3. Company Pro le Financial Highlights
(dollars in millions)
Kohl’s mission is to be the 2006 2005
leading family-focused,
Net Sales $15,544 $ 13,402 up 16%
value-oriented specialty
department store o ering
Gross Margin $ 5,654 $ 4,763 up 19%
quality exclusive and national Percent of Sales 36.4 % 35.5 % up 0.9%
brand merchandise to the
SG&A $ 3,401 $ 2,964 up 15%
customer in an environment
Percent of Sales 21.9 % 22.1 % down 0.2%
that is convenient, friendly
and exciting. up 28%
Operating Income $ 1,815 $ 1,416
Percent of Sales 11.7 % 10.6 % up 1.1%
Kohl’s operates from coast
Net Income $ 1,109 $ 842 up 32%
to coast. At the end of scal
Percent of Sales 7.1 % 6.3 % up 0.8%
2006, we served customers in
45 states through 817 stores
and Kohls.com.
)
) (1
(1
Net Sales Net Income R
R
AG
AG
(in millions of dollars) (in millions of dollars)
C
C %
.7% 9.3
$15,544
15 1
$1,109
$13,402
$11,701
$842
$10,282
$9,120 $703
$601
$7,489
$546
$458
2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006
Compounded Annual Growth Rate.
(1)
Results 1
4. Larry Montgomery, Chairman and Chief
Executive Of cer; Kevin Mansell, President; and
Tom Kingsbury, Senior Executive Vice President
Dear Shareholder,
Our scal 2006 performance can best In April, we completed the sale of our
Operating Income
be described in one word: growth. We proprietary credit card business to
(in millions of dollars)
)
(1
R delivered solid top- and bottom-line JPMorgan Chase and intered into a multi-
G
CA performance. We opened 85 exciting year agreement with Chase to share in the
. 1% new stores and we successfully executed pro tability of the credit card portfolio. We
18 on our four strategic initiatives. used the net proceeds to begin our authorized
$1,815
$2 billion share repurchase program,
Strong Financial Growth purchasing 27 million shares in scal 2006
Our sales have grown by 50% over
$1,416
Growth across the Nation
the past three years, from $10 billion
We continue to deliver on our real estate
in 2003 to a record $15.5 billion this
$1,193
growth strategy. Our ability to successfully
year. No other major department
$1,021
add new stores and new markets reached
$951 store has a growth rate that comes
new heights with the grand opening of 65
even close. For this year, comparable
$790
stores across the country on a single day in
store sales rose 5.9%, increasing in all
October, the largest one-day grand opening
regions and all four quarters, boosting
in our history.
us to the top of the rankings among
our peer group.
Looking ahead, we see many more
opportunities for strategic, pro table
Operating income grew 28% to $1.8
growth. By the end of 2010, we expect to
billion and the operating margin reached
2001 2002 2003 2004 2005 2006
be operating more than 1,200 stores and to
an all-time high of 11.7%. This puts us
generate approximately $24 billion in sales
well on our way to achieving our goal of
Compounded Annual Growth Rate.
(1)
and $1.9 billion in net income. We believe
12.5% operating margin by 2010.
these goals are both realistic and achievable.
Net income increased 32% to a record
Growth throughout the Business
$1.1 billion or $3.31 per diluted share,
Our strategic initiatives are the roadmap
driven by strong improvement in our
for our future growth. These initiatives
gross margin and prudent expense
management. Our balance sheet focus on merchandise content, marketing,
remained strong and we again inventory management and the in-store
generated signi cant ow from shopping experience.
Vision
operations.
2
5. “Our sales have grown by 50% over the past three years,
from $10 billion in 2003 to a record $15.5 billion this year.
No other major department store has a growth rate that
comes even close.”
