Kohl’s
Annual Report 2014

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)ýAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended January 31, 2015or¨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) 703-7000Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, $.01 Par Value New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate 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 preceding12 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 andposted 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 andpost 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’sknowledge, 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 “largeaccelerated 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 $11.0billion (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 anaggregate 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.Table of ContentsKOHL’S CORPORATIONINDEX PART I3Item 1.Business3Item 1A.Risk Factors6Item 1B.Unresolved Staff Comments10Item 2.Properties10Item 3.Legal Proceedings12Item 4.Mine Safety Disclosures12 PART II13Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities13Item 6.Selected Consolidated Financial Data16Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations17Item 7A.Quantitative and Qualitative Disclosures About Market Risk30Item 8.Financial Statements and Supplementary Data30Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosures30Item 9A.Controls and Procedures31Item 9B.Other Information32 PART III33Item 10.Directors, Executive Officers and Corporate Governance33Item 11.Executive Compensation34Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters34Item 13.Certain Relationships and Related Transactions, and Director Independence34Item 14.Principal Accountant Fees and Services34 PART IV34Item 15.Exhibits and Financial Statement Schedules35 Signatures36 Exhibit Index37 Index to Consolidated Financial StatementsF-1Table of ContentsPART IItem 1. BusinessKohl’s Corporation (the “Company” or “Kohl’s”) was organized in 1988 and is a Wisconsin corporation. As of January 31, 2015, we operated 1,162department 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 toregional 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 yearsrather than to calendar years. The following fiscal periods are presented in this report.Fiscal YearEnded Number ofWeeks2014January 31, 2015 522013February 1, 2014 522012February 2, 2013 53As 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 customeracross every shopping channel. We strive to offer the appropriate balance between the fashion that our customers want and the everyday basics that theyneed.Our merchandise mix includes both national brands and private and exclusive brands which are available only at Kohl's. In 2014, we continued ouremphasis on national brands as we believe they drive customer traffic and sales increases. National brands generally have higher selling prices than privateand 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. Sellingprices 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 FoodNetwork, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang. Exclusive brands have selling prices which are generally lower thannational brands, but higher than private brands.3Table of ContentsThe charts below summarize the percentage of our sales which were national brands and those which were private and exclusive brands over the lastthree years.We frequently add new products, brands and categories in order to maintain freshness in our inventory assortment and drive customer traffic to ourstores and website. In 2014, we launched the Fitbit, IZOD, Juicy Couture, Gaiam, Nespresso and PUMA brands as well as various Jumping Beans collectionsfeaturing 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 whichwere 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 ofyear-end, approximately half of our stores have newly-renovated beauty departments. We expect to have the new beauty department in approximately 900stores 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'sCash promotions and for being a Kohl's-branded private label credit card holder. In 2014, we launched a nationwide loyalty program called Yes2Yourewards. Customers who enroll earn rewards based on the dollar amount of purchases that they make. As of year-end 2014, approximately 25 millioncustomers 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-coststructure are our unique store format; lean staffing levels; sophisticated systems which enhance productivity and support personalization, predictive analyticsand 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. Whetherthey 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 customerscan 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 shoppingexperience, we are focused on localizing and tailoring what we sell and how we communicate our product. This ensures that our products and offers arepersonally relevant to each and every customer. At the same time, personalized connections is about contributing to causes such as children's health andeducation 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."DistributionWe receive substantially all of our store merchandise at our nine retail distribution centers. A small amount of our merchandise is delivered directly tothe stores by vendors or their distributors. The retail distribution centers, which are strategically located throughout the United Sates, ship merchandise toeach 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 ourretail 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 storesby the end of 2015.See Item 2, “Properties,” for additional information about our distribution centers.4Table of ContentsEmployeesAs 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 acollective bargaining unit. We believe our relations with our associates are very good.CompetitionThe 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 departmentstores, upscale mass merchandisers, off-price retailers, specialty stores, internet and catalog businesses and other forms of retail commerce. Our specificcompetitors vary from market to market.Merchandise VendorsWe purchase merchandise from numerous domestic and foreign suppliers. We have Terms of Engagement requirements which set forth the basicminimum requirements all business partners must meet in order to do business with us. Our Terms of Engagement include provisions regarding laws andregulations, 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 anydeficiencies, 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 morethan 5% of our net purchases during 2014. We have no significant long-term purchase commitments or arrangements with any of our suppliers, and believethat we are not dependent on any one supplier. We believe we have good working relationships with our suppliers.SeasonalityOur business, like that of most retailers, is subject to seasonal influences. The majority of our sales and income are typically realized during the secondhalf 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 ourbusiness, results for any quarter are not necessarily indicative of the results that may be achieved for the fiscal year. Revenues and costs associated with theopening of new stores may also affect our quarterly results.Trademarks and Service MarksThe name “Kohl’s” is a registered service mark of one of our wholly-owned subsidiaries. We consider this mark and the accompanying namerecognition to be valuable to our business. This subsidiary has over 180 additional registered trademarks, trade names and service marks, most of which areused in connection with our private label program.Available InformationOur corporate website is www.KohlsCorporation.com. Through the “Investor Relations” portion of this website, we make available, free of charge, ourproxy 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 amendmentsto 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 EthicsAny amendment to or waiver from the provisions of the Code of Ethics that is applicable to our Chief Executive Officer, Chief Financial Officer or otherkey finance associates will be disclosed on the “Corporate Governance” portion of the website.5Table of ContentsInformation 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 providedwithout 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 FactorsForward-Looking StatementsThis 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 FinancialCondition and Results of Operations. There are a number of important factors that could cause our results to differ materially from those indicated by theforward-looking statements including, among others, those risk factors described below. Forward-looking statements relate to the date made, and weundertake 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, grossmargin and/or operating results.•Declines in general economic conditions, consumer spending levels and other conditions could lead to reduced consumer demand for ourmerchandise.Consumer spending habits, including spending for the merchandise that we sell, are affected by many factors including prevailing economicconditions, 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 havecaused disruptions and significant volatility in financial markets, increased rates of default and bankruptcy and declining consumer and businessconfidence, which has led to decreased levels of consumer spending, particularly on discretionary items. A continued or incremental slowdown in theU.S. economy and the uncertain economic outlook could continue to adversely affect consumer spending habits. As all of our stores are located in theUnited 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 ofterrorist 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 ourbusiness 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 ofretailing to on-line and mobile channels has increased our challenges in differentiating ourselves from other retailers especially as it relates to nationalbrands. In particular, consumers are able to quickly and conveniently comparison shop with digital tools, which can lead to decisions based solely onprice. 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 manageour inventory levels.Our business is dependent on our ability to anticipate fluctuations in consumer demand for a wide variety of merchandise. Failure to accuratelypredict constantly changing consumer tastes, preferences, spending patterns and other lifestyle decisions could create inventory imbalances andadversely affect our performance and long-term relationships6Table of Contentswith our customers. Additionally, failure to accurately predict changing consumer tastes may result in excess inventory, which could result in additionalmarkdowns 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 awide variety of domestic and international vendors. Our ability to find qualified vendors and access products in a timely and efficient manner is asignificant challenge which is typically even more difficult for goods sourced outside the United States. Political or financial instability, traderestrictions, tariffs, currency exchange rates, transport capacity and costs, work stoppages, port strikes, and other factors relating to foreign trade arebeyond 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 andavailability of raw materials may fluctuate substantially, depending on a variety of factors, including demand, weather, supply conditions, transportationcosts, energy prices, work stoppages, government regulation and government policy, economic climates, market speculation and other unpredictablefactors. An inability to mitigate these cost increases, unless sufficiently offset with our pricing actions, might cause a decrease in our profitability. Anyrelated pricing actions might cause a decline in our sales volume. Additionally, a decrease in the availability of raw materials could impair our ability tomeet our production or purchasing requirements in a timely manner. Both the increased cost and lower availability of merchandise, raw materials, fueland 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 foralternate or replacement contracts, transactions or business relationships on terms as favorable as current terms, which could adversely affect our salesand 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 tocomply with all applicable local and national laws and regulations and our Terms of Engagement for Kohl's Business Partners. Our Terms of Engagementinclude employment and ethical standards as well as environmental, legal, communication, monitoring/compliance and other requirements. From time totime, suppliers may not be in compliance with these standards or applicable laws. Significant or continuing noncompliance with such standards and lawsby 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 ourbrands and to build personalized connections with our customers. We believe our marketing programs will strengthen customer loyalty, increase thenumber and frequency of customers that shop our stores and website and increase our sales. If our marketing programs are not successful, our sales andprofitability 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 significantresources to promoting and protecting them. We develop and promote private and exclusive brands that have generated national recognition. In somecases, the brands or the marketing of such brands are tied to or affiliated with well-known individuals. Damage to the reputations (whether or notjustified) of the Kohl’s brand, our private and exclusive brand names or any affiliated individuals, could arise from product failures; concerns abouthuman 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 ourreputation 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 concernscould expose us to government enforcement action and/or7Table of Contentsprivate 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 effectivelymanage 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 interruptionsassociated with implementing technology initiatives or the failure of our information systems to perform as designed could disrupt our business andharm 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 bysevere or unexpected weather conditions. Frequent or unusually heavy snow, ice or rain storms; natural disasters such as earthquakes, tornadoes, floodsand 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, socialmedia and/or other interactions. We strive to offer a desirable omni-channel shopping experience for our customers and use social media as a way tointeract 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-facingtechnology in a timely manner. Our ability to compete may also suffer if Kohl’s, our suppliers, or our third-party shipping and delivery vendors areunable 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-onlyretailer. 