Governance” portion of the website.

5


Information contained on our website is not part of this Annual Report on Form 10-K. Paper copies of any of the materials listed above will be provided without charge to any shareholder submitting a written request to our Investor Relations Department at N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin 53051 or via e-mail to Investor.Relations@Kohls.com.

Item 1A. Risk Factors
Forward-Looking Statements
This Form 10-K contains “forward-looking statements” made within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "anticipates," "plans," "may," "intends," "will," "should," "expects" and similar expressions are intended to identify forward-looking statements. Forward-looking statements also include comments about our future sales or financial performance and our plans, performance and other objectives, expectations or intentions, such as statements regarding our liquidity, debt service requirements, planned capital expenditures, future store initiatives, adequacy of capital resources and reserves and statements contained in the "2015 Outlook" section of Management's Discussion and Analysis of Financial Condition and Results of Operations. There are a number of important factors that could cause our results to differ materially from those indicated by the forward-looking statements including, among others, those risk factors described below. Forward-looking statements relate to the date made, and we undertake no obligation to update them.
Our sales, gross margin and operating results could be negatively impacted by a number of factors including, but not limited to those described below. Many of these risk factors are outside of our control. If we are not successful in managing these risks, they could have a negative impact on our sales, gross margin and/or operating results.

Declines in general economic conditions, consumer spending levels and other conditions could lead to reduced consumer demand for our merchandise.
Consumer spending habits, including spending for the merchandise that we sell, are affected by many factors including prevailing economic conditions, levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy and fuel costs, income tax rates and policies, consumer confidence, consumer perception of economic conditions, and the consumer’s disposable income, credit availability and debt levels.
The moderate income consumer, which is our core customer, has been under economic pressure for several years. Recent economic conditions have caused disruptions and significant volatility in financial markets, increased rates of default and bankruptcy and declining consumer and business confidence, which has led to decreased levels of consumer spending, particularly on discretionary items. A continued or incremental slowdown in the U.S. economy and the uncertain economic outlook could continue to adversely affect consumer spending habits. As all of our stores are located in the United States, we are especially susceptible to deteriorations in the U.S. economy.
Consumer confidence is also affected by the domestic and international political situation. The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the United States, could lead to a decrease in spending by consumers.

Actions by our competitors.
The retail business is highly competitive. We compete for customers, associates, locations, merchandise, services and other important aspects of our business with many other local, regional and national retailers. Those competitors include traditional department stores, upscale mass merchandisers, off-price retailers, specialty stores, internet and catalog businesses and other forms of retail commerce.
We consider style, quality and price to be the most significant competitive factors in our industry. The continuing migration and evolution of retailing to on-line and mobile channels has increased our challenges in differentiating ourselves from other retailers especially as it relates to national brands. In particular, consumers are able to quickly and conveniently comparison shop with digital tools, which can lead to decisions based solely on price. Unanticipated changes in the pricing and other practices of our competitors may adversely affect our performance.

Our inability to offer merchandise that resonates with existing customers and helps to attract new customers and failure to successfully manage our inventory levels.
Our business is dependent on our ability to anticipate fluctuations in consumer demand for a wide variety of merchandise. Failure to accurately predict constantly changing consumer tastes, preferences, spending patterns and other lifestyle decisions could create inventory imbalances and adversely affect our performance and long-term relationships

6


with our customers. Additionally, failure to accurately predict changing consumer tastes may result in excess inventory, which could result in additional markdowns and adversely affect our operating results.

We may be unable to source merchandise in a timely and cost-effective manner.
Approximately 30% of the merchandise we sell is sourced through a third-party purchasing agent. The remaining merchandise is sourced from a wide variety of domestic and international vendors. Our ability to find qualified vendors and access products in a timely and efficient manner is a significant challenge which is typically even more difficult for goods sourced outside the United States. Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs, work stoppages, port strikes, and other factors relating to foreign trade are beyond our control and could adversely impact our performance.
Increases in the price of merchandise, raw materials, fuel and labor or their reduced availability could increase our cost of goods. The price and availability of raw materials may fluctuate substantially, depending on a variety of factors, including demand, weather, supply conditions, transportation costs, energy prices, work stoppages, government regulation and government policy, economic climates, market speculation and other unpredictable factors. An inability to mitigate these cost increases, unless sufficiently offset with our pricing actions, might cause a decrease in our profitability. Any related pricing actions might cause a decline in our sales volume. Additionally, a decrease in the availability of raw materials could impair our ability to meet our production or purchasing requirements in a timely manner. Both the increased cost and lower availability of merchandise, raw materials, fuel and labor may also have an adverse impact on our cash and working capital needs as well as those of our suppliers.
If any of our significant vendors were to become subject to bankruptcy, receivership or similar proceedings, we may be unable to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as current terms, which could adversely affect our sales and operating results.

Failure of our vendors to adhere to our Terms of Engagement and applicable laws.
A substantial portion of our merchandise is received from vendors and factories outside of the United States. We require all of our suppliers to comply with all applicable local and national laws and regulations and our Terms of Engagement for Kohl's Business Partners. Our Terms of Engagement include employment and ethical standards as well as environmental, legal, communication, monitoring/compliance and other requirements. From time to time, suppliers may not be in compliance with these standards or applicable laws. Significant or continuing noncompliance with such standards and laws by one or more suppliers could have a negative impact on our reputation and our results of operations.

Ineffective marketing.
We believe that differentiating Kohl's in the marketplace is critical to our success. We design our marketing programs to increase awareness of our brands and to build personalized connections with our customers. We believe our marketing programs will strengthen customer loyalty, increase the number and frequency of customers that shop our stores and website and increase our sales. If our marketing programs are not successful, our sales and profitability could be adversely affected.

Damage to the reputation of the Kohl's brand or our private and exclusive brands.
We believe the Kohl's brand name and many of our private and exclusive brand names are powerful sales and marketing tools. We devote significant resources to promoting and protecting them. We develop and promote private and exclusive brands that have generated national recognition. In some cases, the brands or the marketing of such brands are tied to or affiliated with well-known individuals. Damage to the reputations (whether or not justified) of the Kohl’s brand, our private and exclusive brand names or any affiliated individuals, could arise from product failures; concerns about human rights, working conditions and other labor rights and conditions where merchandise is produced; perceptions of our pricing and return policies; litigation; vendor violations of our Terms of Engagement; or various other forms of adverse publicity, especially in social media outlets. Damage to our reputation may generate negative customer sentiment, potentially resulting in a reduction in sales, earnings, and shareholder value.

Product safety concerns.
If our merchandise offerings do not meet applicable safety standards or our customers' expectations regarding safety, we could experience lost sales, experience increased costs and/or be exposed to legal and reputational risk. Events that give rise to actual, potential or perceived product safety concerns could expose us to government enforcement action and/or

7


private litigation. Reputational damage caused by real or perceived product safety concerns, could have a negative impact on our sales.

Disruptions in our information systems or an inability to adequately maintain and update those systems.
The efficient operation of our business is dependent on our information systems. In particular, we rely on our information systems to effectively manage sales, distribution, and merchandise planning and allocation functions. We also generate sales though the operations of our Kohls.com website. We frequently make investments that will help maintain and update our existing information systems. The potential problems and interruptions associated with implementing technology initiatives or the failure of our information systems to perform as designed could disrupt our business and harm sales and profitability.

Weather conditions could adversely affect consumer shopping patterns.
A significant portion of our business is apparel and is subject to weather conditions. As a result, our operating results may be adversely affected by severe or unexpected weather conditions. Frequent or unusually heavy snow, ice or rain storms; natural disasters such as earthquakes, tornadoes, floods and hurricanes; or extended periods of unseasonable temperatures could adversely affect our performance by affecting consumer shopping patterns, diminishing demand for seasonal merchandise and/or causing physical damage to our properties.

Inability to successfully execute a profitable omni-channel strategy.
Our business has evolved from an in-store only shopping experience to a multi-channel experience which includes in-store, on-line, mobile, social media and/or other interactions. We strive to offer a desirable omni-channel shopping experience for our customers and use social media as a way to interact with our customers and enhance their shopping experiences.
Our ability to compete with other retailers and to meet our customer expectations may suffer if we are unable to execute a relevant customer-facing technology in a timely manner. Our ability to compete may also suffer if Kohl’s, our suppliers, or our third-party shipping and delivery vendors are unable to effectively and efficiently fulfill and deliver orders, especially during the holiday season when sales volumes are especially high. Consequently, our results of operations could be adversely affected.
Our omni-channel business currently generates a lower operating margin than we have historically reported when we were primarily a store-only retailer. This profitability variance is due to a variety of factors including, but not limited to, an increase in the volume of lower margin merchandise, especially home products; costs to ship merchandise to our customers; and investments to provide the infrastructure necessary to expand our omni-channel strategy. There can be no assurances that future profitability will return to historical levels.
Our revenues, operating results and cash requirements are affected by the seasonal nature of our business.
Our business is subject to seasonal influences, with a major portion of sales and income historically realized during the second half of the fiscal year, which includes the back-to-school and holiday seasons.
If we do not properly stock or restock popular products, particularly during the back-to-school and holiday seasons, we may fail to meet customer demand, which could affect our revenue and our future growth. If we overstock products, we may be required to take significant inventory markdowns or write-offs, which could reduce profitability.
We may experience an increase in costs associated with shipping on-line orders due to complimentary upgrades, split shipments, and additional long-zone shipments necessary to ensure timely delivery for the holiday season. If too many customers access our website within a short period of time due to increased holiday demand, we may experience system interruptions that make our website unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we sell and the attractiveness of our products and services. Also, third-party delivery, direct ship vendors and customer service co-sourcers may be unable to meet the seasonal demand.
This seasonality causes our operating results and cash needs to vary considerably from quarter to quarter. Additionally, any decrease in sales or profitability during the second half of the fiscal year could have a disproportionately adverse effect on our results of operations.