Our focus on lifestyle merchandising Enhancing the in-store shopping She retired from the Board in February
is designed to meet our objective of experience revolves around making our 2007. Jay was one of the three principals
increasing market share by expanding our stores more visually exciting and easier who built the solid foundation for our
appeal to a broader range of customers. to shop. Introduced in 2006, our new success, serving as president for 13
Brands such as Chaps continue to attract innovation store design is aimed squarely years. Jay will retire from the Board
our core classic customer. In the updated at broadening customer appeal. From the in May 2007.
and contemporary categories, daisy exterior showcase windows displaying the
Stephen E. Watson joined our Board
fuentes, apt. 9, Candie’s, Tony Hawk and latest fashions to creative merchandise
of Directors in 2006, bringing his
Casa Cristina are just a few of our new displays highlighting the newest trends,
30 years of retail industry experience,
brands and brand extensions. our innovation stores encourage shoppers
including 23 years with Target
to browse every department. Of the 85
Corporation. We also welcomed
In 2007, we’ll add even more variety and stores we opened in 2006, approximately
Tom Kingsbury as a principal in
innovation to our merchandise through half were innovation stores. We plan to
the newly created position of senior
exclusive licensing agreements for Simply incorporate elements of this format into
executive vice president.
Vera Vera Wang, ELLE and Food Network all new and remodeled stores in 2007.
collections. Together, these will be the
Coming o another outstanding year,
For us, growth is an all-encompassing
largest number and by far the largest
it is appropriate that we again thank
and never-ending process. Through
volume of new and expanded o erings
the people who made it happen – our
ongoing innovation across the business,
we have ever launched. To support our
Associates, shareholders, customers and
we are converting our core concepts
growing portfolio of world-class brands,
business partners. With their help, you
of brands, value and convenience
we will open a design of ce in the heart
can continue to expect great things
into sustained long-term growth and
of New York’s garment district in spring
from Kohl’s.
pro tability. The signi cant increase
of 2007.
in our stock price in 2006 re ects our
Our marketing program is designed success in achieving these goals.
to di erentiate our stores in the
marketplace. The program uses a The People behind our Growth
strategically selected variety of media It’s no secret that the key to our success
to build awareness and desire for our has always been the talent within our Larry Montgomery
national, private and exclusive brands, organization and our 114,000 dedicated Chairman and Chief Executive Of cer
and to increase traf c and sales. Our Associates who make our customers their
marketing statement, “Only at Kohl’s,” rst priority. Our commitment to our
distinguishes our stores and our exclusive great team of Associates was underscored
brands, giving customers an even more in 2006 with our selection by Business
compelling reason to shop our stores. Kevin Mansell
Week magazine as one of the top 50
President
companies to launch a career.
Our focus on inventory management
includes activities to improve inventory We wish to extend a deep and heartfelt
ow and increase speed-to-market. As thank you to Arlene Meier and Jay Baker.
always, our goal is to meet customer Arlene retired after 16 years with the
expectations for in-stock merchandise in Tom Kingsbury
company, serving for the past six years
a broad range of sizes and colors. Senior Executive Vice President
as chief operating of cer and a director.
3
6. GROWTH. Innovation. Success.
Our success in growth and innovation
has made Kohl’s a major force in
retailing across the nation.
®
4
8. New State
GROWTH in 2006
Projected Stores
Across the Nation
by 2010
We continue to deliver successful,
1,200 +
pro table growth. In the last 10 years
New State
alone, we’ve grown from 150 stores in 2006
in 16 states in 1996, to 817 stores
in 45 states at the end of scal 2006.
By the end of 2010, we expect to
be operating more than 1,200 stores
– a strategically developed and very
817 achievable target.
Growing our Regions
In addition to signi cantly increasing
our number of stores, over the past 10
years we have also expanded from our
Midwestern base to become a major
national retailer. In 2006, we entered the
Northwest with new stores in Oregon and
382
Washington. We now operate in every
region of the country. To support this new
store for markets of all
region, as well as our continuing growth in
sizes. All three formats will be
the Southwest, we opened a distribution
part of our expansion, with our 88,000
center in Patterson, California, with the
150
square-foot suburban store remaining
capacity to support 110 stores.
the predominant format. We will
also continue to remodel our existing
Successful Strategy
stores, with all of the remodels in 2007
We’ve proven that our growth strategy
incorporating key elements of our new
works. With our three formats: suburban,
1996 2001 2006 2010
innovation store concept.
small and urban, we have the right-sized
“By the end of 2010, we expect to be operating more
than 1,200 stores – a strategically developed and very
achievable target.”