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 customerdemand, which could affect our revenue and our future growth. If we overstock products, we may be required to take significant inventory markdowns orwrite-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 toincreased holiday demand, we may experience system interruptions that make our website unavailable or prevent us from efficiently fulfilling orders, whichmay reduce the volume of goods we sell and the attractiveness of our products and services. Also, third-party delivery, direct ship vendors and customerservice 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 orprofitability during the second half of the fiscal year could have a disproportionately adverse effect on our results of operations.8Table of ContentsOur 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 maintainedlines of credit with financial institutions. Changes in the credit and capital markets, including market disruptions, limited liquidity and interest ratefluctuations, may increase the cost of financing or restrict our access to these potential sources of future liquidity. Our continued access to these liquiditysources on favorable terms depends on multiple factors, including our operating performance and maintaining strong debt ratings. If our credit ratings fallbelow desirable levels, our ability to access the debt markets and our cost of funds for new debt issuances could be adversely impacted. Additionally, ifunfavorable capital market conditions exist if and when we were to seek additional financing, we may not be able to raise sufficient capital on favorableterms 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 increasesignificantly, 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, managingdebt levels, and periodically returning value to our shareholders through share repurchases and dividends. To a large degree, capital efficiency reflects howwell 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 capitalefficiency. If we do not properly allocate our capital to maximize returns, we may fail to produce optimal financial results and we may experience a reductionin 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'scredit 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 offinance charges, late fees and other revenue less write-offs of uncollectible accounts. Changes in funding costs related to interest rate fluctuations will beshared similar to the revenue if interest rates exceed defined amounts. Though management currently believes that increases in funding costs will be largelyoffset 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 cannotcontrol 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-timepositions 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 attractand 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, minimumwage legislation, actions by our competitors in compensation levels and changing demographics. Changes that adversely impact our ability to attract andretain quality associates could adversely affect our performance. In addition, changes in federal and state minimum wage laws and other laws relating toemployee 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 costsand other effects of new or changed legal requirements cannot be determined with certainty. For example, new legislation or regulations may result inincreased costs directly for our compliance or indirectly to the extent such requirements increase prices of goods and services, reduce the availability of rawmaterials 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 complywith such laws and regulations may result in an erosion of our reputation, disruption of business and/or loss of associate morale. Additionally, we areregularly involved in various litigation matters that arise out of the conduct of our business. Litigation or regulatory developments could adversely affect ourbusiness operations and financial performance.9Table of ContentsUnauthorized disclosure of sensitive or confidential customer, associate or company information could severely damage our reputation, expose us to risksof 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. Theprotection of this data is extremely important to us, our associates and our customers. Despite the considerable security measures we have in place, ourfacilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplacedor lost data, programming and/or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorizeddisclosure of confidential information, whether by us or our vendors, could disrupt our operations, damage our reputation and customers' willingness to shopin our stores or on our website, violate applicable laws, regulations, orders and agreements, and subject us to additional costs and liabilities which could bematerial.Item 1B. Unresolved Staff CommentsNot applicableItem 2. PropertiesStoresAs 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 approximately88,000 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 andserve 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 ofour 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 theleases provide for additional rent based on a percentage of sales over designated levels.10Table of ContentsThe following tables summarize key information about our stores. Number of Stores Number of Stores 2013 NetChange 2014 2013 NetChange 2014 Mid-Atlantic Region: South Central Region: Delaware5 — 5 Arkansas8 — 8Maryland23 — 23 Kansas12 — 12Pennsylvania50 — 50 Louisiana6 2 8Virginia30 — 30 Missouri26 — 26West Virginia7 — 7 Oklahoma10 1 11Total Mid-Atlantic115 — 115 Texas85 — 85Midwest Region: Total South Central147 3 150Illinois66 — 66 Southeast Region: Indiana39 — 39 Alabama14 — 14Iowa18 — 18 Florida53 — 53Michigan45 — 45 Georgia35 — 35Minnesota26 — 26 Kentucky16 1 17Nebraska7 — 7 Mississippi5 — 5North Dakota4 — 4 North Carolina31 — 31Ohio58 — 58 South Carolina15 1 16South Dakota3 — 3 Tennessee20 — 20Wisconsin40 — 40 Total Southeast189 2 191Total Midwest306 — 306 West Region: Northeast Region: Alaska1 — 1Connecticut21 1 22 Arizona26 — 26Maine5 — 5 California128 (2) 126Massachusetts25 — 25 Colorado24 — 24New Hampshire11 — 11 Idaho5 — 5New Jersey38 — 38 Montana2 — 2New York51 (1) 50 Nevada12 — 12Rhode Island3 — 3 New Mexico5 — 5Vermont1 — 1 Oregon11 — 11Total Northeast155 — 155 Utah12 — 12 Washington18 1 19 Wyoming2 — 2 Total West246 (1) 245 Total Kohl’s1,158 4 1,16211Table of Contents Number of Storesby Store Type Number of Storesby Ownership 2013 NetChange 2014 2013 NetChange 2014Prototype993 (5) 988 Owned412 1 413Small165 9 174 Leased* 1,158 4 1,162 Operating lease246 4 250 On-balance sheet500 (1) 499 Number of Stores by Location Total leased746 3 749 1,158 4 1,162 2013 NetChange 2014 * Includes locations where we lease the land and/or buildingStrip centers777 3 780 Community & regional malls85 — 85 Freestanding296 1 297 1,158 4 1,162 Distribution CentersThe following table summarizes key information about each of our distribution centers. YearOpened SquareFootageFindlay, Ohio1994 780,000Winchester, Virginia1997 420,000Blue Springs, Missouri1999 540,000Corsicana, Texas2001 540,000Monroe, Ohio*2001 1,200,000Mamakating, New York2002 605,000San Bernardino, California2002 575,000Macon, Georgia2005 560,000Patterson, California2006 360,000Ottawa, Illinois2008 328,000San Bernardino, California*2010 970,000Edgewood, Maryland*2011 1,450,000DeSoto, Texas*2012 1,200,000* On-line fulfillment centersWe own all of the distribution centers except Corsicana, Texas, which is leased.Corporate FacilitiesWe own our corporate headquarters in Menomonee Falls, Wisconsin. We also own or lease additional buildings and office space which are used byvarious corporate departments, including our credit operations.Item 3. Legal ProceedingsWe 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 ofthe conduct of our business.Item 4. Mine Safety DisclosuresNot applicable12Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities(a) Market informationOur Common Stock has been traded on the New York Stock Exchange ("NYSE") since May 19, 1992, under the symbol “KSS.” The prices in the tableset forth below indicate the high and low sales prices of our Common Stock per the New York Stock Exchange Composite Price History and our quarterlycash 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 $0.35Third Quarter62.50 53.74 0.39 57.04 49.84 0.35Second Quarter55.89 51.00 0.39 54.16 47.00 0.35First Quarter57.89 49.09 0.39 49.32 45.21 0.35On 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 asof March 11, 2015. In 2014, we paid aggregate cash dividends of $317 million.(b) HoldersAs of March 11, 2015, there were approximately 4,200 record holders of our Common Stock.(c) Securities Authorized For Issuance Under Equity Compensation PlansSee the information provided in the “Equity Compensation Plan Information” section of the Proxy Statement for our May 14, 2015 Annual Meeting ofShareholders, which information is incorporated herein by reference.13Table of Contents(d) Performance GraphThe graph below compares our cumulative five-year shareholder return to that of the Standard & Poor’s 500 Index and a Peer Group Index that isconsistent with the retail peer group used in the Compensation Discussion & Analysis section of our Proxy Statement for our May 14, 2015 Annual Meetingof 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.CPenney Company, Inc.; Limited Brands, Inc.; Macy’s, Inc.; Nordstrom, Inc.; Ross Stores, Inc.; Sears Holding Corporation; Target Corporation; and The TJXCompanies, Inc. The Peer Group Index is weighted by the market capitalization of each component company at the beginning of each period. The graphassumes an investment of $100 on January 30, 2010 and reinvestment of dividends. The calculations exclude trading commissions and taxes.Company / IndexJan 30, 2010 Jan 29, 2011 Jan 28, 2012 Feb 2, 2013 Feb 1, 2014 Jan 31, 2015Kohl’s Corporation$100.00 $101.65 $94.58 $95.78 $108.30 $131.35S&P 500 Index100.00 121.26 127.72 150.20 180.70 206.41Peer Group Index100.00 118.35 140.64 169.67 187.33 239.18(e) Recent Sales of Unregistered Securities; Use of Proceeds from Registered SecuritiesWe 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 PurchasersIn 2012, our Board of Directors authorized the repurchase of $3.5 billion of our shares of common stock. Purchases under the repurchase program maybe made in the open market, through block trades and other negotiated transactions. We expect to execute the share repurchase program primarily in openmarket 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Table of ContentsThe following table contains information for shares repurchased and shares acquired from employees in lieu of amounts required to satisfy minimumtax withholding requirements upon the vesting of the employees’ restricted stock during the three fiscal months ended January 31, 2015:PeriodTotalNumberof SharesPurchasedDuringPeriod AveragePricePaid PerShare Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPlans orPrograms ApproximateDollar Value ofShares that MayYet Be PurchasedUnder the Plans orPrograms (Dollars In Millions)November 2 – November 29, 2014942,839 $56.61 941,999 $1,714November 30, 2014 – January 3, 2015713,532 58.19 712,237 1,673January 4 – January 31, 2015494,521 60.02 466,162 1,645Total2,150,892 $57.92 2,120,398 $1,64515Table of ContentsItem 6. Selected Consolidated Financial DataThe selected consolidated financial data presented below should be read in conjunction with our consolidated financial statements and related notesincluded elsewhere in this document. The Statement of Income and Balance Sheet Data have been derived from our audited consolidated financialstatements. 