8


Our inability to raise additional capital and maintain bank credit on favorable terms could adversely affect our business and financial condition.
We have historically relied on the public debt markets to raise capital to partially fund our operations and growth. We have also historically maintained lines of credit with financial institutions. Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate fluctuations, may increase the cost of financing or restrict our access to these potential sources of future liquidity. Our continued access to these liquidity sources on favorable terms depends on multiple factors, including our operating performance and maintaining strong debt ratings. If our credit ratings fall below desirable levels, our ability to access the debt markets and our cost of funds for new debt issuances could be adversely impacted. Additionally, if unfavorable capital market conditions exist if and when we were to seek additional financing, we may not be able to raise sufficient capital on favorable terms and on a timely basis (if at all). If our access to capital was to become significantly constrained or our cost of capital was to increase significantly, our financial condition, results of operations and cash flows could be adversely affected.
Inefficient or ineffective allocation of capital could adversely affect our operating results and/or shareholder value.
Our goal is to invest capital to maximize our overall long-term returns. This includes spending on inventory, capital projects and expenses, managing debt levels, and periodically returning value to our shareholders through share repurchases and dividends. To a large degree, capital efficiency reflects how well we manage our other key risks. The actions taken to address other specific risks may affect how well we manage the more general risk of capital efficiency. If we do not properly allocate our capital to maximize returns, we may fail to produce optimal financial results and we may experience a reduction in shareholder value.
Changes in our credit card operations could adversely affect our sales and/or profitability.
Our credit card operations facilitate merchandise sales and generate additional revenue from fees related to extending credit. The proprietary Kohl's credit card accounts are owned by an unrelated third-party, but we share in the net risk-adjusted revenue of the portfolio, which is defined as the sum of finance charges, late fees and other revenue less write-offs of uncollectible accounts. Changes in funding costs related to interest rate fluctuations will be shared similar to the revenue if interest rates exceed defined amounts. Though management currently believes that increases in funding costs will be largely offset by increases in finance charge revenue, increases in funding costs could adversely impact the profitability of this program.
Changes in credit card use, payment patterns and default rates may also result from a variety of economic, legal, social and other factors that we cannot control or predict with certainty. Changes that adversely impact our ability to extend credit and collect payments could negatively affect our results.
An inability to attract and retain quality associates could result in higher payroll costs and adversely affect our operating results.
Our performance is dependent on attracting and retaining a large number of quality associates. Many of those associates are in entry level or part-time positions with historically high rates of turnover. Many of our strategic initiatives require that we hire and/or develop associates with appropriate experience. Our staffing needs are especially high during the holiday season. Competition for these associates is intense. We cannot be sure that we will be able to attract and retain a sufficient number of qualified personnel in future periods.
Our ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation, actions by our competitors in compensation levels and changing demographics. Changes that adversely impact our ability to attract and retain quality associates could adversely affect our performance. In addition, changes in federal and state minimum wage laws and other laws relating to employee benefits could cause us to incur additional wage and benefit costs, which could negatively impact our profitability.
Regulatory and litigation developments could adversely affect our business operations and financial performance.
Various aspects of our operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time. The costs and other effects of new or changed legal requirements cannot be determined with certainty. For example, new legislation or regulations may result in increased costs directly for our compliance or indirectly to the extent such requirements increase prices of goods and services, reduce the availability of raw materials or further restrict our ability to extend credit to our customers.
We continually monitor the state and federal legal/regulatory environment for developments that may impact us. Failure to detect changes and comply with such laws and regulations may result in an erosion of our reputation, disruption of business and/or loss of associate morale. Additionally, we are regularly involved in various litigation matters that arise out of the conduct of our business. Litigation or regulatory developments could adversely affect our business operations and financial performance.

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Unauthorized disclosure of sensitive or confidential customer, associate or company information could severely damage our reputation, expose us to risks of litigation and liability, disrupt our operations and harm our business.
As part of our normal course of business, we collect, process and retain sensitive and confidential customer, associate and company information. The protection of this data is extremely important to us, our associates and our customers. Despite the considerable security measures we have in place, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us or our vendors, could disrupt our operations, damage our reputation and customers' willingness to shop in our stores or on our website, violate applicable laws, regulations, orders and agreements, and subject us to additional costs and liabilities which could be material.

Item 1B. Unresolved Staff Comments
Not applicable

Item 2. Properties
Stores
As of January 31, 2015, we operated 1,162 stores with 83.8 million selling square feet in 49 states. Our typical, or “prototype,” store has approximately 88,000 gross square feet of retail space and serves trade areas of 150,000 to 200,000 people. Most “small” stores are 55,000 to 68,000 gross square feet and serve trade areas of 100,000 to 150,000 people.
Our typical store lease has an initial term of 20-25 years and four to eight renewal options for consecutive five-year extension terms. Substantially all of our leases provide for a minimum annual rent that is fixed or adjusts to set levels during the lease term, including renewals. Approximately one-fourth of the leases provide for additional rent based on a percentage of sales over designated levels.

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The following tables summarize key information about our stores.
 
Number of Stores
 
 
Number of Stores
 
2013
 
Net
Change
 
2014
 
 
2013
 
Net
Change
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Mid-Atlantic Region:
 
 
 
 
 
 
South Central Region:
 
 
 
 
 
Delaware
5

 

 
5

 
Arkansas
8

 

 
8

Maryland
23

 

 
23

 
Kansas
12

 

 
12

Pennsylvania
50

 

 
50

 
Louisiana
6

 
2

 
8

Virginia
30

 

 
30

 
Missouri
26

 

 
26

West Virginia
7

 

 
7

 
Oklahoma
10

 
1

 
11

Total Mid-Atlantic
115

 

 
115

 
Texas
85

 

 
85

Midwest Region:
 
 
 
 
 
 
Total South Central
147

 
3

 
150

Illinois
66

 

 
66

 
Southeast Region:
 
 
 
 
 
Indiana
39

 

 
39

 
Alabama
14

 

 
14

Iowa
18

 

 
18

 
Florida
53

 

 
53

Michigan
45

 

 
45

 
Georgia
35

 

 
35

Minnesota
26

 

 
26

 
Kentucky
16

 
1

 
17

Nebraska
7

 

 
7

 
Mississippi
5

 

 
5

North Dakota
4

 

 
4

 
North Carolina
31

 

 
31

Ohio
58

 

 
58

 
South Carolina
15

 
1

 
16

South Dakota
3

 

 
3

 
Tennessee
20

 

 
20

Wisconsin
40

 

 
40

 
Total Southeast
189

 
2

 
191

Total Midwest
306

 

 
306

 
West Region:
 
 
 
 
 
Northeast Region:
 
 
 
 
 
 
Alaska
1

 

 
1

Connecticut
21

 
1

 
22

 
Arizona
26

 

 
26

Maine
5

 

 
5

 
California
128

 
(2
)
 
126

Massachusetts
25

 

 
25

 
Colorado
24

 

 
24

New Hampshire
11

 

 
11

 
Idaho
5

 

 
5

New Jersey
38

 

 
38

 
Montana
2

 

 
2

New York
51

 
(1
)
 
50

 
Nevada
12

 

 
12

Rhode Island
3

 

 
3

 
New Mexico
5

 

 
5

Vermont
1

 

 
1

 
Oregon
11

 

 
11

Total Northeast
155

 

 
155

 
Utah
12

 

 
12

 
 
 
 
 
 
 
Washington
18

 
1

 
19

 
 
 
 
 
 
 
Wyoming
2

 

 
2

 
 
 
 
 
 
 
Total West
246

 
(1
)
 
245

 
 
 
 
 
 
 
Total Kohl’s
1,158

 
4

 
1,162


11


 
Number of Stores
by Store Type
 
 
Number of Stores
by Ownership
 
2013
 
Net
Change
 
2014
 
 
2013
 
Net
Change
 
2014
Prototype
993

 
(5
)
 
988

 
Owned
412

 
1

 
413

Small
165

 
9

 
174

 
Leased*
 
 
 
 
 
 
1,158

 
4

 
1,162

 
Operating lease
246

 
4

 
250

 
 
 
 
 
 
 
On-balance sheet
500

 
(1
)
 
499

 
Number of Stores
 by Location
 
Total leased
746

 
3

 
749

 
 
 
1,158

 
4

 
1,162

 
2013
 
Net
Change
 
2014
 
* Includes locations where we lease the land and/or building
Strip centers
777

 
3

 
780

 
 
 
 
 
 
 
Community & regional malls
85

 

 
85

 
 
 
 
 
 
 
Freestanding
296

 
1

 
297

 
 
 
 
 
 
 
 
1,158

 
4

 
1,162

 
 
 
 
 
 
 
 
Distribution Centers
The following table summarizes key information about each of our distribution centers.
 
Year
Opened
 
Square
Footage
Findlay, Ohio
1994
 
780,000

Winchester, Virginia
1997
 
420,000

Blue Springs, Missouri
1999
 
540,000

Corsicana, Texas
2001
 
540,000

Monroe, Ohio*
2001
 
1,200,000

Mamakating, New York
2002
 
605,000

San Bernardino, California
2002
 
575,000

Macon, Georgia
2005
 
560,000

Patterson, California
2006
 
360,000

Ottawa, Illinois
2008
 
328,000

San Bernardino, California*
2010
 
970,000

Edgewood, Maryland*
2011
 
1,450,000

DeSoto, Texas*
2012
 
1,200,000

* On-line fulfillment centers
We own all of the distribution centers except Corsicana, Texas, which is leased.

Corporate Facilities
We own our corporate headquarters in Menomonee Falls, Wisconsin. We also own or lease additional buildings and office space which are used by various corporate departments, including our credit operations.

Item 3. Legal Proceedings
We are not currently a party to any material legal proceedings, but are subject to certain legal proceedings and claims from time to time that arise out of the conduct of our business.