Number of Stores 2% 3% 1%
by Region
5%
These charts show 11% 12%
the successful
32%
expansion from our 11%
14%
Midwestern base 46%
into every region
13%
14%
across the country.
15%
90% 16%
12%
3%
1996 2001 2006
6
9. New State
in 2006
New State
in 2006
With the opening of 85 NEW STORES,
New Stores in 2006
New States in 2007
we operated 817 stores in 45 states
Northwest Region
at the end of scal 2006.
(10 stores)
Midwest Region
(260 stores)
South Central Region
(106 stores)
Growth
Northeast Region
(124 stores)
Mid-Atlantic Region
(85 stores)
Southeast Region
(100 stores)
Southwest Region
(132 stores)
7
10. INNOVATION with Impact
Making our stores more visually exciting experience. Higher ceilings, attractive restrooms. The spacious tting rooms have
and easier to shop took a bold step carpeting and soft wall colors create three-way mirrors and lounge areas, with
forward with the introduction of our new a more open, spacious environment. laminate wood ooring, sofas and decorative
innovation store design. The innovation Large signs make departments easy to wall art. The streamlined customer service
begins with the storefront, with bright white nd. High-impact graphics highlight desk is more inviting and redesigned
columns and large windows showcasing merchandise for every lifestyle. Eye- customer check-out stations improveow
products and lifestyles to give customers a catching displays provide apparel and and speed up the check-out process.
glimpse of the great merchandise inside. accessory ideas and stately wooden
Our friendly and knowledgeable
hutches showcase our home merchandise.
Enhancing the Customer Experience Associates are always nearby to provide the
Inside, the new store design is aimed Innovation throughout the store also shopping assistance and courteous service
squarely at broadening customer appeal includes a comfortable and luxurious that make our stores a destination for
and reach through an enhanced shopping residential look in our tting rooms and shoppers across the U.S.
erience 9
11. In 2006, Kohl’s Cares for Kids
merchandise included Sandra Boynton’s
fun- lled, special edition books, sing-along
CDs and snuggly plush animals. 15
12. “Developing exclusive
collections of world-class
brands is a key growth
strategy.”
SUCCESS with Style
In 2006, we gave our customer even develop another new brand available
more of what she’s looking for with new “Only at Kohl’s.” The ELLE line of misses’
world-class brands and brand extensions. apparel will feature contemporary, runway-
We introduced West End and AB Studio inspired looks that appeal to the younger
in misses’ and Stamp 10 in both misses’ segment of our core customer base. The
and men’s. In young men’s and boys’, we line, which launches in selected stores in
launched the Tony Hawk brand. Chaps is spring 2007, demonstrates a speed-to-
now in misses’, men’s, boys’, footwear and market strategy that will bring new ELLE
infants’/toddlers’ and will expand into fashions into our stores every month.
women’s, girls’ and home in 2007.
Expanding in Home
Food preparation is one of the fastest
Top-Fashion Apparel in 2007
growing areas in our home assortment. In
Developing exclusive collections of world-
2006, we added the Rachael Ray line of
class brands is a key growth strategy. Our
cookware. We also formed an exclusive
most signi cant initiative for 2007, and
relationship with Food Network, the
the largest launch in our history, is the
undisputed authority in cooking and
introduction of the Simply Vera Vera Wang
entertainment, to develop a Food Network-
premium fashion and lifestyle brand,
branded line of home goods. We will
beginning in fall 2007. The collection
introduce this brand in fall 2007.
spans the store, including misses’,
accessories, jewelry, footwear, intimate
We also introduced a new home furnishings
apparel and soft home. Vera Wang is one
line, Casa Cristina, by Cristina Saralegui, an
of the most respected designers in the
in uential role model in today’s Hispanic
world, making her collection a strong
community. This line will ultimately
addition to our exclusive brand selection.
expand across several home categories in
We’ve also teamed up with ELLE magazine, 2007. Other extensions in 2007 include
the world’s largest fashion magazine, to daisy fuentes and Chaps in soft home.