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 $18,391Cost of merchandise sold12,098 12,087 12,289 11,625 11,359Gross margin6,925 6,944 6,990 7,179 7,032Selling, general and administrative expenses4,350 4,313 4,267 4,243 4,190Depreciation and amortization886 889 833 778 750Operating income1,689 1,742 1,890 2,158 2,092Interest expense, net340 338 329 299 304Income before income taxes1,349 1,404 1,561 1,859 1,788Provision for income taxes482 515 575 692 668Net income$867 $889 $986 $1,167 $1,120Basic earnings per share$4.28 $4.08 $4.19 $4.33 $3.69Diluted earnings per share$4.24 $4.05 $4.17 $4.30 $3.66Dividends 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 $231As a percent of sales: Gross margin36.4 % 36.5 % 36.3% 38.2% 38.2%Operating income8.9 % 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 80,139Number of stores (end of period)1,162 1,158 1,146 1,127 1,089Balance Sheet Data: Working capital$2,839 $2,556 $2,184 $2,222 $2,888Total assets14,431 14,357 13,905 14,148 14,891Long-term debt2,793 2,792 2,492 2,141 1,894Capital lease and financing obligations1,968 2,069 2,061 2,103 2,104Shareholders’ equity5,991 5,978 6,048 6,508 7,850Cash flow from operations2,024 1,884 1,265 2,139 1,750Capital expenditures682 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 prioryear periods and omni-channel sales. Fiscal 2013 comparable sales growth compares the 52 weeks ended February 1, 2014 to the 52 weeks endedJanuary 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Table of ContentsItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsExecutive SummaryAs of January 31, 2015, we operated 1,162 family-focused, value-oriented department stores and a website (www.Kohls.com) that sell moderately-pricedprivate label, exclusive and national brand apparel, footwear, accessories, beauty and home products. Our stores generally carry a consistent merchandiseassortment with some differences attributable to regional preferences. Our website includes merchandise which is available in our stores, as well asmerchandise 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 toincrease 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 ouremphasis 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 hasincreased 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 pleasedwith the results that we saw in its first year. Comparable sales and number of transactions improved throughout the year. In the fourth quarter, bothcomparable 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 byhigher 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 tolaunch our new loyalty program and to increase customer traffic and invested in omni-channel technology initiatives. Variable expenses, including storepayroll, 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 salesand free cash flow (a non-GAAP financial measure).17Table of Contents2015 OutlookOur current expectations for 2015 are as follows: Total salesIncrease 1.8 - 2.8%Comparable salesIncrease 1.5 - 2.5%Gross margin as a percent of salesIncrease 0 - 20 bpsSG&AIncrease 1.5 - 2.5%Depreciation$940 millionInterest$335 millionEffective tax rate37%Earnings per diluted share$4.40 - $4.60Capital expenditures$800 millionShare repurchases: Total repurchases$1 billionCost per share$70.00Results of OperationsNet Sales.As our omni-channel strategy continues to mature, it is increasingly difficult to distinguish between a "store" sale and an "E-Commerce" sale. Ourwebsite 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-channelexamples:•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 of2015.•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 anycombination 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. Wealso include omni-channel sales in our comparable sales.18Table of ContentsThe following table summarizes net sales: 2014 2013 2012Net sales (In Millions)$19,023 $19,031 $19,279Increase (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 andomni-channel sales. 2013 compares the 52 weeks ending February 1, 2014 to the 52 weeks ending January 26, 2013. 2012 compares the 52 weeksended 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 revenues46 — 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 2013Selling price per unit2.8 % (0.4)%Units per transaction(0.8) 1.5Average transaction value2.0 1.1Number 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 ascustomers purchased fewer items in response to the higher prices. Transactions improved throughout the year and were higher in the fourth quarter as theGreatness 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 salesdecreases 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 thelargest increase. Accessories, led by bath and beauty, was slightly above the Company average, primarily as a result of our beauty remodel program. Homeand Women's both underperformed the Company average. Active was the strongest category in the Men's,Women's, and Footwear businesses. Electrics andluggage 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Table of ContentsNet sales for 2013 decreased $248 million from 2012 and comparable sales decreased 1.2%. From a line of business perspective, Children's, Men's andHome outperformed the Company average in 2013. Comparable sales in Women's was consistent with the Company average, while Accessories and Footwearwere 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 $6,990As a percent of net sales36.4% 36.5% 36.3%Gross margin includes the total cost of products sold, including product development costs, net of vendor payments other than reimbursement ofspecific, incremental and identifiable costs; inventory shrink; markdowns; freight expenses associated with moving merchandise from our vendors to ourdistribution centers; shipping and handling expenses of on-line sales; and terms cash discount. Our gross margin may not be comparable with that of otherretailers because we include distribution center costs in selling, general and administrative expenses while other retailers may include these expenses in costof 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 lossesreduced 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 ourmerchandise sales margin. This increase was primarily due to modest decreases in apparel costs in 2013. Partially offsetting this increase were higher shippinglosses 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-linebusiness.Selling, general and administrative expenses. 2014 2013 2012 (Dollars in Millions)Selling, general, and administrative expenses$4,350 $4,313 $4,267As a percent of net sales22.9% 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 distributioncenters 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 includedepreciation 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 $32Marketing costs, excluding credit card operations21 9Distribution costs10 27Store expenses(4) 27Net 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 anddecrease 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 salesdecreased from the prior year, the expense "leveraged" and indicates that the expense was well-managed or effectively generated additional sales. If theexpense as a percent of sales20Table of Contentsincreased 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-channelstrategy. 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 inthe 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 higherdistribution 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 revenuesfrom credit card operations are the result of higher finance charge revenues and late fees due to growth in the portfolio. Partially offsetting these increaseswere 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 pointsin 2013. The increase in SG&A was due primarily to higher distribution costs, increased marketing, investments in technology and infrastructure related toour 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 $833Interest expense, net340 338 329Provision for income taxes482 515 575Effective tax rate35.7% 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. Theincrease 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 dueto 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.InflationAlthough we expect that our operations will be influenced by general economic conditions, including food, fuel and energy prices, and by costs tosource 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 ourbusiness will not be impacted by such factors in the future.21Table of ContentsLiquidity and Capital ResourcesThe 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 extendedpayment terms• Line of credit under our revolving credit facilityOur 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 $1,265Investing 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 financialmeasure.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 receiptvolume 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 lowerbonus 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 theexpansion of our corporate campus, increased IT spending and the purchase and build out of a call center in Texas, partially offset by decreased new storespending.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 havenow 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 ourinvestments at par.22Table of ContentsThe following table summarizes expected and actual capital expenditures by major category as a percentage of total capital expenditures: 2015Estimate 2014 2013 2012Computer hardware and software41% 43% 45% 33%Store refresh41 34 29 29New stores4 7 9 19Distribution centers8 3 7 15Corporate expansion including credit4 12 9 3Other2 1 1 1Total100% 100% 100% 100%We expect total capital expenditures of approximately $800 million in fiscal 2015. The actual amount of our future capital expenditures will dependon the number and timing of new stores and refreshes; expansion and renovations to distribution centers; the mix of owned, leased or acquired stores; and ITand 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 capitalexpenditures 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 arediscretionary in nature. The timing and amount of repurchases is based upon available cash balances, our stock price and other factors. The shares werepurchased as part of our share repurchase program. We have $1.6 billion of authorized share repurchases remaining from the $3.5 billion program approvedby our Board of Directors in November 2012. We expect to execute the share repurchase program primarily in open market transactions, subject to marketconditions.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 in2018. 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 FitchLong-term debtBaa1 BBB BBB+We may from time to time seek to retire or purchase our outstanding debt through open market cash purchases, privately negotiated transactions orotherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Theamounts 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 QuarterDeclaration dateFebruary 26 May 14 August 12 November 12Record dateMarch 12 June 11 September 10 December 10Payment dateMarch 26 June 25 September 24 December 24Amount per common share$0.39 $0.39 $0.39 $0.39On 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Table of ContentsOur 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 FlowWe 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 ofhigher cash provided by operating activities in 2014. Free cash flow is a non-GAAP financial measure which we define as net cash provided by operatingactivities 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, otherfinancial measures such as net income and cash flow provided by operating activities. We believe that free cash flow represents our ability to generateadditional 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 2012Liquidity Ratios:(Dollars in Millions)Working capital$2,839 $2,556 $2,184Current ratio1.99 1.93 1.86Free Cash Flow (a)$1,234 $1,127 $381Return on Investment Ratios: Ratio of earnings to fixed charges3.6 3.7 4.1Return on Assets6.0% 6.2% 6.9%Return on Gross Investment (a)15.1% 15.5% 16.8%Capital Structure Ratios: Debt/capitalization44.3%44.8%42.9%Adjusted Debt to EBITDAR (a)2.452.422.23(a) Non-GAAP financial measureLiquidity ratios.Liquidity measures our ability to meet short-term cash needs. Working capital increased $283 million and our current ratio increased 6 basis pointsover year-end 2013. In 2013, working capital increased $372 million and our current ratio increased 7 basis points over year-end 2012. The increases wereprimarily 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 ongross 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 keyfinancial 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 andtotal assets and compared with return on assets, it provides investors with a useful tool to evaluate our ongoing operations and our management of assets fromperiod 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 beevaluated 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 January31, 2015, we were in compliance with all debt covenants and expect to remain in compliance during 2015. See the key financial ratio calculations sectionbelow 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Table of ContentsOur 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. AdjustedDebt to EBITDAR is a non-GAAP financial measure which we define as our adjusted outstanding debt balance divided by EBITDAR. We believe that ourdebt levels are best analyzed using this measure. Our current goals are to maintain an Adjusted Debt to EBITDAR ratio of approximately 2.25, to managedebt levels to maintain a BBB+ investment-grade credit rating and to operate with an efficient capital structure for our size, growth plans and industry. Weexceeded 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 debtlevels 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 toEBITDAR calculation may not be comparable to similarly-titled measures reported by other