Item 4. Mine Safety Disclosures
Not applicable


12


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
(a) Market information
Our Common Stock has been traded on the New York Stock Exchange ("NYSE") since May 19, 1992, under the symbol “KSS.” The prices in the table set forth below indicate the high and low sales prices of our Common Stock per the New York Stock Exchange Composite Price History and our quarterly cash dividends per common share for each quarter in 2014 and 2013.
 
 
2014
 
2013
 
High
 
Low
 
Dividend
 
High
 
Low
 
Dividend
 
 
 
 
 
 
 
 
 
 
 
 
Fourth Quarter
$61.54
 
$54.95
 
$0.39
 
$58.47
 
$49.97
 
$0.35
Third Quarter
62.50

 
53.74

 
0.39

 
57.04

 
49.84

 
0.35

Second Quarter
55.89

 
51.00

 
0.39

 
54.16

 
47.00

 
0.35

First Quarter
57.89

 
49.09

 
0.39

 
49.32

 
45.21

 
0.35

On February 25, 2015, our Board of Directors approved a dividend of $0.45 per share which will be paid on March 25, 2015 to shareholders of record as of March 11, 2015. In 2014, we paid aggregate cash dividends of $317 million.
(b) Holders
As of March 11, 2015, there were approximately 4,200 record holders of our Common Stock.
(c) Securities Authorized For Issuance Under Equity Compensation Plans
See the information provided in the “Equity Compensation Plan Information” section of the Proxy Statement for our May 14, 2015 Annual Meeting of Shareholders, which information is incorporated herein by reference.


13


(d) Performance Graph
The graph below compares our cumulative five-year shareholder return to that of the Standard & Poor’s 500 Index and a Peer Group Index that is consistent with the retail peer group used in the Compensation Discussion & Analysis section of our Proxy Statement for our May 14, 2015 Annual Meeting of Shareholders. The Peer Group Index was calculated by Capital IQ, a Standard & Poor’s business and includes Bed, Bath & Beyond Inc.; The Gap, Inc.; J.C Penney Company, Inc.; Limited Brands, Inc.; Macy’s, Inc.; Nordstrom, Inc.; Ross Stores, Inc.; Sears Holding Corporation; Target Corporation; and The TJX Companies, Inc. The Peer Group Index is weighted by the market capitalization of each component company at the beginning of each period. The graph assumes an investment of $100 on January 30, 2010 and reinvestment of dividends. The calculations exclude trading commissions and taxes.
 
Company / Index
Jan 30,
2010
 
Jan 29,
2011
 
Jan 28,
2012
 
Feb 2,
2013
 
Feb 1,
2014
 
Jan 31,
2015
Kohl’s Corporation
$100.00
 
$101.65
 
$94.58
 
$95.78
 
$108.30
 
$131.35
S&P 500 Index
100.00

 
121.26

 
127.72

 
150.20

 
180.70

 
206.41

Peer Group Index
100.00

 
118.35

 
140.64

 
169.67

 
187.33

 
239.18

(e) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
We did not sell any equity securities during 2014 which were not registered under the Securities Act.
(f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In 2012, our Board of Directors authorized the repurchase of $3.5 billion of our shares of common stock. Purchases under the repurchase program may be made in the open market, through block trades and other negotiated transactions. We expect to execute the share repurchase program primarily in open market transactions, subject to market conditions. There is no fixed termination date for the repurchase program, and the program may be suspended, discontinued or accelerated at any time.

14


The following table contains information for shares repurchased and shares acquired from employees in lieu of amounts required to satisfy minimum tax withholding requirements upon the vesting of the employees’ restricted stock during the three fiscal months ended January 31, 2015:
Period
Total
Number
of Shares
Purchased
During
Period
 
Average
Price
Paid Per
Share
 
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
 
Approximate Dollar Value of Shares that May Yet Be  Purchased Under the Plans or Programs
 
 
 
 
 
 
 
(Dollars In Millions)
November 2 – November 29, 2014
942,839

 
$
56.61

 
941,999

 
$
1,714

November 30, 2014 – January 3, 2015
713,532

 
58.19

 
712,237

 
1,673

January 4 – January 31, 2015
494,521

 
60.02

 
466,162

 
1,645

Total
2,150,892

 
$
57.92

 
2,120,398

 
$
1,645



15


Item 6. Selected Consolidated Financial Data
The selected consolidated financial data presented below should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this document. The Statement of Income and Balance Sheet Data have been derived from our audited consolidated financial statements.
 
2014
 
2013
 
2012 (d)
 
2011
 
2010
 
(Dollars in Millions, Except Per Share and Per Square Foot Data)
Statements of Income Data:
 
 
 
 
 
 
 
 
 
Net sales
$
19,023

 
$
19,031

 
$
19,279

 
$
18,804

 
$
18,391

Cost of merchandise sold
12,098

 
12,087

 
12,289

 
11,625

 
11,359

Gross margin
6,925

 
6,944

 
6,990

 
7,179

 
7,032

Selling, general and administrative expenses
4,350

 
4,313

 
4,267

 
4,243

 
4,190

Depreciation and amortization
886

 
889

 
833

 
778

 
750

Operating income
1,689

 
1,742

 
1,890

 
2,158

 
2,092

Interest expense, net
340

 
338

 
329

 
299

 
304

Income before income taxes
1,349

 
1,404

 
1,561

 
1,859

 
1,788

Provision for income taxes
482

 
515

 
575

 
692

 
668

Net income
$
867

 
$
889

 
$
986

 
$
1,167

 
$
1,120

Basic earnings per share
$
4.28

 
$
4.08

 
$
4.19

 
$
4.33

 
$
3.69

Diluted earnings per share
$
4.24

 
$
4.05

 
$
4.17

 
$
4.30

 
$
3.66

Dividends per share
$
1.56

 
$
1.40

 
$
1.28

 
$
1.00

 

Operating Data:
 
 
 
 
 
 
 
 
 
Net sales growth
 %
 
(1.3
)%
 
2.5
%
 
2.2
%
 
7.1
%
Comparable sales growth (a)
(0.3
)%
 
(1.2
)%
 
0.3
%
 
0.5
%
 
4.4
%
Net sales per selling square foot (b)
$
226

 
$
227

 
$
231

 
$
232

 
$
231

As a percent of sales:
 
 
 
 
 
 
 
 
 
Gross margin
36.4
 %
 
36.5
 %
 
36.3
%
 
38.2
%
 
38.2
%
Operating income
8.9
 %
 
9.2
 %
 
9.8
%
 
11.5
%
 
11.4
%
Return on average shareholders’ equity (c)
14.7
 %
 
14.8
 %
 
15.8
%
 
16.4
%
 
14.1
%
Total square feet of selling space (in thousands)
83,750

 
83,671

 
83,098

 
82,226

 
80,139

Number of stores (end of period)
1,162

 
1,158

 
1,146

 
1,127

 
1,089

Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Working capital
$
2,839

 
$
2,556

 
$
2,184

 
$
2,222

 
$
2,888

Total assets
14,431

 
14,357

 
13,905

 
14,148

 
14,891

Long-term debt
2,793

 
2,792

 
2,492

 
2,141

 
1,894

Capital lease and financing obligations
1,968

 
2,069

 
2,061

 
2,103

 
2,104

Shareholders’ equity
5,991

 
5,978

 
6,048

 
6,508

 
7,850

Cash flow from operations
2,024

 
1,884

 
1,265

 
2,139

 
1,750

Capital expenditures
682

 
643

 
785

 
927

 
801

 
(a)
Comparable sales growth is based on sales for stores (including relocated or remodeled stores) which were open throughout both the full current and prior year periods and omni-channel sales. Fiscal 2013 comparable sales growth compares the 52 weeks ended February 1, 2014 to the 52 weeks ended January 26, 2013. Fiscal 2012 comparable sales growth compares the 52 weeks ended January 26, 2013 to the 52 weeks ended January 28, 2012.
(b)
Net sales per selling square foot includes on-line sales and stores open for the full current period. 2012 excludes the impact of the 53rd week.
(c)
Average shareholders’ equity is based on a 5-quarter average.
(d)
Fiscal 2012 was a 53-week year. During the 53rd week, total sales were $169 million; selling, general and administrative expenses were approximately $30 million; interest was approximately $2 million; net income was approximately $15 million and diluted earnings per share was approximately $0.06.

16


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

As of January 31, 2015, we operated 1,162 family-focused, value-oriented department stores and a website (www.Kohls.com) that sell moderately-priced private label, exclusive and national brand apparel, footwear, accessories, beauty and home products. Our stores generally carry a consistent merchandise assortment with some differences attributable to regional preferences. Our website includes merchandise which is available in our stores, as well as merchandise which is available only on-line. 

In the first quarter of 2014, we introduced a multi-year strategic framework which we refer to as "the Greatness Agenda". It is built on five pillars - amazing product, incredible savings, easy experience, personalized connections and winning teams.  All of the Greatness Agenda initiatives are designed to increase sales, primarily by increasing the number of customers that shop at our stores and on-line. 

To ensure newness and excitement in our merchandise assortment, we added new brands, including Fitbit, IZOD, Juicy Couture, Gaiam, Nespresso, PUMA and various Jumping Beans collections featuring Disney characters, and improved the beauty department in many of our stores.  We renewed our emphasis on national brands as the name recognition of these brands often increases customer traffic.

We improved the Kohl’s mobile shopping experience and personalized our marketing.  We also launched the Yes2You rewards program which has increased customer loyalty by providing future discounts based on past purchases.

We knew that 2014 would be a transitional year as we implemented Greatness Agenda initiatives.  Though we are early in the program, we are pleased with the results that we saw in its first year.  Comparable sales and number of transactions improved throughout the year.  In the fourth quarter, both comparable sales and number of transactions were higher than the prior year.

Net sales for the year were $19.0 billion, consistent with 2013.  Comparable sales decreased 0.3%.

Gross margin as a percentage of sales was 36.4% in 2014, 8 basis points lower than in 2013. Merchandise margin increased, but was more than offset by higher shipping losses attributable to growth in the number of on-line orders.

