Kohl's Corporaton

Kohl's Corporation

Cardinal Stritch University

Paul Drewek

Managerial Finance - ADM 406

BSBA 014024

April 24, 2012

INTRODUCTION

We believe Kohl's (NYSE: KSS) is a dynamic company which is currently outperforming its peers. Kohl's has developed unique product lines while increasing sales and inaugurating new stores. Kohl's has a long and storied history of distinction in the ever-evolving world of retail. In an industry that sees competitors flare into and out of existence on a daily basis, Kohl's stands as a testament to great people, great products and great expectations.

The company's focus is delivering brands at an extraordinary value and convenience to its customers. The overall shopping experiences comprise of easily accessible locations, efficient store layouts, strong in-stock positions, centralized fast checkouts, and online shopping. The company's current infrastructure and financial strength permits future long- term expansion and financial growth.

HISTORY

American retailer Kohl's has become a prevalent fixture for the purchase of discounted clothing and home goods in the mid-west for over fifty years. The history of the company however has roots much more modest than present day market dominance would suggest. Dating back to a Wisconsin supermarket in 1946, founder Max Kohl (father of Senator Herb Kohl) grew his small business to the most successful chain of supermarkets in the Milwaukee area (Kohl's Fact Book). By 1962 Kohl opened his first department store in Brookfield, Wisconsin where a wide-ranging selection of merchandise, from sporting goods, motor oil and candy, was sold (Kohl's Corpooration). In 1972, the Kohl's Company which by then consisted of 50 grocery stores, six department stores, three drug stores and three liquor stores, sold 80 percent of its interests to the American subsidiary of British American Tobacco (BAT), p.l.c., BATUS, Inc. The Kohl's family ended participation in the operations of the company soon after the sale (Kohl's Corpooration).

BATUS, like many other tobacco companies began looking to diversify its holdings by acquiring department stores in the 1960's. By the mid-1980's BATUS held 19th place for the largest retail holdings in the United States with assets including Gamble's, Saks Fifth Avenue and Marshall Field & Co. (Kohl's Corpooration). In 1983 BATUS, Inc. dropped its interest in the Kohl's Food Stores to Atlantic and Pacific Tea Company (Kohl's Fact Book). In 1986 a group of private investors purchased the 40 Kohl's department stores and formed Kohl's Corporation. It was during that period of private ownership that the Kohl's management team began to develop the Kohl's sales model that is still in use today (Kohl's Corpooration). The primary focus for the Kohl's management was to define themselves as an affordable family-oriented retailer that was an incorporation of a traditional department store feel but with a lower cost price structure of a discount store. It was also during that time that the company tightened its product line and dropped less profitable items like candy and sewing notions, replacing them with higher profit margin goods like jewelry and linens (Kohl's Corpooration). The innovative business model proved sucessful and two years after forming the Kohl's Corporation, 26 Main Street Stores were purchased from Federataed Department Stores (Kohl's Fact Book). That brought Kohl's total stores owned to 66 and allowed them to enter new markets in Michigan, Minnesota and Chicago (Kohl's Corpooration). In 1992 in order to fund continued expansion of the corporation including a goal of 14-16 additional stores per year, an initial public offering of 11.1 million shares was offered on the public market, one of Wisconsin's largest initial offerings (Kohl's Fact Book). From there Kohl's expansion was exponential over the years, branching throughout the Midwest, Mid-Atlantic and North-East. By the end of 1992 Kohl's had 120 stores and by the end of 1995 had opened 73 additional stores (Kohl's Corpooration).

Kohl's began its expansion into the west in 1999, primarily concentrating on Texas, Missouri and Colorado. Also during this time, 33 Caldor Corporation stores were purchased in New York and Boston through an offering of 2.8 million shares of stock (Kohl's Corpooration). From Kohl's emergence as a public company in 1992-1999, the company more than tripled its numbers of stores while quadrupling its profits (Kohl's Corpooration).

In the summer of 2001 the company launched its e-commerce site Kohls.com and despite a weakening economy after the terrorist attacks in September 2001, Kohl's continued its vigorous expansion into new markets throughout the United States. In 2002 the first stores were opened in Nashville, Tennessee, New Hampshire and Rhode Island adding to the overall total of 457 Kohl's stores. The 2003 expansion into California made Kohl's a bona fide coast-to-coast retail entity (Kohl's Corpooration).

It was during that time of aggressive growth that Kohl's acquired exclusive contracts with name brand labels and celebrity endorsements such as the successful juniors line Candies, and a Daisy Fuentes line of clothing and accessories. The marketing plan of Kohl's exclusive brands as well as a mix of exclusive celebrity endorsed labels in both homewares and clothing proved to be so successful that the company continues to introduce new and updated celebrity endorsed product lines to present day (Brooks, 2005).

By 2011, Kohl's corporation reported 1,097 stores and a net income of $1.1 million dollars (Kohl's Fact Book). Since its first public offering, Kohl's Corporation has shown steady growth and strong profits and much of that is a result of exclusive and private brands, ability to embrace technological changes and carefully adjusting its business model to changing customer expectations. The launching of Kohls.com in 2001 has resulted in steady sales growth in the e-commerce portion of the company. To support the internet sales, a 940,000 square foot distribution center was opened in 2001 and a second one was opened in 2010. As internet sales continued to increase to more than 50% of its previous years sales, a third distribution plant has been acquired in Edgewood, Maryland (The Business Journal, 2011). This would indicate