companies. Adjusted Debt to EBITDAR should be evaluated inaddition to, and not considered a substitute for, other financial measures such as debt/capitalization. See the key financial ratio calculations section below forour 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 $1,265Acquisition of property & equipment(682) (643) (785)Capital lease & financing obligation payments(114) (115) (111)Proceeds from financing obligations6 1 12Free cash flow$1,234$1,127$381The 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 $1,890Depreciation and amortization886 889 833Rent expense277270265EBITDAR$2,852$2,901$2,988Average: (a) Total assets$14,406 $14,335 $14,266Cash equivalents and long-term investments (b)(477) (321) (677)Deferred tax and other assets(140) (149) (126)Accumulated depreciation and amortization5,743 5,457 4,943Accounts 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 2,573Gross Investment (“AGI”)$18,893 $18,771 $17,800Return 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 Investment25Table of ContentsThe 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$4,768Permitted exclusions(7) Subtotal4,761Rent x 82,216 Included Indebtedness$6,977 Adjusted Debt Compliance EBITDAR Net income$867Rent expense277Depreciation and amortization886Net interest340Provision for income taxes482EBITDAR2,852Stock based compensation48Other non-cash revenues and expenses13Adjusted Debt Compliance EBITDAR$2,913 Debt Ratio (a)2.40Maximum permitted Debt Ratio3.75(a) Included Indebtedness divided by Adjusted Debt Compliance EBITDARThe 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 $4,553Rent x 82,216 2,160 2,120Adjusted Debt$6,977 $7,021 $6,673Total Equity$5,991 $5,978 $6,048EBITDAR per above$2,852 $2,901 $2,988Debt/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 EBITDAR26Table of ContentsContractual ObligationsOur contractual obligations as of January 31, 2015 were as follows: Maturing in: Total 2015 2016and2017 2018and2019 2020andafter (Dollars In Millions)Recorded contractual obligations: Long-term debt$2,800 $— $650 $— $2,150Capital lease and financing obligations1,510 99 217 190 1,004 4,310 99 867 190 3,154Unrecorded contractual obligations: Interest payments: Long-term debt1,617 149 298 216 954Capital lease and financing obligations2,681 180 336 303 1,862Operating leases (a)5,800 246 481 476 4,597Purchase obligations (b)4,366 4,366 — — —Other (c)699 289 271 110 29 15,163 5,230 1,386 1,105 7,442Total$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 includedin 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 leaseterm 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 arecancelable 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 paymentsassociated 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 contractualobligations table because we are not able to reasonably estimate the timing of cash settlements. It is reasonably possible that such tax positions may changewithin 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 isnot anticipated that payment of any such amounts in future periods will materially affect liquidity and cash flows.Off-Balance Sheet ArrangementsWe 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 operatingour business. We do not have any arrangements or relationships with entities that are not consolidated into the financial statements that are reasonably likelyto materially affect our financial condition, liquidity, results of operations or capital resources.Critical Accounting Policies and EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimatesand 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Table of ContentsRetail Inventory Method and Inventory ValuationWe 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 ofthe inventories. Inherent in the retail inventory method are certain management estimates that may affect the ending inventory valuation as well as grossmargin.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 theretail value of inventories. Management estimates the need for an additional markdown reserve based on a review of historical clearance markdowns, currentbusiness 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 differencebetween the recorded amount of inventory and the physical inventory. Shrink may occur due to theft, loss, inaccurate records for the receipt of inventory ordeterioration 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. Thoughhistorical 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 basispoint change in estimated inventory shrink would also have had an immaterial impact on our financial statements.Vendor AllowancesWe receive allowances from many of our merchandise vendors. These allowances often are reimbursements for markdowns that we have taken in orderto sell the merchandise and/or to support the gross margins earned in connection with the sales of merchandise. The allowances generally relate to soldinventory or permanent markdowns and, accordingly, are reflected as reductions to cost of merchandise sold. Allowances related to merchandise that has notyet 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 ofcosts 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 arrangementsvary significantly from vendor to vendor and are influenced by, among other things, the type of merchandise to be supported. Vendor allowances willfluctuate based on the amount of promotional and clearance markdowns necessary to liquidate the inventory as well as advertising and other reimbursedcosts.Insurance Reserve EstimatesWe 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. Werecord reserves for workers’ compensation and general liability claims which include the total amounts that we expect to pay for a fully developed loss andrelated 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 andseverity 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 weoperate could result in a change to the required reserve levels. Changes in actuarial assumptions28Table of Contentscould 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 estimatethe liability for incurred, but not reported, health care claims. This estimate uses historical claims information as well as estimated health care trends. As ofJanuary 31, 2015, we had recorded approximately $14 million for medical, pharmacy and dental claims which were incurred in 2014 and expected to be paidin 2015. Historically, our actuarial estimates have not been materially different from actual results.Impairment of AssetsAs of January 31, 2015, our investment in buildings and improvements, before accumulated depreciation, was $10 billion. We review these buildingsand improvements for impairment when an event or changes in circumstances, such as decisions to close a store or significant operating losses, indicate thecarrying 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 ofthese estimates is the cash flow expected to result from the use and eventual disposition of the asset. When determining the stream of projected future cashflows associated with an individual store, management estimates future store performance including sales growth rates, gross margin and controllableexpenses, such as store payroll and occupancy expense. Projected cash flows must be estimated for future periods throughout the remaining life of theproperty, 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 generaleconomic 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 relatedimprovements, net of accumulated depreciation, would not generally be material to our financial results.Income TaxesWe regularly evaluate the likelihood of realizing the benefit for income tax positions we have taken in various federal and state filings by consideringall 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 abenefit at the largest amount which we believe is cumulatively greater than 50% likely to be realized. Our unrecognized tax benefit, excluding accruedinterest 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 variousincome tax audits and our particular facts and circumstances. Also, as audits are completed or statutes of limitations lapse, it may be necessary to recordadjustments to our taxes payable, deferred tax assets, tax reserves or income tax expense. Although we believe we have adequately reserved for our uncertaintax positions, no assurance can be given that the final tax outcome of these matters will not be different.Operating LeasesAs of January 31, 2015, 749 of our 1,162 retail stores were subject to either a ground or building lease. Accounting for leased properties requirescompliance with technical accounting rules and significant judgment by management. Application of these accounting rules and assumptions made bymanagement will determine whether we are considered the owner for accounting purposes or whether the lease is accounted for as a capital or operating leasein 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 orcapital lease obligation on our balance sheet. The asset is then depreciated over its expected lease term. Rent payments for these properties are recognized asinterest 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 theexpected lease term.29Table of ContentsThe 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 suchoptions would result in an economic penalty. The expected lease term is used in determining whether the lease is accounted for as an operating leaseor 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 alsoused in determining the depreciable life of the asset or the straight-line rent recognition period. Increasing the expected lease term will increase theprobability that a lease will be considered a capital lease and will generally result in higher rent expense for an operating lease and higher interestand 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 expectedlease term and our credit spread. The incremental borrowing rate is primarily used in determining whether the lease is accounted for as an operatinglease 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 valueof the property. Increasing the incremental borrowing rate decreases the net present value of the lease payments and reduces the probability that alease will be considered a capital lease. For leases which are recorded on our balance sheet with a related capital lease or financing obligation, theincremental 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 asprovided by third-party appraisers or consideration received from the landlord. Fair market value is used in determining whether the lease isaccounted 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 greaterthan 90% of the fair market value of the property. Increasing the fair market value reduces the probability that a lease will be considered a capitallease. Fair market value is also used in determining the amount of property and related financing obligation to be recognized on our balance sheetfor certain leased properties which are considered owned for accounting purposes.Item 7A. Quantitative and Qualitative Disclosures About Market RiskAll 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 debtinstruments 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 lesswrite-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 impactedby various factors, including our ability to pass higher funding costs on to the credit card holders and the outstanding receivable balance, and cannot bereasonably estimated at this time. Item 8. Financial Statements and Supplementary DataThe financial statements are included in this report beginning on page F-3.Item 9. Changes In and Disagreements with Accountants on Accounting and Financial DisclosuresNone30Table of ContentsItem 9A. Controls and Procedures(a) Evaluation of Disclosure Controls and ProceduresUnder the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried outan evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (the “Evaluation”) at a reasonable assurance level asof 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 areeffective 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 submitunder the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controlsand procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file orsubmit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, toallow 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 therecan 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 ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system wasdesigned to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of our publishedfinancial statements.All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective canprovide 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 overfinancial 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 AnnualReport 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 financialreporting.