Selling, general and administrative ("SG&A") expenses increased both in dollars and as a percentage of sales.  We increased our marketing expenses to launch our new loyalty program and to increase customer traffic and invested in omni-channel technology initiatives.  Variable expenses, including store payroll, were well managed throughout the year. 

For the year, net income was $867 million, 2% lower than last year, and diluted earnings per share was $4.24, an increase of 5% over 2013.

We generated $1.2 billion of free cash flow in 2014, a 9% increase over 2013.  We ended the year with $1.4 billion of cash and cash equivalents. 

See Results of Operations and Liquidity and Capital Resources for additional details about our financial results and how we define comparable sales and free cash flow (a non-GAAP financial measure).



17


2015 Outlook
Our current expectations for 2015 are as follows:
 
 
Total sales
Increase 1.8 - 2.8%
Comparable sales
Increase 1.5 - 2.5%
Gross margin as a percent of sales
Increase 0 - 20 bps
SG&A
Increase 1.5 - 2.5%
Depreciation
$940 million
Interest
$335 million
Effective tax rate
37%
Earnings per diluted share
$4.40 - $4.60
Capital expenditures
$800 million
Share repurchases:
 
Total repurchases
$1 billion
Cost per share
$70.00

Results of Operations

Net Sales.

As our omni-channel strategy continues to mature, it is increasingly difficult to distinguish between a "store" sale and an "E-Commerce" sale. Our website increases store sales as in-store customers have often pre-shopped on-line before shopping in the store. Below is a list of some omni-channel examples:

Stores increase on-line sales by providing customers opportunities to view, touch and/or try on physical merchandise before ordering on-line.
On-line purchases can easily be returned in our stores.
Kohl's Cash coupons and Yes2You rewards can be earned and redeemed on-line or in store regardless of where they were earned.
In-store customers can order from on-line kiosks in our stores.
Order on-line and pick-up in store is available in approximately 100 stores and is expected to be available in all stores by the second quarter of 2015.
Customers who utilize our mobile app while in the store may receive mobile coupons to use when they check out.
On-line orders may be shipped from a dedicated E-Commerce fulfillment center, a store, a retail distribution center, direct ship vendors or any combination of the above.

Because we no longer have a clear distinction between "store" sales and "E-Commerce" sales, we do not separately report E-Commerce sales.

Comparable sales include sales for stores (including relocated or remodeled stores) which were open during both the current and prior year periods. We also include omni-channel sales in our comparable sales.


18


The following table summarizes net sales:
 
2014
 
2013
 
2012
Net sales (In Millions)
$
19,023

 
$
19,031

 
$
19,279

Increase (decrease) in sales:
 
 
 
 
 
Total
 %
 
(1.3
)%
 
2.5
%
Comparable (a)
(0.3
)%
 
(1.2
)%
 
0.3
%
Net sales per selling square foot (b)
$
226

 
$
227

 
$
231

(a) Includes sales for stores (including relocated or remodeled stores) which were open throughout both the full current and prior year periods and omni-channel sales. 2013 compares the 52 weeks ending February 1, 2014 to the 52 weeks ending January 26, 2013. 2012 compares the 52 weeks ended January 26, 2013 to the 52 weeks ended January 28, 2012.
(b) Net sales per selling square foot includes on-line sales and stores open for the full current period. 2012 excludes the impact of the 53rd week.

The following table summarizes the changes in net sales:
 
2014
 
2013
 
$
 
%
 
$
 
%
 
(Dollars in Millions)
Net sales - prior year
$
19,031

 
 
 
$
19,279

 
 
Comparable sales (a)
(54
)
 
(0.3
)%
 
(233
)
 
(1.2
)%
New stores and other revenues
46

 

 
154

 

Net change before 53rd week
(8
)
 
 %
 
(79
)
 
(0.4
)%
Net sales in 53rd week

 

 
(169
)
 

Total decrease in net sales
(8
)
 
 %
 
(248
)
 
(1.3
)%
Net sales - current year
$
19,023

 
 
 
$
19,031

 
 
(a) 2013 compares the 52 weeks ending February 1, 2014 to the 52 weeks ending January 26, 2013.
Drivers of the changes in comparable sales were as follows:
 
2014
 
2013
Selling price per unit
2.8
 %
 
(0.4
)%
Units per transaction
(0.8
)
 
1.5

Average transaction value
2.0

 
1.1

Number of transactions
(2.3
)
 
(2.3
)
Comparable sales
(0.3
)%
 
(1.2
)%

The increase in selling price per unit was primarily due to increases in national brand merchandise penetration. Units per transaction decreased as customers purchased fewer items in response to the higher prices. Transactions improved throughout the year and were higher in the fourth quarter as the Greatness Agenda initiatives gained traction.
From a regional perspective, including on-line originated sales, the West, Southeast, and Midwest reported higher sales, which were offset by sales decreases in the Northeast, Mid-Atlantic, and South Central regions.
By line of business, Children's, Footwear, and Men's reported sales increases. All Children's categories reported sales increases, with toys reporting the largest increase. Accessories, led by bath and beauty, was slightly above the Company average, primarily as a result of our beauty remodel program. Home and Women's both underperformed the Company average. Active was the strongest category in the Men's,Women's, and Footwear businesses. Electrics and luggage reported the highest sales increases in the Home business.
Net sales per selling square foot (which includes on-line sales and stores open for the full current period and includes omni-channel), decreased $1 to $226 in 2014. The decrease is consistent with the decrease in comparable sales.

19


Net sales for 2013 decreased $248 million from 2012 and comparable sales decreased 1.2%. From a line of business perspective, Children's, Men's and Home outperformed the Company average in 2013. Comparable sales in Women's was consistent with the Company average, while Accessories and Footwear were below the Company average. All regions, except the West, which reported sales consistent with 2012, reported modest sales decreases.

Gross margin.
 
2014
 
2013
 
2012
 
(Dollars in Millions)
Gross margin
$
6,925

 
$
6,944

 
$
6,990

As a percent of net sales
36.4
%
 
36.5
%
 
36.3
%

Gross margin includes the total cost of products sold, including product development costs, net of vendor payments other than reimbursement of specific, incremental and identifiable costs; inventory shrink; markdowns; freight expenses associated with moving merchandise from our vendors to our distribution centers; shipping and handling expenses of on-line sales; and terms cash discount. Our gross margin may not be comparable with that of other retailers because we include distribution center costs in selling, general and administrative expenses while other retailers may include these expenses in cost of merchandise sold.

Gross margin as a percentage of sales decreased 8 basis points from 2013 to 2014. Merchandise sales margin increased 9 basis points. Shipping losses reduced margin 22 basis points more in 2014 than in 2013.

Gross margin as a percentage of sales increased approximately 20 basis points in 2013 over 2012. The increase included a 45 basis point increase in our merchandise sales margin. This increase was primarily due to modest decreases in apparel costs in 2013. Partially offsetting this increase were higher shipping losses in our on-line business. The losses were due to higher costs to ship merchandise during the fourth quarter holiday season and to growth in our on-line business.
Selling, general and administrative expenses.
 
2014
 
2013
 
2012
 
(Dollars in Millions)
Selling, general, and administrative expenses
$
4,350

 
$
4,313

 
$
4,267

As a percent of net sales
22.9
%
 
22.7
%
 
22.1
%
SG&A expenses include compensation and benefit costs (including stores, headquarters, buying and merchandising and distribution centers); occupancy and operating costs of our retail, distribution and corporate facilities; freight expenses associated with moving merchandise from our distribution centers to our retail stores and among distribution and retail facilities; advertising expenses, offset by vendor payments for reimbursement of specific, incremental and identifiable costs; net revenues from our Kohl’s credit card operations; and other administrative revenues and expenses. We do not include depreciation and amortization in SG&A. The classification of these expenses varies across the retail industry.

The following table summarizes the changes in SG&A by expense type:
 
2014
 
2013
 
(Dollars In Millions)
Corporate expenses
$
34

 
$
32

Marketing costs, excluding credit card operations
21

 
9

Distribution costs
10

 
27

Store expenses
(4
)
 
27

Net revenues from credit card operations
(24
)
 
(19
)
SG&A in 53rd week

 
(30
)
Total increase
$
37

 
$
46

    
Many of our expenses, including store payroll and distribution costs, are variable in nature. These costs generally increase as sales increase and decrease as sales decrease. We measure both the change in these variable expenses and the expense as a percent of sales. If the expense as a percent of sales decreased from the prior year, the expense "leveraged" and indicates that the expense was well-managed or effectively generated additional sales. If the expense as a percent of sales

20


increased over the prior year, the expense "deleveraged" and indicates that sales growth was less than expense growth. SG&A as a percent of sales increased, or "deleveraged," by approximately 20 basis points in 2014.

IT spending, which is included in corporate expenses, increased over 2013 due to growth and infrastructure investments related to our omni-channel strategy. Corporate expenses also increased due to higher incentive compensation.

Marketing costs increased in 2014 as we increased our spending in digital and broadcast. In addition, we launched our loyalty program nationwide in the third quarter of 2014. The increased spending was partially offset by a decrease in spending in newspaper inserts and direct mail.

Distribution costs were $281 million for 2014, $271 million for 2013 and $245 million for 2012. Distribution costs increased in 2014 due to higher distribution and fulfillment costs related to our growing on-line business, particularly in the fourth quarter.

The decrease in store expenses are the result of lower operating expenses, such as common area maintenance, utilities, and janitorial.

Revenues from our credit card operations were $430 million in 2014, $406 million in 2013 and $388 million in 2012. The increases in net revenues from credit card operations are the result of higher finance charge revenues and late fees due to growth in the portfolio. Partially offsetting these increases were higher bad debt expenses and operational costs. The increased operating costs were primarily due to growth in the portfolio.

