Market Overview

Kohl's Corporation Reports Financial Results

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  • Shifted comparable sales* increase 3.1%; fiscal comparable sales
    increase 4.3%
  • Gross margin increases 42 bps
  • Raises earnings per share guidance

Kohl's Corporation (NYSE:KSS) today reported results for the three and
six month periods ended August 4, 2018.

           
    Three Months     Six Months
($ in millions, except per share data)   2018     2017     Change     2018     2017     Change
Total revenue   $ 4,570     $ 4,395       4.0 %     $ 8,778     $ 8,460     3.8 %
Comparable sales* 3.1 % (0.4) % 1.8 % (1.5) %
Gross margin 39.5 % 39.1 % 42 bps 38.3 % 37.8 % 46 bps
Selling, general, and administrative expenses $ 1,272 $ 1,220 4.3 % $ 2,532 $ 2,434 4.0 %
Reported
Net income $ 292 $ 208 40 % $ 368 $ 274 34 %
Diluted earnings per share $ 1.76 $ 1.24 42 % $ 2.21 $ 1.62 36 %
Excluding loss on extinguishment of debt:
Net income $ 292 $ 208 40 % $ 399 $ 274 46 %
Diluted earnings per share   $ 1.76       $ 1.24         42 %     $ 2.40       $ 1.62       48 %

*Comparable sales for the 13 weeks ended August 4, 2018 and August 5,
2017

Michelle Gass, Kohl's chief executive officer, said, "We are pleased to
report that our sales momentum continued in the second quarter,
resulting in a comparable sales increase of 3.1%, our fourth consecutive
quarter of positive comparable sales. We saw strength across the
business -- both our store and digital channels, all regions of the
country, and our proprietary and national brands. Our Men's and Women's
apparel businesses led the company, followed closely by Footwear. We
also reported higher gross margin as a result of our ongoing focus on
inventory management. I would like to thank our team for their
outstanding efforts in delivering strong and sustainable performance,
which are reflected in our results."

Dividend

On August 14, 2018, Kohl's Board of Directors declared a quarterly cash
dividend on the Company's common stock of $0.61 per share. The dividend
is payable September 26, 2018 to shareholders of record at the close of
business on September 12, 2018.

Guidance Update

The Company now expects its fiscal 2018 diluted earnings per share to be
$4.96 to $5.36, compared to its prior guidance of $4.86 to $5.31.
Excluding the loss on extinguishment of debt, fiscal 2018 diluted
earnings per share is expected to be $5.15 to $5.55, compared to prior
guidance of $5.05 to $5.50.

Second Quarter 2018 Earnings Conference Call

Kohl's will host its quarterly earnings conference call at 9:00 am ET on
August 21, 2018. The phone number for the conference call is (800)
230-1085. Replays of the call will be available for 30 days by dialing
(800) 475-6701. The conference ID is 433485. The conference call and
replays are also accessible via the Company's website at http://corporate.kohls.com/investors/events-and-presentations.

Cautionary Statement Regarding Forward-Looking
Information

This press release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995,
including 2018 earnings guidance. Kohl's intends forward-looking
terminology such as "believes," "expects," "may," "will," "should,"
"anticipates," "plans," or similar expressions to identify
forward-looking statements. Such statements are subject to certain risks
and uncertainties, which could cause Kohl's actual results to differ
materially from those anticipated by the forward-looking statements.
These risks and uncertainties include, but are not limited to, those
described in Item 1A in Kohl's Annual Report on Form 10-K, which is
expressly incorporated herein by reference, and other factors as may
periodically be described in Kohl's filings with the SEC.

About Kohl's

Kohl's (NYSE:KSS) is a leading omnichannel retailer with more than
1,100 stores in 49 states. With a commitment to inspiring and empowering
families to lead fulfilled lives, Kohl's offers amazing national and
exclusive brands, incredible savings and an easy shopping experience in
our stores, online at Kohls.com and on Kohl's mobile app. Throughout its
history, Kohl's has given nearly $650 million to support communities
nationwide. For a list of store locations or to shop online, visit
Kohls.com. For more information about Kohl's impact in the community or
how to join our winning team, visit Corporate.Kohls.com or follow
@KohlsNews on Twitter.