(c) Changes in Internal Control Over Financial ReportingDuring the last fiscal quarter, there were no changes in our internal controls that have materially affected or are reasonably likely to materially affectsuch controls, including any corrective actions with regard to significant deficiencies and material weaknesses.31Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Kohl's CorporationWe 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'sCorporation's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Ourresponsibility 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 requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe 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 financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internalcontrol over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the companyare being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financialstatements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof 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, basedon the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets 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 datedMarch 20, 2015 expressed an unqualified opinion thereon./s/ Ernst & Young LLPMilwaukee, WisconsinMarch 20, 2015Item 9B. Other InformationNone32Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceFor 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 ProxyStatement for our May 14, 2015 Annual Meeting of Shareholders (“our 2015 Proxy”), which information is incorporated herein by reference. For informationwith respect to Section 16 reports, see the information provided in the “Section 16(a) Beneficial Ownership Reporting Compliance” section of our 2015Proxy, which information is incorporated herein by reference.Our executive officers as of January 31, 2015 were as follows:NameAge PositionKevin Mansell62 Chairman, Chief Executive Officer and PresidentMichelle Gass46 Chief Customer OfficerKenneth Bonning57 Senior Executive Vice PresidentWesley S. McDonald52 Senior Executive Vice President, Chief Financial OfficerRichard D. Schepp54 Senior Executive Vice PresidentMr. Mansell is responsible for Kohl’s strategic direction, long-term growth and profitability. He has served as Chairman since September 2009, ChiefExecutive 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 storeplanning. Previously, he had served as Executive Vice President, Logistics, Facilities and Store Planning from October 2006 to May 2011. Mr. Bonningbegan 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 planningand 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, realestate and internal audit. Mr. Schepp assumed responsibility for our human resource department in April 2012. He previously served as Executive VicePresident—General Counsel, Secretary from August 2001 to May 2011. Mr. Schepp began his retail career in 1992.33Table of ContentsMembers of our Board of Directors as of January 31, 2015 were as follows: Kevin MansellChairman, President and Chief ExecutiveOfficer,Kohl’s Corporation Frank V. Sica (b)* (c)Managing Partner,Tailwind Capital Peter Boneparth (b) (c)Former Senior Advisor,Irving Place Capital PartnersFormer President and Chief Executive Officer,Jones Apparel Group Peter M. SommerhauserShareholder,Godfrey & Kahn, S.C. Law Firm Steven A. Burd (b) (c)Founder and Chief Executive Officer,Burd Health LLCFormer Chairman, Chief Executive Officer and President,Safeway Inc. Stephanie A. Streeter(a) (c)*Chief Executive OfficerLibbey, 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 StoreDivision of Dayton-Hudson Corporation(a)Audit Committee member(b)Compensation Committee member(c)Governance & Nominating Committee member* Denotes ChairItem 11. Executive CompensationSee the information provided in the applicable portions of the “Questions and Answers About our Board of Directors and Corporate GovernanceMatters” 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 MattersSee the information provided in the “Security Ownership of Certain Beneficial Owners, Directors and Management” and “Equity Compensation PlanInformation” sections of our 2015 Proxy, which information is incorporated herein by reference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceSee the information provided in the “Independence Determinations & Related Party Transactions” section of our 2015 Proxy, which information isincorporated herein by reference.Item 14. Principal Accountant Fees and ServicesSee the information provided in the “Fees Paid to Ernst & Young” section of our 2015 Proxy, which information is incorporated herein by reference.34Table of ContentsPART 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 andthe 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Table of ContentsSignaturesPursuant 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 itsbehalf 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, 2015Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the date indicated above: /S/ KEVIN MANSELLKevin MansellChairman, President, Chief Executive Officer and Director(Principal Executive Officer) /S/ PETER BONEPARTHPeter BoneparthDirector /S/ PETER M. SOMMERHAUSERPeter M. SommerhauserDirector /S/ STEVEN A. BURDSteven A. BurdDirector /S/ STEPHANIE A. STREETERStephanie A. StreeterDirector /S/ DALE E. JONESDale E. JonesDirector /S/ NINA G. VACANina G. VacaDirector /S/ JOHN E. SCHLIFSKEJohn E. SchlifskeDirector /S/ STEPHEN E. WATSONStephen E. WatsonDirector /S/ FRANK V. SICAFrank V. SicaDirector 36Table of ContentsExhibit IndexExhibitNumber Description3.1 Amended and Restated Articles of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 of the Company’sCurrent 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 onForm 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., asthe Administrative Agent and as a Continuing Lender and as an Issuing Bank and a Swing Line Lender, U.S Bank National Association, asa Continuing Lender, an Issuing Bank, and a Swing Line Lender, and Wells Fargo Bank, National Association, as a Continuing Lender, anIssuing Bank, and a Swing Line Lender, incorporated herein by reference to Item 4.1 of the Company's Quarterly Report on Form 10-Q forthe 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 tothe Commission, upon request, copies of any instruments defining the rights of holders of any such long-term debt described in Note 2and 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 CapitalOne, National Association, incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for thefiscal 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-Qfor 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’sAnnual 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 byreference 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 forthe 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 theCompany’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 onMarch 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-Qfor 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 onForm 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 onForm 10-Q for the fiscal quarter ended August 2, 2008.* 37Table of ContentsExhibitNumber Description10.10 Kohl’s Corporation 2010 Long Term Compensation Plan, incorporated herein by reference to Annex A to the Proxy Statement onSchedule 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, incorporatedherein 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 hereinby 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, incorporatedherein 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, incorporatedherein 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 2014grant), incorporated herein by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May3, 2014.* 10.14 Form of Outside Director Stock Option Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan, incorporatedherein 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 datedas of November 14, 2014, incorporated herein by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed onNovember 14, 2014.* 10.18(a) Amended and Restated Employment Agreement between Kohl’s Corporation and Kohl’s Department Stores, Inc. and Donald Brennandated 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 fiscalyear 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 byreference 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 MichelleGass, 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. McDonalddated 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 fiscalyear ended February 2, 2013.*38Table of ContentsExhibitNumber Description10.21 Amended and Restated Employment Agreement dated as of April 1, 2012 by and between Kohl's Corporation and Kohl's DepartmentStores, Inc. and Richard D. Schepp, incorporated by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for thefiscal 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 DepartmentStores, 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 VicePresidents, incorporated herein by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2013.* 12.1 Ratio of Earnings to Fixed Charges. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young LLP. 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002. 32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase *A management contract or compensatory plan or arrangement.39Table of ContentsIndex to Consolidated Financial Statements PageConsolidated Financial Statements Report of Independent Registered Public Accounting FirmF-2 Consolidated Balance SheetsF-3 Consolidated Statements of IncomeF-4 Consolidated Statements of Comprehensive IncomeF-4 Consolidated Statements of Changes in Shareholders’ EquityF-5 Consolidated Statements of Cash FlowsF-6 Notes to Consolidated Financial StatementsF-7Schedules have been omitted as they are not applicable.F-1Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Kohl's CorporationWe have audited the accompanying consolidated balance sheets of Kohl's Corporation (the "Company") 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 theperiod ended January 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinionon these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kohl'sCorporation at January 31, 2015 and February 1, 2014, and the consolidated results of its operations and its cash flows for each of the three years in theperiod ended January 31, 2015, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Kohl's Corporation'sinternal control over financial reporting as of January 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated March 20, 2015 expressed an unqualifiedopinion thereon./s/ Ernst & Young LLPMilwaukee, WisconsinMarch 20, 2015F-2Table of ContentsKOHL’S CORPORATIONCONSOLIDATED BALANCE SHEETS(Dollars In Millions) January 31, 2015 February 1, 2014Assets Current assets: Cash and cash equivalents$1,407 $971Merchandise inventories3,814 3,874Deferred income taxes116 142Other361 327Total current assets5,698 5,314Property and equipment, net8,515 8,745Other assets218 298Total assets$14,431 $14,357 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable$1,511 $1,365Accrued liabilities1,160 1,138Income taxes payable78 116Current portion of capital lease and financing obligations110 139Total current liabilities2,859 2,758Long-term debt2,793 2,792Capital lease and financing obligations1,858 1,930Deferred income taxes368 339Other long-term liabilities562 560Shareholders’ equity: Common stock - 367 and 364 million shares issued4 4Paid-in capital2,743 2,598Treasury stock, at cost, 166 and 153 million shares(8,744) (8,052)Accumulated other comprehensive loss(20) (34)Retained earnings12,008 11,462Total shareholders’ equity5,991 5,978Total liabilities and shareholders’ equity$14,431 $14,357See accompanying Notes to Consolidated Financial StatementsF-3Table of ContentsKOHL’S CORPORATIONCONSOLIDATED STATEMENTS OF INCOME(In Millions, Except per Share Data) 2014 2013 2012Net sales$19,023 $19,031 $19,279Cost of merchandise sold12,098 12,087 12,289Gross margin6,925 6,944 6,990Operating expenses: Selling, general and administrative4,350 4,313 4,267Depreciation and amortization886 889 833Operating income1,689 1,742 1,890Interest expense, net340 338 329Income before income taxes1,349 1,404 1,561Provision for income taxes482 515 575Net income$867 $889 $986Net income per share: Basic$4.28 $4.08 $4.19Diluted$4.24 $4.05 $4.17 Dividends declared and paid per share$1.56 $1.40 $1.28See accompanying Notes to Consolidated Financial StatementsKOHL’S CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Millions) 2014 2013 2012Net income$867 $889 $986Other comprehensive income, net of tax: Unrealized gains on investments11 8 5Reclassification adjustment for interest expense on interest ratederivatives included in net income3 3 3Other comprehensive income14 11 8Comprehensive income$881 $900 $994See accompanying Notes to Consolidated Financial StatementsF-4Table of ContentsKOHL’S CORPORATIONCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(In Millions, Except per Share Data) Common Stock Paid-In Treasury Stock AccumulatedOtherComprehensive Retained Shares Amount CapitalShares Amount Loss Earnings TotalBalance at January 28, 2012358 $4 $2,339 (111) $(5,977) $(53) $10,195 $6,508Comprehensive income— — — — — 8 986 994Stock options and awards, net of tax2 — 115 — (9) — — 106Dividends paid ($1.28 per common share)— — — — 3 — (303) (300)Treasury stock purchases— — — (27) (1,260) — — (1,260)Balance at February 2, 2013360 4 2,454 (138) (7,243) (45) 10,878 6,048Comprehensive income— — — — — 11 889 900Stock options and awards, net of tax4 — 144 — (13) — — 131Dividends paid ($1.40 per common share)— — — — 3 — (305) (302)Treasury stock purchases— — — (15) (799) — — (799)Balance at February 1, 2014364 4 2,598 (153) (8,052) (34) 11,462 5,978Comprehensive income— — — — — 14 867 881Stock options and awards, net of tax3 — 145 — (19) — — 126Dividends paid ($1.56 per common share)— — — — 4 — (321) (317)Treasury stock purchases— — — (13) (677) — — (677)Balance at January 31, 2015367 $4 $2,743 (166) $(8,744) $(20) $12,008 $5,991See accompanying Notes to Consolidated Financial StatementsF-5Table of ContentsKOHL’S CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(In