SG&A for 2013 increased $46 million, or 1% over 2012. As a percentage of sales, SG&A increased, or "deleveraged", by approximately 60 basis points in 2013. The increase in SG&A was due primarily to higher distribution costs, increased marketing, investments in technology and infrastructure related to our on-line business. These increases were partially offset by lower incentive costs.

Other Expenses.
 
2014
 
2013
 
2012
 
(Dollars In Millions)
Depreciation and amortization
$
886

 
$
889

 
$
833

Interest expense, net
340

 
338

 
329

Provision for income taxes
482

 
515

 
575

Effective tax rate
35.7
%
 
36.7
%
 
36.8
%
Depreciation and amortization were consistent in 2014 and 2013, as higher IT amortization was offset by a decrease due to maturing stores. The increase in depreciation and amortization in 2013 was primarily due to our on-line fulfillment centers and IT amortization.
Net interest expense increased $2 million, or 1%, in 2014 and increased $9 million, or 3%, in 2013. The increases in interest expense are primarily due to higher outstanding long-term debt following the September 2013 debt issuance.
The decreases in the effective tax rate for 2014 and 2013 were primarily due to favorable settlements of state tax audits in both years.
Inflation
Although we expect that our operations will be influenced by general economic conditions, including food, fuel and energy prices, and by costs to source our merchandise, we do not believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be impacted by such factors in the future.


21


Liquidity and Capital Resources

The following table presents the primary cash requirements and sources of funds.
Cash Requirements
 
Source of Funds
•   Operational needs, including salaries,
     rent, taxes and other costs of running
     our business
•   Capital expenditures
•   Inventory (seasonal and new store)
•   Share repurchases
•   Dividend payments
 
•   Cash flow from operations
•   Short-term trade credit, in the form of extended payment terms
•   Line of credit under our revolving credit facility
Our working capital and inventory levels typically build throughout the fall, peaking during the November and December holiday selling season. Share repurchases are discretionary and can be discontinued at any time should we require cash for other uses.

The following table includes cash balances and changes.
 
2014
 
2013
 
2012
 
(In Millions)
Cash and cash equivalents
$
1,407

 
$
971

 
$
537

 
 
 
 
 
 
Net cash provided by (used in):
 
 
 
 
 
Operating activities
$
2,024

 
$
1,884

 
$
1,265

Investing activities
(593
)
 
(623
)
 
(660
)
Financing activities
(995
)
 
(827
)
 
(1,273
)
 
 
 
 
 
 
Free Cash Flow (a)
$
1,234

 
$
1,127

 
$
381


(a) See the Free Cash Flow discussion later in this Liquidity and Capital Resources section for additional discussion of this non-GAAP financial measure.

Operating activities.

Cash provided by operations increased $140 million, or 7%, in 2014 to $2.0 billion.

Merchandise inventory decreased $60 million in 2014 to $3.8 billion. Inventory per store decreased 2% and units per store decreased 3% from 2013. Accounts payable as a percent of inventory was 39.6% at January 31, 2015, compared to 35.2% at February 1, 2014. The increase reflects higher receipt volume and timing of payments to some of our vendors.
Cash provided by operations increased $619 million to $1.9 billion in 2013. The increase was primarily due to reduced inventory growth and to lower bonus and other payroll-related liability payments in 2013.

Investing activities.
Net cash used in investing activities decreased $30 million to $593 million in 2014.
Capital expenditures totaled $682 million in 2014, a $39 million increase over 2013. The increase in capital spending is primarily due to the expansion of our corporate campus, increased IT spending and the purchase and build out of a call center in Texas, partially offset by decreased new store spending.
Proceeds from sales of investments in auction rate securities totaled $82 million in 2014 and $1 million in 2013. All of our auction rate securities have now been sold. Despite the non-liquid nature of these investments following market conditions that arose in 2008, we were able to sell substantially all of our investments at par.


22


The following table summarizes expected and actual capital expenditures by major category as a percentage of total capital expenditures:
 
2015
Estimate
 
2014
 
2013
 
2012
Computer hardware and software
41
%
 
43
%
 
45
%
 
33
%
Store refresh
41

 
34

 
29

 
29

New stores
4

 
7

 
9

 
19

Distribution centers
8

 
3

 
7

 
15

Corporate expansion including credit
4

 
12

 
9

 
3

Other
2

 
1

 
1

 
1

Total
100
%
 
100
%
 
100
%
 
100
%
We expect total capital expenditures of approximately $800 million in fiscal 2015. The actual amount of our future capital expenditures will depend on the number and timing of new stores and refreshes; expansion and renovations to distribution centers; the mix of owned, leased or acquired stores; and IT and corporate spending. We do not anticipate that our capital expenditures will be limited by any restrictive covenants in our financing agreements.
Net cash used in investing activities decreased $37 million to $623 million in 2013. The decrease reflects a $142 million decrease in capital expenditures which was substantially offset by a $108 million decrease in auction rate securities sales.
Financing activities.
Our financing activities used cash of $995 million in 2014 and $827 million in 2013.
We repurchased 12 million shares of our common stock for $677 million in 2014 and 15 million shares for $799 million in 2013. Share repurchases are discretionary in nature. The timing and amount of repurchases is based upon available cash balances, our stock price and other factors. The shares were purchased as part of our share repurchase program. We have $1.6 billion of authorized share repurchases remaining from the $3.5 billion program approved by our Board of Directors in November 2012. We expect to execute the share repurchase program primarily in open market transactions, subject to market conditions.
In September 2013, we issued $300 million of 4.75% notes with semi-annual interest payments that began in December 2013.
We have various facilities upon which we may draw funds, including a 5-year, $1 billion senior unsecured revolving credit facility which matures in 2018. There were no draws on these facilities during 2014 or 2013.
As of January 31, 2015, our credit ratings were as follows:
 
Moody’s
 
Standard & Poor’s
  
Fitch
Long-term debt
Baa1
  
BBB
 
BBB+
We may from time to time seek to retire or purchase our outstanding debt through open market cash purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved could be material.
During 2014, we paid cash dividends of $317 million as detailed in the following table:
 
First Quarter
  
Second Quarter
  
Third Quarter
  
Fourth Quarter
Declaration date
February 26
  
May 14
  
August 12
  
November 12
Record date
March 12
  
June 11
  
September 10
  
December 10
Payment date
March 26
  
June 25
  
September 24
  
December 24
Amount per common share
$0.39
  
$0.39
  
$0.39
  
$0.39
On February 25, 2015 our Board of Directors approved a 15% increase to our dividend to $0.45 per common share which will be paid on March 25, 2015 to shareholders of record as of March 11, 2015.

23


Our financing activities used cash of $827 million in 2013 and $1.3 billion in 2012. The decrease was primarily due to lower share repurchases.
Free Cash Flow
We generated $1.2 billion of free cash flow in 2014; an increase of $107 million over 2013. As discussed above, the increase is primarily the result of higher cash provided by operating activities in 2014. Free cash flow is a non-GAAP financial measure which we define as net cash provided by operating activities and proceeds from financing obligations (which generally represent landlord reimbursements of construction costs) less acquisition of property & equipment and capital lease & financing obligation payments. Free cash flow should be evaluated in addition to, and not considered a substitute for, other financial measures such as net income and cash flow provided by operating activities. We believe that free cash flow represents our ability to generate additional cash flow from our business operations. See the key financial ratio calculations section below.
Key financial ratios.
The following ratios provide additional measures of our liquidity, return on investments, and capital structure.
 
2014
 
2013
 
2012
Liquidity Ratios:
(Dollars in Millions)
Working capital
$
2,839

 
$
2,556

 
$
2,184

Current ratio
1.99

 
1.93

 
1.86

Free Cash Flow (a)
$
1,234

 
$
1,127

 
$
381

Return on Investment Ratios:
 
 
 
 
 
Ratio of earnings to fixed charges
3.6

 
3.7

 
4.1

Return on Assets
6.0
%
 
6.2
%
 
6.9
%
Return on Gross Investment (a)
15.1
%
 
15.5
%
 
16.8
%
Capital Structure Ratios:
 
 
 
 
 
Debt/capitalization
44.3
%

44.8
%

42.9
%
Adjusted Debt to EBITDAR (a)
2.45


2.42


2.23

(a) Non-GAAP financial measure
Liquidity ratios.
Liquidity measures our ability to meet short-term cash needs. Working capital increased $283 million and our current ratio increased 6 basis points over year-end 2013. In 2013, working capital increased $372 million and our current ratio increased 7 basis points over year-end 2012. The increases were primarily due to higher cash balances.
 
Return on investment ratios.
Lower earnings resulted in decreases in all three of our return on investment ratios - ratio of earnings to fixed charges, return on assets and return on gross investment ("ROI"). See Exhibit 12.1 to this Annual Report on Form 10-K for the calculation of our ratio of earnings to fixed charges and the key financial ratio calculations below for the return on assets and ROI calculations.

We believe that ROI is a useful financial measure in evaluating our operating performance. When analyzed in conjunction with our net earnings and total assets and compared with return on assets, it provides investors with a useful tool to evaluate our ongoing operations and our management of assets from period to period. ROI is a non-GAAP financial measure which we define as earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) divided by average gross investment. Our ROI calculation may not be comparable to similarly-titled measures reported by other companies. ROI should be evaluated in addition to, and not considered a substitute for, other financial measures such as return on assets.
Capital structure ratios.
Our debt agreements contain various covenants including limitations on additional indebtedness and a maximum permitted debt ratio. As of January 31, 2015, we were in compliance with all debt covenants and expect to remain in compliance during 2015. See the key financial ratio calculations section below for our debt covenant calculation.

Our debt/capitalization ratio was 44.3% at year-end 2014 and 44.8% at year-end 2013. The decrease is primarily due to lower store lease obligations.