   
KOHL'S CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

         
Three Months Ended   Six Months Ended
August 4,   July 29, August 4,   July 29,
(Dollars in Millions, Except per Share Data)   2018   2017   2018   2017
Net sales $ 4,310 $ 4,147 $ 8,263 $ 7,962
Other revenue     260       248       515       498  
Total revenue 4,570 4,395 8,778 8,460
Cost of merchandise sold 2,605 2,525 5,101 4,953
Gross margin rate 39.5 % 39.1 % 38.3 % 37.8 %
Operating expenses:
Selling, general, and administrative 1,272 1,220 2,532 2,434
As a percent of total revenue 27.8 % 27.8 % 28.8 % 28.8 %
Depreciation and amortization     241       243       483       482  
Operating income 452 407 662 591
Interest expense, net 65 75 135 150
Loss on extinguishment of debt                 42        
Income before income taxes 387 332 485 441
Provision for income taxes     95       124       117       167  
Net income   $ 292     $ 208     $ 368     $ 274  
 
Average number of shares:
Basic 165 168 165 169
Diluted 166 168 166 169
Earnings per share:
Basic $ 1.77 $ 1.24 $ 2.23 $ 1.62
Diluted $ 1.76 $ 1.24 $ 2.21 $ 1.62
Excluding loss on extinguishment of debt:
Net income $ 292 $ 208 $ 399 $ 274
Diluted earnings per share   $ 1.76     $ 1.24     $ 2.40     $ 1.62  
   
KOHL'S CORPORATION
CONSOLIDATED BALANCE SHEETS

(Unaudited)

         
August 4, July 29,
(Dollars in Millions)   2018   2017
Assets
Current assets:
Cash and cash equivalents $ 1,066 $ 552
Merchandise inventories 3,572 3,853
Other     404       381
Total current assets 5,042 4,786
Property and equipment, net 7,635 8,068
Other assets     238       230
Total assets   $ 12,915     $ 13,084
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 1,404 $ 1,370
Accrued liabilities 1,174 1,125
Income taxes payable 70 43
Current portion of capital lease and financing obligations     122       133
Total current liabilities 2,770 2,671
Long-term debt 2,273 2,796
Capital lease and financing obligations 1,537 1,637
Deferred income taxes 188 268
Other long-term liabilities 660 691
Shareholders' equity     5,487       5,021
Total liabilities and shareholders' equity   $ 12,915     $ 13,084
 
KOHL'S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

       
Six Months Ended
August 4,   July 29,
(Dollars in Millions)   2018   2017
Operating activities
Net income $ 368 $ 274
Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization 483 482
Share-based compensation 50 21
Deferred income taxes (25 ) (2 )
Loss on extinguishment of debt 42
Other non-cash revenues and expenses 13 (5 )
Changes in operating assets and liabilities:
Merchandise inventories (24 ) (53 )
Accrued and other long-term liabilities (88 ) (176 )
Accounts payable 133 (137 )
Other current and long-term assets 89 36
Income taxes     6       (64 )
Net cash provided by operating activities     1,047       376  
 
Investing activities
Acquisition of property and equipment (312 ) (399 )
Other     6       16  
Net cash used in investing activities     (306 )     (383 )
 
Financing activities
Treasury stock purchases (165 ) (250 )
Shares withheld for taxes on vested restricted shares (21 ) (12 )
Dividends paid (202 ) (186 )
Reduction of long-term borrowings (528 )
Premium paid on redemption of debt (35 )
Capital lease and financing obligation activity (64 ) (67 )
Proceeds from stock option exercises     32        
Net cash used in financing activities     (983 )     (515 )
Net decrease in cash and cash equivalents (242 ) (522 )
Cash at beginning of period     1,308       1,074  
Cash at end of period   $ 1,066     $ 552  

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