Millions) 2014 2013 2012Operating activities Net income$867 $889 $986Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization886 889 833Share-based compensation48 55 50Excess tax benefits from share-based compensation(3) (3) (4)Deferred income taxes46 (11) (79)Other non-cash expenses, net31 43 29Changes in operating assets and liabilities: Merchandise inventories68 (116) (523)Other current and long-term assets(33) (19) (37)Accounts payable146 58 74Accrued and other long-term liabilities33 149 (60)Income taxes(65) (50) (4)Net cash provided by operating activities2,024 1,884 1,265Investing activities Acquisition of property and equipment(682) (643) (785)Sales of investments in auction rate securities82 1 109Other7 19 16Net cash used in investing activities(593) (623) (660)Financing activities Treasury stock purchases(677) (799) (1,284)Shares withheld for taxes on vested restricted shares(19) (13) (9)Dividends paid(317) (302) (300)Proceeds from issuance of debt, net of deferred financing costs— 296 347Proceeds from financing obligations6 1 12Capital lease and financing obligation payments(114) (115) (111)Proceeds from stock option exercises123 102 68Excess tax benefits from share-based compensation3 3 4Net cash used in financing activities(995) (827) (1,273)Net increase (decrease) in cash and cash equivalents436 434 (668)Cash and cash equivalents at beginning of period971 537 1,205Cash and cash equivalents at end of period$1,407 $971 $537Supplemental information: Interest paid, net of capitalized interest$329 $326 $318Income taxes paid502 561 654Non-Cash Investing and Financing Activities Property and equipment acquired through capital lease and financing obligations$41 $121 $63See accompanying Notes to Consolidated Financial StatementsF-6KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Business and Summary of Accounting PoliciesBusinessAs of January 31, 2015, we operated 1,162 department stores in 49 states 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 withsome differences attributable to regional preferences. Our website includes merchandise which is available in our stores, as well as merchandise which isavailable only on-line.Our authorized capital stock consists of 800 million shares of $0.01 par value common stock and 10 million shares of $0.01 par value preferred stock.ConsolidationThe consolidated financial statements include the accounts of Kohl’s Corporation and its subsidiaries including Kohl’s Department Stores, Inc., itsprimary operating company. All intercompany accounts and transactions have been eliminated.Accounting PeriodOur fiscal year ends on the Saturday closest to January 31st each year. Unless otherwise stated, references to years in this report relate to fiscal yearsrather than to calendar years. The following fiscal periods are presented in this report. Fiscal yearEnded Number ofWeeks2014January 31, 2015 522013February 1, 2014 522012February 2, 2013 53Use of EstimatesThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actualresults could differ from those estimates.Cash and Cash EquivalentsIn addition to money market investments, cash equivalents include commercial paper and certificates of deposit with original maturities of threemonths or less. We carry these investments at cost which approximates fair value.Also included in cash and cash equivalents are amounts due from credit card transactions with settlement terms of less than five days. Credit and debitcard receivables included within cash were $95 million at January 31, 2015 and $89 million at February 1, 2014.Merchandise InventoriesMerchandise inventories are valued at the lower of cost or market with cost determined on the first-in, first-out (“FIFO”) basis using the retail inventorymethod (“RIM”). Under RIM, the valuation of inventory at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retailvalue inventory. RIM is an averaging method that has been widely used in the retail industry due to its practicality. The use of RIM will result in inventorybeing valued at the lower of cost or market since permanent markdowns are currently taken as a reduction of the retail value of inventory. We record anadditional reserve if the future estimated selling price is less than cost.F-7KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)Property and EquipmentProperty and equipment consist of the following: Jan 31, 2015 Feb 1, 2014 (Dollars In Millions)Land$1,103 $1,095Buildings and improvements: Owned7,844 7,713Leased1,848 1,845Store fixtures and equipment2,032 2,147Computer hardware and software1,368 1,033Construction in progress210 291Total property and equipment, at cost14,405 14,124Less accumulated depreciation(5,890) (5,379)Property and equipment, net$8,515 $8,745Construction in progress includes land, building and improvements, and computer hardware and software which is not ready for its intended use.Property and equipment is recorded at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimateduseful lives of the assets. Leased property and improvements to leased property are amortized on a straight-line basis over the term of the lease or useful life ofthe asset, whichever is less.The annual provisions for depreciation and amortization generally use the following ranges of useful lives: Buildings and improvements5-40 yearsStore fixtures and equipment3-15 yearsComputer hardware and software3-8 years Long-Lived AssetsAll property and equipment and other long-lived assets are reviewed for potential impairment when events or changes in circumstances indicate thatthe asset’s carrying value may not be recoverable. If such indicators are present, it is determined whether the sum of the estimated undiscounted future cashflows attributable to such assets is less than the carrying value of the assets. A potential impairment has occurred if projected future undiscounted cash flowsare less than the carrying value of the assets. No impairments were recorded in 2014, 2013, or 2012 as a result of the tests performed.Accrued LiabilitiesAccrued liabilities consist of the following: Jan 31, 2015 Feb 1, 2014 (Dollars In Millions)Gift cards and merchandise return cards$307 $296Payroll and related fringe benefits135 112Sales, property and use taxes185 166Credit card liabilities106 109Other427 455Accrued liabilities$1,160 $1,138F-8KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)Self-InsuranceWe use a combination of insurance and self-insurance for a number of risks including workers’ compensation, general liability, and employee-relatedhealth care benefits, a portion of which is paid by our associates. Liabilities associated with these losses include estimates of both reported losses and lossesincurred but not yet reported. We use a third-party actuary, which considers historical claims experience, demographic factors, severity factors and otheractuarial assumptions, to estimate the liabilities associated with these risks. Total estimated liabilities for workers’ compensation, general liability andemployee-related health benefits were approximately $46 million at January 31, 2015 and $47 million at February 1, 2014. Although these amounts areactuarially determined based on analysis of historical trends, the amounts that we will ultimately disburse could differ from these estimates.As of January 1, 2015, our self insurance exposure for property losses differs based on the type of claim. For catastrophic claims like earthquakes,floods and windstorms, depending on the location, we are self insured for 2-5% of the insurance claim. For other standard claims like fire and buildingdamages, we are self insured for the first $250,000 of property loss claims.Treasury StockWe account for repurchases of common stock and shares withheld in lieu of taxes when restricted stock vests using the cost method with common stockin treasury classified in the Consolidated Balance Sheets as a reduction of shareholders’ equity.Accumulated Other Comprehensive Loss and Other Comprehensive IncomeAccumulated other comprehensive loss consists of the following: UnrealizedGains(Losses) onInvestments Loss onInterestRateDerivatives AccumulatedOtherComprehensiveLoss (Dollars In Millions)Balance at February 2, 2013$(19) $(26) $(45)Other comprehensive income8 3 11Balance at February 1, 2014(11) (23) (34)Other comprehensive income11 3 14Balance at January 31, 2015$— $(20) $(20) The tax effects of each component of other comprehensive income are as follows: 2014 2013 2012 (Dollars In Millions)Unrealized gains on investments: Before-tax amounts$18 $12 $9Tax expense(7) (4) (4)After-tax amounts11 8 5Interest rate derivatives: Before-tax amounts5 5 5Tax expense(2) (2) (2)After-tax amounts3 3 3Other comprehensive income$14 $11 $8F-9KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)Revenue RecognitionRevenue from the sale of merchandise at our stores is recognized at the time of sale, net of any returns. Sales of merchandise shipped to our customersare recorded based on estimated receipt of merchandise by the customer. Net sales do not include sales tax as we are considered a pass-through conduit forcollecting and remitting sales taxes.Revenue from Kohl's gift card sales is recognized when the gift card is redeemed. Gift card breakage revenue is based on historical redemption patternsand represents the balance of gift cards for which we believe the likelihood of redemption by a customer is remote.Cost of Merchandise Sold and Selling, General and Administrative ExpensesThe following table illustrates the primary costs classified in Cost of Merchandise Sold and Selling, General and Administrative Expenses:Cost of Merchandise Sold Selling, General andAdministrative Expenses• Total cost of products sold including product development costs, net ofvendor payments other than reimbursement of specific, incremental andidentifiable costs • Inventory shrink • Markdowns • Freight expenses associated with moving merchandise from our vendors toour distribution centers • Shipping and handling expenses of sales generated on-line • Terms cash discount • Compensation and benefit costs including:• Stores• Corporate headquarters, including buying and merchandising• Distribution centers • Occupancy and operating costs of our retail, distribution andcorporate facilities • Net revenues from the Kohl’s credit card program • Freight expenses associated with moving merchandise from ourdistribution centers to our retail stores and between distributionand retail facilities • Advertising expenses, offset by vendor payments forreimbursement of specific, incremental and identifiable costs • Other administrative revenues and expensesThe classification of these expenses varies across the retail industry. Vendor AllowancesWe receive consideration for a variety of vendor-sponsored programs, such as markdown allowances, volume rebates and promotion and advertisingsupport. The vendor consideration is recorded as earned either as a reduction of inventory costs or Selling, General and Administrative (“SG&A”) expensesbased on the application of Accounting Standards Codification (“ASC”) No. 605, Subtopic 50, “Customer Payments and Incentives.” Promotional andadvertising allowances are intended to offset our advertising costs to promote vendors’ merchandise. Markdown allowances and volume rebates are recordedas a reduction of inventory costs.Loyalty ProgramWe currently operate the Kohl's Yes2You Rewards program in which customers earn points based on their spending and other promotional activities.Upon accumulating certain point levels, customers receive rewards to apply to future purchases. We accrue the cost of anticipated redemptions related to theprogram when the points are earned at the initial purchase. The costs of the program are recorded in cost of merchandise sold.F-10KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)Fair ValueASC No. 820, “Fair Value Measurements and Disclosures,” requires fair value measurements be classified and disclosed in one of the following pricingcategories: Level 1: Financial instruments with unadjusted, quoted prices listed on active market exchanges. Level 2: Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financialinstruments. The prices for the financial instruments are determined using prices for recently traded financial instruments withsimilar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observableat commonly quoted intervals. Level 3: Financial instruments that are not actively traded on a market exchange. This category includes situations where there is little, ifany, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuationtechniques.We carry our current assets and liabilities at cost, which approximate fair value.LeasesWe lease certain property and equipment used in our operations.We are often involved extensively in the construction of leased stores. In many cases, we are responsible for construction cost over runs or non-standardtenant improvements (e.g. roof or HVAC systems). As a result of this involvement, we are deemed the “owner” for accounting purposes during theconstruction period, so are required to capitalize the construction costs on our Balance Sheet. Upon completion of the project, we perform a sale-leasebackanalysis pursuant to ASC 840, “Leases,” to determine if we can remove the assets from our Balance Sheet. In many of our leases, we are reimbursed a portionof the construction costs via adjusted rental payments and/or cash payments or have terms which fix the rental payments for a significant percentage of theleased asset’s economic life. These