24


Our Adjusted Debt to EBITDAR ratio was 2.45 for 2014, 2.42 for 2013, and 2.23 for 2012. The increases are primarily due to lower EBITDAR. Adjusted Debt to EBITDAR is a non-GAAP financial measure which we define as our adjusted outstanding debt balance divided by EBITDAR. We believe that our debt levels are best analyzed using this measure. Our current goals are to maintain an Adjusted Debt to EBITDAR ratio of approximately 2.25, to manage debt levels to maintain a BBB+ investment-grade credit rating and to operate with an efficient capital structure for our size, growth plans and industry. We exceeded our target goal in 2014 and 2013 to take advantage of a favorable, low interest rate debt environment.  We expect to manage our business and debt levels to get our overall ratio back to our target goal over the next several years. We currently have no plans for new debt in 2015. Our Adjusted Debt to EBITDAR calculation may not be comparable to similarly-titled measures reported by other companies. Adjusted Debt to EBITDAR should be evaluated in addition to, and not considered a substitute for, other financial measures such as debt/capitalization. See the key financial ratio calculations section below for our Adjusted Debt to EBITDAR calculation.
Key financial ratio calculations.
The following table reconciles net cash provided by operating activities (a GAAP measure) to free cash flow (a non-GAAP measure).
 
2014
 
2013
 
2012
 
(Dollars in Millions)
Net cash provided by operating activities
$
2,024

 
$
1,884

 
$
1,265

Acquisition of property & equipment
(682
)
 
(643
)
 
(785
)
Capital lease & financing obligation payments
(114
)
 
(115
)
 
(111
)
Proceeds from financing obligations
6

 
1

 
12

Free cash flow
$
1,234


$
1,127


$
381

The following table includes our ROI and return on assets (the most comparable GAAP measure) calculations:
 
2014
 
2013
 
2012
 
(Dollars in Millions)
Operating income
$
1,689

 
$
1,742

 
$
1,890

Depreciation and amortization
886

 
889

 
833

Rent expense
277


270


265

EBITDAR
$
2,852


$
2,901


$
2,988

Average: (a)
 
 
 
 
 
Total assets
$
14,406

 
$
14,335

 
$
14,266

Cash equivalents and long-term investments (b)
(477
)
 
(321
)
 
(677
)
Deferred tax and other assets
(140
)
 
(149
)
 
(126
)
Accumulated depreciation and amortization
5,743

 
5,457

 
4,943

Accounts payable
(1,624
)
 
(1,556
)
 
(1,622
)
Accrued liabilities
(1,119
)
 
(1,082
)
 
(1,079
)
Other long-term liabilities
(563
)
 
(538
)
 
(478
)
Capitalized rent (c)
2,667

 
2,625

 
2,573

Gross Investment (“AGI”)
$
18,893

 
$
18,771

 
$
17,800

Return on Assets (“ROA”) (d)
6.0
%

6.2
%

6.9
%
Return on Gross Investment (“ROI”) (e)
15.1
%
 
15.5
%
 
16.8
%
(a)    Represents average of 5 most recent quarter end balances
(b)    Represents excess cash not required for operations
(c)    Represents 10 times store rent and 5 times equipment/other rent
(d)    Net income divided by average total assets
(e)    EBITDAR divided by Gross Investment

25


The following table includes our debt ratio calculation, as defined by our debt agreements, as of January 31, 2015:
 
(Dollars in Millions)
Included Indebtedness
 
Total debt
$
4,768

Permitted exclusions
(7
)
 
 
Subtotal
4,761

Rent x 8
2,216

 
 
Included Indebtedness
$
6,977

 
 
Adjusted Debt Compliance EBITDAR
 
Net income
$
867

Rent expense
277

Depreciation and amortization
886

Net interest
340

Provision for income taxes
482

EBITDAR
2,852

Stock based compensation
48

Other non-cash revenues and expenses
13

Adjusted Debt Compliance EBITDAR
$
2,913

 
 
Debt Ratio (a)
2.40

Maximum permitted Debt Ratio
3.75

(a) Included Indebtedness divided by Adjusted Debt Compliance EBITDAR

The following table includes our Adjusted Debt to EBITDAR and debt/capitalization (a comparable GAAP measure) calculations:
 
 
2014
 
2013
 
2012
 
(Dollars in Millions)
Total Debt (net of discount)
$
4,761

 
$
4,861

 
$
4,553

Rent x 8
2,216

 
2,160

 
2,120

Adjusted Debt
$
6,977

 
$
7,021

 
$
6,673

Total Equity
$
5,991

 
$
5,978

 
$
6,048

EBITDAR per above
$
2,852

 
$
2,901

 
$
2,988

Debt/capitalization (a)
44.3
%
 
44.8
%
 
42.9
%
Adjusted Debt to EBITDAR (b)
2.45

 
2.42

 
2.23

(a)    Total debt divided by total debt and total equity
(b)    Adjusted debt divided by EBITDAR


26


Contractual Obligations
Our contractual obligations as of January 31, 2015 were as follows:
 
Maturing in:
 
Total
 
2015
 
2016
and
2017
 
2018
and
2019
 
2020
and
after
 
(Dollars In Millions)
Recorded contractual obligations:
 
 
 
 
 
 
 
 
 
Long-term debt
$
2,800

 
$

 
$
650

 
$

 
$
2,150

Capital lease and financing obligations
1,510

 
99

 
217

 
190

 
1,004

 
4,310

 
99

 
867

 
190

 
3,154

Unrecorded contractual obligations:
 
 
 
 
 
 
 
 
 
Interest payments:
 
 
 
 
 
 
 
 
 
Long-term debt
1,617

 
149

 
298

 
216

 
954

Capital lease and financing obligations
2,681

 
180

 
336

 
303

 
1,862

Operating leases (a)
5,800

 
246

 
481

 
476

 
4,597

Purchase obligations (b)
4,366

 
4,366

 

 

 

Other (c)
699

 
289

 
271

 
110

 
29

 
15,163

 
5,230

 
1,386

 
1,105

 
7,442

Total
$
19,473

 
$
5,329

 
$
2,253

 
$
1,295

 
$
10,596

 
(a)
Our leases typically require that we pay real estate taxes, insurance and maintenance costs in addition to the minimum rental payments included in the table above. Such costs vary from period to period and totaled $175 million for both 2014 and 2013 and $165 million for 2012. The lease term includes cancelable option periods where failure to exercise such options would result in an economic penalty.
(b)
Purchase obligations consist mainly of purchase orders for merchandise. Amounts committed under open purchase orders for merchandise are cancelable without penalty prior to a date that precedes the vendors’ scheduled shipment date.
(c)
Other includes royalties, legally binding minimum lease and interest payments for stores opening in 2015 or later, as well as payments associated with technology and marketing agreements.
We have not included $146 million of long-term liabilities for unrecognized tax benefits and the related interest and penalties in the contractual obligations table because we are not able to reasonably estimate the timing of cash settlements. It is reasonably possible that such tax positions may change within the next 12 months, primarily as a result of ongoing audits. While it is possible that one or more of these audits may be resolved in the next year, it is not anticipated that payment of any such amounts in future periods will materially affect liquidity and cash flows.
Off-Balance Sheet Arrangements
We have not provided any financial guarantees as of year-end 2014.
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any arrangements or relationships with entities that are not consolidated into the financial statements that are reasonably likely to materially affect our financial condition, liquidity, results of operations or capital resources.

Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts. A discussion of the more significant estimates follows. Management has discussed the development, selection and disclosure of these estimates and assumptions with the Audit Committee of our Board of Directors.

27


Retail Inventory Method and Inventory Valuation
We value our inventory at the lower of cost or market with cost determined on the first-in, first-out (“FIFO”) basis using the retail inventory method (“RIM”). Under RIM, the valuation of inventories at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail value of the inventories. Inherent in the retail inventory method are certain management estimates that may affect the ending inventory valuation as well as gross margin.
The use of RIM will generally result in inventories being valued at the lower of cost or market as permanent markdowns are taken as a reduction of the retail value of inventories. Management estimates the need for an additional markdown reserve based on a review of historical clearance markdowns, current business trends, expected vendor funding and discontinued merchandise categories.
We also record a reserve for estimated inventory shrink between the last physical inventory count and the balance sheet date. Shrink is the difference between the recorded amount of inventory and the physical inventory. Shrink may occur due to theft, loss, inaccurate records for the receipt of inventory or deterioration of goods, among other things. We generally perform an annual physical inventory count at the majority of our stores and distribution centers. The shrink reserve is based on sales and actual shrink results from previous inventories.
We did not make any material changes in the methodologies used to value our inventory or to estimate the markdown and shrink reserves during 2014, 2013 or 2012. We believe that we have sufficient current and historical knowledge to record reasonable estimates for our inventory reserves. Though historical reserves have approximated actual markdowns and shrink adjustments, it is possible that future results could differ from current recorded reserves.
Because we routinely record permanent markdowns for potentially obsolete merchandise, the markdown reserve was immaterial as of January 31, 2015. Changes in the assumptions used to estimate our markdown reserve requirement would not have had a material impact on our financial statements. A 10 basis point change in estimated inventory shrink would also have had an immaterial impact on our financial statements.
Vendor Allowances
We receive allowances from many of our merchandise vendors. These allowances often are reimbursements for markdowns that we have taken in order to sell the merchandise and/or to support the gross margins earned in connection with the sales of merchandise. The allowances generally relate to sold inventory or permanent markdowns and, accordingly, are reflected as reductions to cost of merchandise sold. Allowances related to merchandise that has not yet been sold are recorded in inventory.
We also receive vendor allowances which represent reimbursements of costs (primarily advertising) that we have incurred to promote the vendors’ merchandise. These allowances are generally netted against advertising or the other related costs as the costs are incurred. Advertising allowances in excess of costs incurred are recorded as a reduction of merchandise costs.
Most of our vendor allowance agreements are supported by signed contracts which are binding, but informal in nature. The terms of these arrangements vary significantly from vendor to vendor and are influenced by, among other things, the type of merchandise to be supported. Vendor allowances will fluctuate based on the amount of promotional and clearance markdowns necessary to liquidate the inventory as well as advertising and other reimbursed costs.
Insurance Reserve Estimates
We use a combination of insurance and self-insurance for a number of risks.
We retain the initial risk of $500,000 per occurrence in workers’ compensation claims and $250,000 per occurrence in general liability claims. We record reserves for workers’ compensation and general liability claims which include the total amounts that we expect to pay for a fully developed loss and related expenses, such as fees paid to attorneys, experts and investigators. The fully developed loss includes amounts for both reported claims and incurred, but not reported losses.
We use a third-party actuary to estimate the liabilities associated with these risks. The actuary considers historical claims experience, demographic and severity factors and actuarial assumptions to estimate the liabilities associated with these risks. As of January 31, 2015, estimated liabilities for workers’ compensation and general liability claims were approximately $32 million.
A change in claims frequency and severity of claims from historical experience as well as changes in state statutes and the mix of states in which we operate could result in a change to the required reserve levels. Changes in actuarial assumptions