World-Class
10
15. GROWTH through Di erentiation
Growth through di erentiation means exciting than ever by adding inspiring
enabling our customer to nd everything she strikepoints and large graphic displays.
wants for her home, her family and herself – These new visuals showcase di erent lifestyle
in a single shopping trip. We’ve captured brands and provide wardrobe suggestions,
market share by expanding our merchandise complete with accessories such as jewelry,
assortment to reach a broader group of shoes and handbags. Lifestyle merchandising
customers. While classic American families also includes specialty departments for our
continue to be our primary customer, we are important special-size customers.
adding brands and merchandise targeted to
With the addition of ne fragrances,
various lifestyles.
we have all the elements in place
Lifestyle Merchandising to launch the “Kohl’s Beauty Dept.,”
To appeal to this expanded customer base, creating awareness for the total beauty
we’ve reorganized departments to re ect category – cosmetics, skincare, bath &
di erent customer lifestyles: classic, updated body and fragrance.
and contemporary. Whether she is a busy
Exceptional Customer Service
mom with young children, a recent college
Of course, it is our Associates who make
graduate on her way up the career ladder or
the shopping experience truly exceptional.
an empty nester, we have the look she wants,
We value and appreciate all of the Associates
in the sizes and colors she needs.
behind our recognition for Top 10
Our goal is to deliver a consistent experience achievement in customer service for 2006
for every customer, in every store, every by the National Retail Federation and
time. We made shopping our stores more American Express Research.
Lifestyle 13
16. The District 16 A-Team in western
Michigan won the “Kohl’s Award of
Excellence” three years in a row.
INNOVATION with Spirit
“Our Associates are We believe that caring for our friends, In 2006, A-Team members volunteered
neighbors and families is what over 57,800 hours, a 171% increase over
leading by example, communities are all about. From the 2005, raising over $1.2 million.
following their hearts, volunteer support of our Associates to
Kohl’s Cares for Kids is a promise
our corporate nancial contributions,
inspiring others and of hope for a brighter, healthier future
we want to have a positive impact in
for children in our communities.
making a real di erence each community we serve. In 2006, we
Throughout the year, we sell special
provided approximately $33 million to
for children in our Kohl’s Cares for Kids merchandise with
support our communities across the U.S.
communities.” 100% of the net pro ts supporting
Our Associates are leading by example, health and educational opportunities
following their hearts, inspiring others for children. Our well-established
and making a real di erence for children Kohl’s Cares for Kids children’s hospital
in our communities through the Kohl’s program continues to grow. In 2006,
A-Team. As A-Team members, our we partnered with 143 hospitals in
Associates choose youth-focused non- 45 states.
pro t organizations they want to support.
Our annual Kohl’s Kids Who Care
After they have given the gift of time and
scholarship program gives us the
talent to the organization, they become
opportunity to recognize and reward youth
eligible for a corporate grant given
who volunteer in their communities. In
directly to their charity.
2006, we recognized 152 young volunteers
We are proud of our Associates and with Kohl’s Kids Who Care scholarships
their commitment to their communities. totaling more than $200,000.