items generally are considered “continuing involvement” which precludes us from derecognizing the assets from ourBalance Sheet when construction is complete. In conjunction with these leases, we also record financing obligations equal to the cash proceeds or fair marketvalue of the assets received from the landlord. At the end of the lease term, including exercise of any renewal options, the net remaining financing obligationover the net carrying value of the fixed asset will be recognized as a non-cash gain on sale of the property. We do not report rent expense for the propertieswhich are owned for accounting purposes. Rather, rental payments under the lease are recognized as a reduction of the financing obligation and interestexpense.Some of our property and equipment is held under capital leases. These assets are included in property and equipment and depreciated over the term ofthe lease. We do not report rent expense for capital leases. Rather, rental payments under the lease are recognized as a reduction of the capital lease obligationand interest expense.All other leases are considered operating leases in accordance with ASC 840. Assets subject to an operating lease and the related lease payments are notrecorded on our balance sheet. Rent expense is recognized on a straight-line basis over the expected lease term.The lease term for all types of leases begins on the date we become legally obligated for the rent payments or we take possession of the building orland, whichever is earlier. The lease term includes cancelable option periods where failure to exercise such options would result in an economic penalty.Failure to exercise such options would result in the recognition of accelerated depreciation expense of the related assets. F-11KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)AdvertisingAdvertising costs, which include primarily television and radio broadcast, direct mail, digital, and newspaper circulars, are expensed when theadvertisement is first seen. Advertising costs, net of related vendor allowances, were as follows: 2014 2013 2012 (Dollars In Millions)Gross advertising costs$1,189 $1,185 $1,163Vendor allowances(165) (172) (170)Net advertising costs$1,024 $1,013 $993Net advertising costs as a percent of net sales5.4% 5.3% 5.2%Income TaxesIncome taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recorded based ondifferences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes.Deferred tax assets and liabilities are calculated using the enacted tax rates and laws that are expected to be in effect when the differences are expected toreverse. We establish valuation allowances for deferred tax assets when we believe it is more likely than not that the asset will not be realizable for taxpurposes.We recognize interest and penalty expense related to unrecognized tax benefits in our provision for income tax expense.Net Income Per ShareBasic net income per share is net income divided by the average number of common shares outstanding during the period. Diluted net income per shareincludes incremental shares assumed to be issued upon exercise of stock options.The information required to compute basic and diluted net income per share is as follows: 2014 2013 2012 (In Millions, Except per Share Data)Numerator—net income$867 $889 $986Denominator—weighted average shares Basic203 218 235Impact of dilutive employee stock options (a)1 2 2Diluted204 220 237Net income per share: Basic$4.28 $4.08 $4.19Diluted$4.24 $4.05 $4.17(a)Excludes 3 million share-based awards for 2014, 10 million share-based awards for 2013 and 14 million share-based awards for 2012 as theimpact of such awards was antidilutive. Share-Based AwardsStock-based compensation expense is generally recognized on a straight-line basis over the vesting period based on the fair value of awards which areexpected to vest. The fair value of all share-based awards is estimated on the date of grant.Recent Accounting Pronouncements Not Yet AdoptedIn May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606),which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized todepict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange forthose goods or services. We are required to adopt the new pronouncement in the first quarter of fiscal 2017 using one of two retrospective applicationmethods. We are evaluating the application method and the impact of this new statement on our financial statements.F-12KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)2. DebtLong-term debt consists of the following unsecured senior debt: OutstandingMaturityEffectiveRate Coupon Rate January 31, 2015 February 1, 2014 (Dollars in Millions)20176.31% 6.25% $650 $65020214.81% 4.00% 650 65020233.25% 3.25% 350 35020234.78% 4.75% 300 30020297.36% 7.25% 200 20020336.05% 6.00% 300 30020376.89% 6.88% 350 350 5.54% 2,800 2,800Unamortized debt discount (7) (8)Long-term debt $2,793 $2,792Based on quoted market prices (Level 1 per ASC No. 820, "Fair Value Measurements and Disclosures"), the estimated fair value of our long-term debtwas $3.1 billion at January 31, 2015 and $3.0 billion at February 1, 2014.We have various facilities upon which we may draw funds, including a 5-year, $1 billion senior unsecured revolving credit facility which matures inJune 2018. There were no draws on these facilities during 2014 or 2013.Our various debt agreements contain covenants including limitations on additional indebtedness and certain financial tests. As of January 31, 2015, wewere in compliance with all covenants of the various debt agreements.We also have outstanding trade letters of credit and stand-by letters of credit totaling approximately $52 million at January 31, 2015, issued underuncommitted lines with two banks.3. Lease CommitmentsRent expense charged to operations was $277 million for 2014, $270 million for 2013, and $265 million for 2012. In addition to rent payments, we areoften required to pay real estate taxes, insurance and maintenance costs on leased properties. These items are not included in the future minimum leasepayments listed below. Many store leases include multiple renewal options, exercisable at our option, that generally range from four to eight additional five-year periods.Future minimum lease payments at January 31, 2015 were as follows: CapitalLeaseandFinancingObligations OperatingLeases (Dollars In Millions)Fiscal year: 2015$279 $2462016282 2422017271 2392018255 2402019238 236Thereafter2,866 4,597 4,191 $5,800Non-cash gain on future sale of property458 Amount representing interest(2,681) Present value of lease payments$1,968 F-13KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)4. Benefit PlansWe have a defined contribution savings plan covering all full-time and certain part-time associates. Participants in this plan may invest up to 100% oftheir base compensation, subject to certain statutory limits. We match 100% of the first 5% of each participant’s contribution.We also have an Employee Stock Ownership Plan ("ESOP") for the benefit of a group of our non-management associates. Contributions are made at thediscretion of the Board of Directors. Shares of our stock held by the ESOP are included as shares outstanding for purposes of the net income per sharecomputations.We also offer a non-qualified deferred compensation plan to a group of executives which provides for pre-tax compensation deferrals up to 100% ofsalary and/or bonus. Deferrals and credited investment returns are 100% vested.The total costs for these benefit plans were $43 million for 2014, $49 million for 2013, and $53 million for 2012.5. Income TaxesDeferred income taxes consist of the following: Jan 31, 2015 Feb 1, 2014 (Dollars In Millions)Deferred tax liabilities: Property and equipment$1,385 $1,416Deferred tax assets: Merchandise inventories24 24Accrued and other liabilities, including stock options182 223Capital lease and financing obligations773 813Accrued step rent liability100 94Unrealized loss on investments— 7Unrealized loss on interest rate swap13 15Federal benefit on state tax reserves41 43 1,133 1,219Net deferred tax liability$252 $197The components of the provision for income taxes were as follows: 2014 2013 2012 (Dollars In Millions)Current federal$400 $473 $592Current state36 45 60Deferred federal48 6 (68)Deferred state(2) (9) (9) $482 $515 $575 The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate tax rate due to the followingitems: 2014 2013 2012Provision at statutory rate35.0% 35.0% 35.0%State income taxes, net of federal tax benefit1.3 2.2 2.2Tax-exempt interest income— (0.2) (0.1)Other federal tax credits(0.6) (0.3) (0.3)Provision for income taxes35.7% 36.7% 36.8%We have analyzed filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open taxyears in these jurisdictions. The only federal returns subject to examination are for the 2008 through 2014 tax years. State returns subject to examination varydepending upon the state. Generally, the 2011 through 2014F-14KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)5. Income Taxes (continued)tax years are subject to state examination. The earliest open period is 2003. Certain states have proposed adjustments which we are currently appealing. If wedo not prevail on our appeals, we do not anticipate that the adjustments would result in a material change in our financial position.A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows: 2014 2013 (Dollars In Millions)Balance at beginning of year$125 $108Increases due to: Tax positions taken in prior years— 6Tax positions taken in current year21 21Decreases due to: Tax positions taken in prior years(16) (4)Settlements with taxing authorities(2) (3)Lapse of applicable statute of limitations(5) (3)Balance at end of year$123 $125Not included in the unrecognized tax benefits reconciliation above are gross unrecognized accrued interest and penalties of $23 million at January 31,2015 and $21 million at February 1, 2014. Interest and penalty expense was $2 million for 2014 and $3 million for 2013.Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $89 million as of January 31, 2015 and $88 million as ofFebruary 1, 2014.It is reasonably possible that our unrecognized tax positions may change within the next 12 months, primarily as a result of ongoing audits. While it ispossible that one or more of these examinations may be resolved in the next year, it is not anticipated that a significant impact to the unrecognized taxbenefit balance will occur.We have both payables and receivables recorded on our balance sheet for current income taxes. The receivables are recorded within other current assetsin our balance sheet. The total of the receivables was $25 million as of January 31, 2015. To conform to the current year presentation, we have reclassed $22million from income taxes payable to other current assets for February 1, 2014.To conform to the current year presentation on our balance sheet, we have reclassed $43 million of the federal income taxes receivable related to statetax reserves and interest from long-term other assets to deferred income taxes on the balance sheet.6. Stock-Based CompensationWe currently grant share-based compensation pursuant to the Kohl’s Corporation 2010 Long-Term Compensation Plan, which provides for the grantingof various forms of equity-based awards, including nonvested stock, performance share units and options to purchase shares of our common stock, to officers,key employees and directors. As of January 31, 2015, there were 18.5 million shares authorized and 11.5 million shares available for grant under the 2010Long-Term Compensation Plan. Options and nonvested stock that are surrendered or terminated without issuance of shares are available for future grants.Annual grants of stock options and nonvested stock are typically made in the first quarter of the fiscal year. Grants to newly-hired and promotedemployees and other discretionary grants are made periodically throughout the remainder of the year. We also have outstanding options which were grantedunder previous compensation plans.Stock optionsThe majority of stock options granted to employees typically vest in five equal annual installments. Outstanding options granted to employees after2005 have a term of seven years. Outstanding options granted to employees prior to 2006 have a term of up to 15 years. Options granted to directors have aterm of 10 years.F-15KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)6. Stock-Based Compensation (continued)All stock options have an exercise price equal to the fair market value of the common stock on the date of grant. The fair value of each option award isestimated using a Black-Scholes option valuation model and the following assumptions as of the grant date: 2014 2013 2012Dividend yield2.8% 2.9% 2.6%Volatility31.0% 32.7% 33.7%Risk-free interest rate1.7% 0.9% 1.0%Expected life in years5.5 5.5 5.5Weighted average fair value at grant date$12.23 $10.68 $11.79The dividend yield represents the expected dividends on our stock for the expected term of the option. The expected volatility assumption is based onthe historical volatility of our stock. The risk-free interest rate for periods within the life of the option is based on a blend of U.S. Treasury bond rates. We usehistorical data to estimate the expected life of the option and the period of time that options granted are expected to be outstanding.The following table summarizes our stock option activity for 2014, 2013, and 2012: 2014 2013 2012 Shares WeightedAverageExercisePrice Shares