28


could also have an impact on estimated reserves. Historically, our actuarial estimates have not been materially different from actual results.
We are fully self-insured for employee-related health care benefits, a portion of which is paid by our associates. We use a third-party actuary to estimate the liability for incurred, but not reported, health care claims. This estimate uses historical claims information as well as estimated health care trends. As of January 31, 2015, we had recorded approximately $14 million for medical, pharmacy and dental claims which were incurred in 2014 and expected to be paid in 2015. Historically, our actuarial estimates have not been materially different from actual results.
Impairment of Assets
As of January 31, 2015, our investment in buildings and improvements, before accumulated depreciation, was $10 billion. We review these buildings and improvements for impairment when an event or changes in circumstances, such as decisions to close a store or significant operating losses, indicate the carrying value of the asset may not be recoverable.
For operating stores, a potential impairment has occurred if the fair value of a specific store is less than the net carrying amount of the assets. If required, we would record an impairment loss equal to the amount by which the carrying amount of the asset exceeds its fair value.
Identifying impaired assets and quantifying the related impairment loss, if any, requires significant estimates by management. The most significant of these estimates is the cash flow expected to result from the use and eventual disposition of the asset. When determining the stream of projected future cash flows associated with an individual store, management estimates future store performance including sales growth rates, gross margin and controllable expenses, such as store payroll and occupancy expense. Projected cash flows must be estimated for future periods throughout the remaining life of the property, which may be as many as 40 years in the future. The accuracy of these estimates will be impacted by a number of factors including general economic conditions, changes in competitive landscape and our ability to effectively manage the operations of the store.
We have not historically experienced any significant impairment of long-lived assets. Additionally, impairment of an individual building and related improvements, net of accumulated depreciation, would not generally be material to our financial results.
Income Taxes
We regularly evaluate the likelihood of realizing the benefit for income tax positions we have taken in various federal and state filings by considering all relevant facts, circumstances and information available to us. If we believe it is more likely than not that our position will be sustained, we recognize a benefit at the largest amount which we believe is cumulatively greater than 50% likely to be realized. Our unrecognized tax benefit, excluding accrued interest and penalties, was $123 million as of January 31, 2015.
Unrecognized tax benefits require significant management judgment regarding applicable statutes and their related interpretation, the status of various income tax audits and our particular facts and circumstances. Also, as audits are completed or statutes of limitations lapse, it may be necessary to record adjustments to our taxes payable, deferred tax assets, tax reserves or income tax expense. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different.
Operating Leases
As of January 31, 2015, 749 of our 1,162 retail stores were subject to either a ground or building lease. Accounting for leased properties requires compliance with technical accounting rules and significant judgment by management. Application of these accounting rules and assumptions made by management will determine whether we are considered the owner for accounting purposes or whether the lease is accounted for as a capital or operating lease in accordance with ASC 840, “Leases.”
If we are considered the owner for accounting purposes or the lease is considered a capital lease, we record the property and a related financing or capital lease obligation on our balance sheet. The asset is then depreciated over its expected lease term. Rent payments for these properties are recognized as interest expense and a reduction of the financing or capital lease obligation.
If the lease is considered an operating lease, it is not recorded on our balance sheet and rent expense is recognized on a straight-line basis over the expected lease term.

29


The most significant estimates used by management in accounting for property leases and the impact of these estimates are as follows:
Expected lease term—Our expected lease term includes both contractual lease periods and cancelable option periods where failure to exercise such options would result in an economic penalty. The expected lease term is used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the lease term exceeds 75% of the leased asset’s useful life. The expected lease term is also used in determining the depreciable life of the asset or the straight-line rent recognition period. Increasing the expected lease term will increase the probability that a lease will be considered a capital lease and will generally result in higher rent expense for an operating lease and higher interest and depreciation expenses for a leased property recorded on our balance sheet.
Incremental borrowing rate—We estimate our incremental borrowing rate using treasury rates for debt with maturities comparable to the expected lease term and our credit spread. The incremental borrowing rate is primarily used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the net present value of the lease payments is greater than 90% of the fair market value of the property. Increasing the incremental borrowing rate decreases the net present value of the lease payments and reduces the probability that a lease will be considered a capital lease. For leases which are recorded on our balance sheet with a related capital lease or financing obligation, the incremental borrowing rate is also used in allocating our rental payments between interest expense and a reduction of the outstanding obligation.
Fair market value of leased asset—The fair market value of leased retail property is generally estimated based on comparable market data as provided by third-party appraisers or consideration received from the landlord. Fair market value is used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the net present value of the lease payments is greater than 90% of the fair market value of the property. Increasing the fair market value reduces the probability that a lease will be considered a capital lease. Fair market value is also used in determining the amount of property and related financing obligation to be recognized on our balance sheet for certain leased properties which are considered owned for accounting purposes.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
All of our long-term debt at year-end 2014 is at fixed interest rates and, therefore, is not affected by changes in interest rates. When our long-term debt instruments mature, we may refinance them at then existing market interest rates, which may be more or less than interest rates on the maturing debt.
We share in the net risk-adjusted revenue of the Kohl’s credit card portfolio as defined by the sum of finance charges, late fees and other revenue less write-offs of uncollectible accounts. We also share the costs of funding the outstanding receivables if interest rates were to exceed defined rates. As a result, our share of profits from the credit card portfolio may be negatively impacted by increases in interest rates. The reduced profitability, if any, will be impacted by various factors, including our ability to pass higher funding costs on to the credit card holders and the outstanding receivable balance, and cannot be reasonably estimated at this time.
 
Item 8. Financial Statements and Supplementary Data
The financial statements are included in this report beginning on page F-3.

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures
None


30


Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (the “Evaluation”) at a reasonable assurance level as of the last day of the period covered by this Report.
Based upon the Evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level. Disclosure controls and procedures are defined by Rules 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act") as controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions, regardless of how remote.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of our published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financing reporting as of January 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013 Framework). Based on this assessment, our management has concluded that as of January 31, 2015, our internal control over financial reporting was effective based on those criteria.
Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on the effectiveness of our internal control over financial reporting.
(c) Changes in Internal Control Over Financial Reporting
During the last fiscal quarter, there were no changes in our internal controls that have materially affected or are reasonably likely to materially affect such controls, including any corrective actions with regard to significant deficiencies and material weaknesses.


31


Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Kohl's Corporation

We have audited Kohl's Corporation's internal control over financial reporting as of January 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the "COSO criteria"). Kohl's Corporation's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Kohl's Corporation maintained, in all material respects, effective internal control over financial reporting as of January 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Kohl's Corporation as of January 31, 2015 and February 1, 2014, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity, and cash flows for each of the three years in the period ended January 31, 2015 of Kohl's Corporation and our report dated March 20, 2015 expressed an unqualified opinion thereon.


/s/ Ernst & Young LLP

Milwaukee, Wisconsin
March 20, 2015

Item 9B. Other Information
None


32


PART III

Item 10. Directors, Executive Officers and Corporate Governance
For information with respect to our Directors, the Board of Directors’ Audit Committee and our written code of ethics, see the applicable portions of the “Questions and Answers About our Board of Directors and Corporate Governance Matters” and “Item One: Election of Directors” sections of the Proxy Statement for our May 14, 2015 Annual Meeting of Shareholders (“our 2015 Proxy”), which information is incorporated herein by reference. For information with respect to Section 16 reports, see the information provided in the “Section 16(a) Beneficial Ownership Reporting Compliance” section of our 2015 Proxy, which information is incorporated herein by reference.
Our executive officers as of January 31, 2015 were as follows:
Name
Age
 
Position
Kevin Mansell
62
 
Chairman, Chief Executive Officer and President
Michelle Gass
46
 
Chief Customer Officer
Kenneth Bonning
57
 
Senior Executive Vice President
Wesley S. McDonald
52
 
Senior Executive Vice President, Chief Financial Officer
Richard D. Schepp
54
 
Senior Executive Vice President
Mr. Mansell is responsible for Kohl’s strategic direction, long-term growth and profitability. He has served as Chairman since September 2009, Chief Executive Officer since August 2008 and President and Director since February 1999. Mr. Mansell began his retail career in 1975.
Ms. Gass joined Kohl's in June 2013 as Chief Customer Officer and is responsible for our overall customer engagement strategy, including our digital, marketing, public relations, and social responsibility efforts, as well as the omni-channel business. Previously, she had served as President, Starbucks Europe, Middle East and Africa. Ms. Gass began her retail career in 1991.
Mr. Bonning was promoted to Senior Executive Vice President in May 2011 and is responsible for information technology, logistics, and store planning. Previously, he had served as Executive Vice President, Logistics, Facilities and Store Planning from October 2006 to May 2011. Mr. Bonning began his retail career in 1985.

Mr. McDonald was promoted to Senior Executive Vice President, Chief Financial Officer in December 2010 and is responsible for financial planning and analysis, investor relations, financial reporting, accounting operations, tax, treasury, non-merchandise purchasing, credit and capital investment. Previously, he had served as Executive Vice President, Chief Financial Officer since August 2003. Mr. McDonald began his retail career in 1988.