Inspiration
14
17. Strength
SUCCESS through Performance
Fiscal Year 2006 2005 2004 2003 2002 2001
Summary of Operations (In millions)
$ 11,701 $ 9,120
Net sales $ 15,544 $ 13,402 $10,282 $ 7,489
4,114 3,139
Gross margin 5,654 4,763 3,395 2,565
2,584 1,884
Selling, general & administrative expenses 3,401 2,964 2,158 1,583
49 41
Preopening expenses 50 44 47 33
288 193
Depreciation and amortization 388 339 239 159
1,193 1,021
Operating income 1,815 1,416 951 790
63 56
Interest expense, net 41 70 73 50
1,130 965
Income before income taxes 1,774 1,346 878 740
703 601
Net income 1,109 842 546 458
Diluted Earnings Per Share $ 3.31 $ 2.43 $ 2.04 $ 1.59 $ 1.75 $ 1.35
Financial Position Data (Dollars in millions)
Working capital $ 1,482 $ 2,520 $ 2,187 $ 1,902 $ 1,776 $ 1,584
Property and equipment, net 5,353 4,616 4,063 3,390 2,806 2,253
Total assets 9,041 9,153 7,979 6,691 6,311 4,927
Long-term debt 1,040 1,046 1,103 1,076 1,059 1,095
Shareholders’ equity 5,603 5,957 5,034 4,212 3,532 2,803
Return on average shareholders’ equity 19.2 % 15.3 % 15.2 % 14.1 % 19.0 % 18.3 %
Other Data
Comparable store sales growth 5.9 % 3.4 % 0.3 % (1.6 )% 5.3 % 6.8 %
Net sales per selling square foot $ 256 $ 252 $ 255 $ 268 $ 284 $ 283
Stores open at year end 817 732 637 542 457 382
Total square feet of selling space (In thousands) 62,357 56,625 49,201 41,447 34,507 28,576
Report of Management
The management of Kohl’s Corporation is responsible for the integrity and objectivity of the nancial and operating information contained in this Annual Report,
including the consolidated nancial statements covered by the Report of Independent Registered Public Accounting Firm. These statements were prepared in
conformity with U.S. generally accepted accounting principles and include amounts that are based on the best estimates and judgments of management.
We remain committed to managing our business both ethically and responsibly and to representing the best interest of our shareholders through good corporate
governance. After thorough review by its Governance and Nominating Committee, the Board of Directors believes Kohl’s is in full compliance with all applicable
corporate governance rules of the Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE). Accordingly, in 2006, Kohl’s provided
the NYSE with an unquali ed Annual CEO Certi cation of Compliance, and has led with the SEC, as an exhibit to our Annual Report on Form 10-K for the
scal year 2006, the Sarbanes-Oxley Act Section 302 certi cation regarding the quality of the company’s public disclosure.
The consolidated nancial statements and related notes have been audited by Ernst & Young LLP, independent registered public ccounting rm, whose
a
report is based on audits conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States). The Company’s
consolidated nancial statements including the Report of Independent Registered Public Accounting Firm are included in the Com
pany’s Form 10-K for the year
ended February 3, 2007.
The Audit Committee of the Board of Directors is composed of four independent Directors. The Committee is responsible for assis the Board in its oversight
ting
of Kohl’s nancial accounting and reporting practices. The Audit Committee is directly responsible for the compensation, appoi
ntment and oversight of the
Company’s independent registered public accounting rm. The Audit Committee meets periodically with the independent registered public accounting rm,
as well as with management, to review accounting, auditing, internal accounting control and nancial reporting matters. The in
dependent registered public
accounting rm has unrestricted access to the Audit Committee.