Mr. Schepp was promoted to Senior Executive Vice President in May 2011 and is responsible for legal affairs, risk management, human resources, real estate and internal audit. Mr. Schepp assumed responsibility for our human resource department in April 2012. He previously served as Executive Vice President—General Counsel, Secretary from August 2001 to May 2011. Mr. Schepp began his retail career in 1992.

33


Members of our Board of Directors as of January 31, 2015 were as follows:
 
 
 
Kevin Mansell
Chairman, President and Chief Executive
Officer,
Kohl’s Corporation
  
Frank V. Sica (b)* (c)
Managing Partner,
Tailwind Capital
 
 
 
Peter Boneparth (b) (c)
Former Senior Advisor,
Irving Place Capital Partners

Former President and Chief Executive Officer,
Jones Apparel Group
 
Peter M. Sommerhauser
Shareholder,
Godfrey & Kahn, S.C. Law Firm
 
 
 
Steven A. Burd (b) (c)
Founder and Chief Executive Officer,
Burd Health LLC

Former Chairman, Chief Executive Officer and President,
Safeway Inc.
 
Stephanie A. Streeter(a) (c)*
Chief Executive Officer
Libbey, Inc.
 
 
 
Dale E. Jones (b) (c)
Chief Executive Officer and President,
Diversified Search
 
Nina G. Vaca(a)(c)
Chairman, Chief Executive Officer,
Pinnacle Technical Resources, Inc.
 
 
 
John E. Schlifske(a) (c)
Chairman and Chief Executive Officer,
Northwestern Mutual Life Insurance Company
 
Stephen E. Watson(a)* (c)
Former President, Chief Executive Officer of Gander Mountain, L.L.C.
 
Former Chairman and Chief Executive Officer, Department Store Division of Dayton-Hudson Corporation

(a)Audit Committee member
(b)Compensation Committee member
(c)Governance & Nominating Committee member
* Denotes Chair

Item 11. Executive Compensation
See the information provided in the applicable portions of the “Questions and Answers About our Board of Directors and Corporate Governance Matters” and “Item One: Election of Directors” sections of our 2015 Proxy, including the Compensation Committee Report and Compensation Discussion & Analysis, which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
See the information provided in the “Security Ownership of Certain Beneficial Owners, Directors and Management” and “Equity Compensation Plan Information” sections of our 2015 Proxy, which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence
See the information provided in the “Independence Determinations & Related Party Transactions” section of our 2015 Proxy, which information is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services
See the information provided in the “Fees Paid to Ernst & Young” section of our 2015 Proxy, which information is incorporated herein by reference.


34


PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report:
1. Consolidated Financial Statements:
See “Index to Consolidated Financial Statements” on page F-1, the Report of Independent Registered Public Accounting Firm on page F-2 and the Consolidated Financial Statements beginning on page F-3, all of which are incorporated herein by reference.
2. Financial Statement Schedule:
All schedules have been omitted as they are not applicable.
3. Exhibits:
See “Exhibit Index” of this Form 10-K, which is incorporated herein by reference.


35



Signatures

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
Kohl’s Corporation
 
 
 
 
By:
/S/    KEVIN MANSELL
 
 
Kevin Mansell
 
 
Chairman, Chief Executive Officer, President and Director
 
 
(Principal Executive Officer)
 
 
 
 
 
/S/    WESLEY S. MCDONALD
 
 
Wesley S. McDonald
 
 
Senior Executive Vice President, Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)
Dated: March 20, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated above:
 
 
 
 
/S/    KEVIN MANSELL
Kevin Mansell
Chairman, President, Chief Executive Officer and Director (Principal Executive Officer)
  
 
 
 
/S/    PETER BONEPARTH
Peter Boneparth
Director
  
/S/    PETER M. SOMMERHAUSER
Peter M. Sommerhauser
Director
 
 
/S/    STEVEN A. BURD
Steven A. Burd
Director
  
/S/    STEPHANIE A. STREETER
Stephanie A. Streeter
Director
 
 
/S/    DALE E. JONES
Dale E. Jones
Director
  
/S/    NINA G. VACA
Nina G. Vaca
Director
 
 
/S/    JOHN E. SCHLIFSKE
John E. Schlifske
Director
  
/S/    STEPHEN E. WATSON
Stephen E. Watson
Director
 
 
/S/    FRANK V. SICA
Frank V. Sica
Director
 
 
 
 
 
  
 



36


Exhibit Index
Exhibit
Number
  
Description
3.1
  
Amended and Restated Articles of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 16, 2011.
 
 
3.2
  
Amended and Restated Bylaws of the Company, incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on August 15, 2014.
 
 
4.1
  
Credit Agreement Amendment dated as of June 21, 2013 by and among the Company, the Lenders party thereto, Bank of America, N.A., as the Administrative Agent and as a Continuing Lender and as an Issuing Bank and a Swing Line Lender, U.S Bank National Association, as a Continuing Lender, an Issuing Bank, and a Swing Line Lender, and Wells Fargo Bank, National Association, as a Continuing Lender, an Issuing Bank, and a Swing Line Lender, incorporated herein by reference to Item 4.1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 3, 2013.
 
 
4.2
  
Certain other long-term debt is described in Note 2 of the Notes to Consolidated Financial Statements. The Company agrees to furnish to the Commission, upon request, copies of any instruments defining the rights of holders of any such long-term debt described in Note 2 and not filed herewith.
 
 
10.1(a)
  
Private Label Credit Card Program Agreement dated as of August 11, 2010 by and between Kohl’s Department Stores, Inc and Capital One, National Association, incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2010.
 
 
10.1(b)
 
Amendment to Private Label Credit Card Program Agreement dated as of May 13, 2014 by and between Kohl's Department Stores, Inc. and Capital One, National Association, incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014.

 
 
 
10.2
  
Amended and Restated Executive Deferred Compensation Plan, incorporated herein by reference to Exhibit 10.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2003.*
 
 
10.3
  
Kohl’s Corporation 2005 Deferred Compensation Plan, as amended and restated effective January 1, 2005, incorporated herein by reference to Exhibit 10.4 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2006.*
 
 
10.4
  
Summary of Executive Medical Plan, incorporated herein by reference to Exhibit 10.6 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2005.*
 
 
10.5
  
Summary of Executive Life and Accidental Death and Dismemberment Plans, incorporated herein by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2005.*
 
 
10.6
  
Kohl’s Corporation Annual Incentive Plan, incorporated herein by reference to Annex B to the Proxy Statement on Schedule 14A filed on March 21, 2011 in connection with the Company’s 2011 Annual Meeting of Shareholders.*
 
 
10.7
  
1994 Long-Term Compensation Plan, incorporated herein by reference to Exhibit 10.15 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 4, 1996.*
 
 
10.8
  
1997 Stock Option Plan for Outside Directors, incorporated herein by reference to Exhibit 4.4 of the Company’s registration statement on Form S-8 (File No. 333-26409), filed on May 2, 1997.*
 
 
10.9
  
Amended and Restated 2003 Long-Term Compensation Plan, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 2008.*
 
 
 

37


Exhibit
Number
  
Description
10.10
  
Kohl’s Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Annex A to the Proxy Statement on Schedule 14A filed on March 26, 2010 in connection with the Company’s 2010 Annual Meeting.*
 
 
 
10.11
  
Form of Executive Performance Share Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K dated as of January 15, 2014.*
 
 
 
10.12
 
Form of Executive Stock Option Agreement pursuant to the Kohl's Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2010.*
 
 
 
10.13(a)
  
Form of Executive Restricted Stock Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2010.*
 
 
 
10.13(b)
 
Form of Executive Restricted Stock Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on January 15, 2014.*
 
 
 
10.13(c)
 
Form of Executive Restricted Stock Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan (March 2014 grant), incorporated herein by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014.*

 
 
 
10.14
  
Form of Outside Director Stock Option Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2010.*
 
 
 
10.15
  
Form of Outside Director Restricted Stock Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2010.*
 
 
10.16
  
Summary of Outside Director Compensation.*
 
 
 
10.17
  
Amended and Restated Employment Agreement between Kohl’s Corporation and Kohl’s Department Stores, Inc. and Kevin Mansell dated as of November 14, 2014, incorporated herein by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on November 14, 2014.*
 
 
10.18(a)
  
Amended and Restated Employment Agreement between Kohl’s Corporation and Kohl’s Department Stores, Inc. and Donald Brennan dated as of April 1, 2012, incorporated herein by reference to Exhibit 10.18 of the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013.*
 
 
 
10.18(b)
 
Agreement dated as of March 24, 2014 by and between Donald A. Brennan and Kohl's Department Stores Inc. incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014.*
 
 
 
10.19
  
Employment Agreement dated as of May 20, 2014 by and between Kohl's Corporation and Kohl's Department Stores, Inc. and Michelle Gass, incorporated by reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2014.*
 
 
10.20
  
Amended and Restated Employment Agreement between Kohl’s Corporation and Kohl’s Department Stores, Inc.and Wesley S. McDonald dated as of April 1, 2012, incorporated herein by reference to Exhibit 10.21 of the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013.*

38


Exhibit
Number
  
Description
10.21
  
Amended and Restated Employment Agreement dated as of April 1, 2012 by and between Kohl's Corporation and Kohl's Department Stores, Inc. and Richard D. Schepp, incorporated by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2014.*
 
 
 
10.22
 
Amended and Restated Employment Agreement dated as of April 1, 2012 by and between Kohl's Corporation and Kohl's Department Stores, Inc. and Kenneth G. Bonning.*
 
 
 
10.23
  
Form of Employment Agreement between Kohl’s Corporation and Kohl’s Department Stores, Inc. and its Senior Executive Vice Presidents, incorporated herein by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013.*
 
 
 
12.1
  
Ratio of Earnings to Fixed Charges.
 
 
21.1
  
Subsidiaries of the Registrant.