Larry Montgomery Wesley S. McDonald
Chairman and Chief Executive Of cer Executive Vice President - Chief Financial Of cer
16
18. Corporate Information
Corporate Headquarters Executive Committee
Kohl’s Corporation Kenneth Bonning John J. Lesko
N56 W17000 Ridgewood Drive Executive Vice President – Logistics Executive Vice President – Administration
Menomonee Falls, WI 53051-5660 Jack Boyle Kevin Mansell
(262) 703-7000 Executive Vice President – General Merchandise President
Web site: www.kohls.com Manager, Women’s Apparel and Accessories Wesley McDonald
Transfer Agent and Registrar Donald A. Brennan Executive Vice President – Chief Financial Of cer
The Bank of New York Executive Vice President – General Merchandise R. Lawrence Montgomery
Shareholder Relations Dept. 12-E Manager, Men’s and Children’s Chairman and Chief Executive Of cer
P.O. Box 11258
Peggy Eskenasi
Church Street Station Jon Nordeen
Executive Vice President – Product Development
New York, New York 10286 Executive Vice President – Planning & Allocation
(800) 524-4458 Julie Gardner Richard D. Schepp
Web site: www.stockbny.com Executive Vice President – Chief Marketing Of cer Executive Vice President – General Counsel,
Janelle Havner Secretary
Annual Meeting
Executive Vice President – Of ce of Store
The Kohl’s 2007 Annual Meeting of Rick Seeger
Administration/Merchandise Presentation
Shareholders will be held on Wednesday, Executive Vice President – General Merchandise
May 2, 2007 at 10:00 a.m. at the Telvin Je ries Manager, Home and Footwear
Midwest Airlines Center, Milwaukee, Executive Vice President – Human Resources John Worthington
Wisconsin.
Thomas Kingsbury Executive Vice President – Director of Stores
Investor Information/Quarterly Reports Senior Executive Vice President
For quarterly earnings reports and other
Directors
investor information, please visit our
Jay H. Baker Arlene Meier
Web site at www.kohls.com or direct
Retired President, Kohl’s Corporation (b) (c) Retired Chief Operating Of cer, Kohl’s Corporation
your inquiries to the company, Attention:
(Retired from Board of Directors in February 2007)
Investor Relations. (Retiring from Board of Directors in May 2007)
R. Lawrence Montgomery
Steven A. Burd
Form 10-K
Chairman and Chief Executive Of cer,
Chairman, President and Chief Executive Of cer,
Parts I-III of Kohl’s Annual Report on Form
Kohl’s Corporation
Safeway Inc. (b) (c)
10-K, as led with the Securities and
Exchange Commission, are included with Frank V. Sica
Wayne Embry
this report for all shareholders. President, Menemsha Capital Partners, Ltd. (b) (c)
Senior Advisor to the General Manager of the
Toronto Raptors (a) (c)* Peter M. Sommerhauser
Shareholder in the law rm of Godfrey & Kahn, S.C.
Forward-Looking Statement James D. Ericson
Certain statements made within this report are Retired Chairman, President and Chief Executive Of cer, Stephen E. Watson
“forward-looking statements” within the meaning Northwestern Mutual Life Insurance Company (b)* (c) Retired President and CEO, Gander Mountain, L.L.C.
of the Private Securities Litigation Reform Act of (a) (c)
John F. Herma
1995. Such forward-looking statements re ect Retired Chief Operating Of cer, Kohl’s Corporation (a) (c) R. Elton White
management’s current views of future events
Retired President, NCR Corporation (a)* (c)
William S. Kellogg
and nancial performance. These statements
Retired Chief Executive Of cer, Kohl’s Corporation (a) 2006 Audit Committee
are subject to certain risks and uncertainties (b) 2006 Compensation and Stock Option Committee
which could cause Kohl’s actual results to di er Kevin Mansell (c) 2006 Governance and Nominating Committee
materially from those anticipated by the forward- * Denotes Chair
President, Kohl’s Corporation
looking statements. These risks and uncertainties
C ommon S tock Price Ra nge S tock Listing
include, but are not limited to, those described
Fiscal 2006 High Low Fiscal 2005 High Low Kohl’s common stock is listed on the New York
in Exhibit 99.1 to Kohl’s annual report on Form First Quarter $ 56.00 $44.13 First Quarter $ 53.86 $45.26 Stock Exchange under the symbol KSS.
10-K and other factors as may periodically be Second Quarter 59.82 52.93 Second Quarter 58.90 46.50
described in Kohl’s lings with the SEC. Third Quarter 73.58 56.61 Third Quarter 57.44 43.63
Fourth Quarter 73.97 66.25 Fourth Quarter 50.96 42.78