WeightedAverageExercisePrice Shares WeightedAverageExercisePrice (Shares in Thousands)Balance at beginning of year11,375 $56.05 15,212 $53.96 16,564 $53.41Granted186 54.69 575 47.86 1,458 49.00Exercised(2,647) 46.87 (2,494) 41.02 (1,718) 40.01Forfeited/expired(2,703) 72.21 (1,918) 56.59 (1,092) 60.93Balance at end of year6,211 $52.95 11,375 $56.05 15,212 $53.96The intrinsic value of options exercised represents the excess of our stock price at the time the option was exercised over the exercise price and was $30million in both 2014 and 2013 and $20 million in 2012.Additional information related to stock options outstanding and exercisable at January 31, 2015, segregated by exercise price range, is summarizedbelow: Stock Options Outstanding Stock Options ExercisableRange of Exercise PricesShares WeightedAverageRemainingContractualLife (inyears) WeightedAverageExercisePrice Shares WeightedAverageRemainingContractualLife (inyears) WeightedAverageExercisePrice (Shares in Thousands)$ 29.09 – $ 46.00823 1.9 $42.27 701 1.3 $41.84$ 46.01 – $ 49.001,180 4.4 47.60 541 4.6 47.46$ 49.01 – $ 51.001,081 2.9 50.06 910 2.6 50.06$ 51.01 – $ 55.001,164 3.9 52.75 592 3.6 52.90$ 55.01 – $ 65.00954 2.7 57.52 766 2.4 57.86$ 65.01 – $ 77.621,009 1.6 66.95 1,009 1.6 66.95 6,211 3.0 $52.95 4,519 2.5 $53.94Intrinsic value (in thousands)$49,754 $33,849 The intrinsic value of outstanding and exercisable stock options represents the excess of our closing stock price on January 31, 2015 ($59.72) over theexercise price multiplied by the applicable number of stock options.F-16KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)6. Stock-Based Compensation (continued)Nonvested stock awardsWe have also awarded shares of nonvested common stock to eligible key employees and to our Board of Directors. Substantially all awards haverestriction periods tied primarily to employment and/or service. Nonvested stock awarded to employees generally vests over five years. Director awards vestover the term to which the director was elected, generally one year. In lieu of cash dividends, nonvested stock awards are granted restricted stock equivalentswhich vest consistently with the underlying nonvested stock awards.The fair value of nonvested stock awards is the closing price of our common stock on the date of grant. We may acquire shares from employees in lieuof amounts required to satisfy minimum tax withholding requirements upon the vesting of the employee’s unvested stock award. Such shares are thendesignated as treasury shares. The following table summarizes nonvested stock activity, including restricted stock equivalents issued in lieu of cash dividends: 2014 2013 2012 Shares WeightedAverageGrantDate FairValue Shares WeightedAverageGrantDate FairValue Shares WeightedAverageGrantDate FairValue (Shares in Thousands)Balance at beginning of year2,653 $50.56 2,323 $50.47 1,946 $51.11Granted910 56.13 1,189 49.22 1,038 48.86Vested(818) 50.69 (706) 48.00 (492) 49.77Forfeited(314) 51.47 (153) 50.48 (169) 50.04Balance at end of year2,431 $52.29 2,653 $50.56 2,323 $50.47The aggregate fair value of awards at the time of vesting was $41 million in 2014, $34 million in 2013 and $24 million in 2012.Performance share unitsIn March 2014, we granted performance-based restricted stock units ("performance share units") to certain executives. The performance measurementperiod for these performance share units is fiscal years 2014 through 2016. The fair market value of the grant was $62.39 per unit and was determined using aMonte-Carlo valuation on the date of grant. The performance share units cover a target of 18,000 shares.In January 2014, we granted performance share units to certain executives. The performance measurement period for these performance share units isfiscal years 2014 through 2016. The fair market value of the grant was $57.37 per unit and was determined using a Monte-Carlo valuation on the date ofgrant. The performance share units cover a target of 230,000 shares.The actual number of shares which will be earned at the end of the three-year vesting periods will vary based on our cumulative financial performanceover the vesting periods. The number of performance share units earned will be modified up or down based on Kohl’s Relative Total Shareholder Returnagainst a defined peer group during the vesting periods. The payouts, if earned, will be settled in Kohl's common stock after the end of each multi-yearperformance periods.Other required disclosuresStock-based compensation expense is included in Selling, General and Administrative expense in our Consolidated Statements of Income. Suchexpense totaled $48 million for 2014, $55 million for 2013 and $50 million for 2012. At January 31, 2015, we had approximately $92 million ofunrecognized share-based compensation expense, which is expected to be recognized over a weighted-average period of 2 years.F-17KOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)7. ContingenciesAt any time, we may be subject to investigations, legal proceedings, or claims related to the on-going operation of our business, including claims bothby and against us. Such proceedings typically involve claims related to various forms of liability, contract disputes, allegations of violations of laws orregulations or other actions brought by us or others including our employees, consumers, competitors, suppliers or governmental agencies. We routinelyassess the likelihood of any adverse outcomes related to these matters on a case by case basis, as well as the potential ranges of losses and fees. We establishaccruals for our potential exposure, as appropriate, for significant claims against us when losses become probable and reasonably estimable. Where we areable to reasonably estimate a range of potential losses relating to significant matters, we record the amount within that range that constitutes our bestestimate. We also disclose the nature of and range of loss for claims against us when losses are reasonably possible and material. These accruals anddisclosures are determined based on the facts and circumstances related to the individual cases and require estimates and judgments regarding theinterpretation of facts and laws, as well as the effectiveness of strategies or other factors beyond our control.8. Quarterly Financial Information (Unaudited)Each quarterly period below was a 13-week accounting period. 2014 First Second Third Fourth (In Millions, Except per Share Data)Net sales$4,070 $4,242 $4,374 $6,337Gross margin$1,496 $1,654 $1,628 $2,147Net income$125 $232 $142 $369Basic shares206 204 202 199Basic net income per share$0.60 $1.14 $0.70 $1.85Diluted shares208 205 203 201Diluted net income per share$0.60 $1.13 $0.70 $1.83 2013 First Second Third Fourth (In Millions, Except per Share Data)Net sales$4,199 $4,289 $4,444 $6,099Gross margin$1,528 $1,676 $1,666 $2,075Net income$147 $231 $177 $334Basic shares222 220 216 213Basic net income per share$0.66 $1.05 $0.82 $1.57Diluted shares223 222 218 215Diluted net income per share$0.66 $1.04 $0.81 $1.56Due to changes in stock prices during the year and timing of share repurchases and issuances, the sum of quarterly net income per share may not equalthe annual net income per share.9. Related Party TransactionsOne of our directors is also a shareholder of a law firm which performs legal services for us.F-18EXHIBIT 10.16OUTSIDE DIRECTOR COMPENSATIONPursuant to our 2014 Non-Employee Director Compensation Program, directors who are not our employees or employees of our subsidiaries receivean annual retainer fee of $100,000. The independent Lead Director receives an additional retainer fee of $40,000. Chairpersons of the CompensationCommittee and the Audit Committee receive an additional $20,000 retainer fee, and the Chairperson of the Governance & Nominating Committee receivesan additional $15,000 retainer fee. Non-employee directors also receive retainer fees for membership on the Board of Directors’ standing committees andExecutive Committee. Committee member retainers are $5,000 for Governance & Nominating Committee members, $10,000 for Compensation Committeemembers and $15,000 for Audit Committee and Executive Committee members. Directors receive no additional compensation for participation in Board ofDirectors’ or committee meetings. Directors are, however, reimbursed for travel and other expenses related to attendance at these meetings as well as traveland other expenses related to attendance at educational seminars approved in advance by the Governance & Nominating Committee.Equity awards are granted to non-employee Directors from time to time pursuant to our 2010 Long Term Compensation Plan. These grants aretypically made following a Director’s initial election to the Board and each time the Director is re-elected by the shareholders to serve a new term. The annualawards, which are comprised of restricted shares, typically have a “grant date fair value” of approximately $100,000, calculated in accordance with FASBASC Topic 718 (formerly FAS 123R). The restricted shares vest on the first anniversary of the date of grant.EXHIBIT 10.22AMENDED AND RESTATEDEMPLOYMENT AGREEMENTTHIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is executed as of this 1st day of April, 2012, by and betweenKohl's Department Stores, Inc. and Kohl's Corporation (collectively referred to in this Agreement as “Company”) and Kenneth G. Bonning (“Executive”).The Company and Executive entered into an Employment Agreement dated as of May 15, 2011 (the “Original Agreement”), whereby Company andExecutive agreed to certain aspects of their relationship during and after the period in which Executive is employed by the Company.The parties believe it is in their best interests to amend and restate the Original Agreement as set forth herein.NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants contained herein, and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged by the Company and Executive (“Parties”), the Parties agree as follows:ARTICLE IEMPLOYMENT1.1 Term of Employment. The Company employs Executive, and Executive accepts employment by the Company, for the three (3) year periodcommencing on April 1, 2012 (the “Initial Term”), subject to earlier termination as hereinafter set forth in Article III, below. This Agreement shall beautomatically extended for one (1) day each day during the term (the Initial Term as so extended, the “Renewal Term”) unless either party shall give the othera written notice of intention not to renew, in which case this Agreement shall terminate as of the end of the Initial Term or said Renewal Term, as applicableor unless this Agreement is earlier terminated as set forth in Article III, below. If this Agreement is extended, the terms of this Agreement during such RenewalTerm shall be the same as the terms in effect immediately prior to such extension (including the early termination provisions set forth in Article III, below),subject to any such changes or modifications as mutually may be agreed between the Parties as evidenced in a written instrument signed by both theCompany and Executive. If Executive's employment is terminated for any reason specified in Section 3.1, below, after either party has provided a notice ofnon-renewal under this Section 1.1, such termination will be treated as a termination under the applicable provision of Section 3.1 and not as a terminationdue to non-renewal under this Section 1.1.1.2 Position and Duties. Executive shall be employed in the position of Senior Executive Vice President, and shall be subject to the authority of,and shall report to, the Company's Chief Administrative Officer and/or Board of Directors (the “Board”). Executive's duties and responsibilities shall includeall those customarily attendant to the position of Senior Executive Vice President and such other duties and responsibilities as may be assigned from time totime by Executive's supervisor and/or the Company's Board. Executive shall devote Executive's entire business time, attention and energies exclusively tothe business interests of the Company while employed by the Company except as otherwise specifically approved in writing by Executive's supervisor and/orthe Company's Board. During the Initial Term and the Renewal Term,Executive may not participate on the board of directors or any similar governing body of any for-profit entity other than the Company, unless first approvedby the Company's Board.ARTICLE IICOMPENSATION AND OTHER BENEFITS2.1 Base Salary. During the Initial Term and the Renewal Term, the Company shall pay Executive an annual base salary as described in Exhibit A(a copy of which is attached hereto and incorporated herein), payable in accordance with the normal payroll practices and schedule of the Company (“BaseSalary”). The Base Salary shall be subject to adjustment from time to time as determined by the Board.2.2 Benefit Plans and Fringe Benefits. During the Initial Term and the Renewal Term, Executive will be eligible to participate in the plans,programs and policies including, without limitation, group medical insurance, fringe benefits, paid vacation, expense reimbursement and incentive payplans, which the Company makes available to senior executives of the Company in accordance with the eligibility requirements, terms and conditions ofsuch plans, programs and policies in effect from time to time. Executive acknowledges and agrees that the Company may amend, modify or terminate any ofsuch plans, programs and policies at any time at its discretion.2.3 Equity Plans or Programs. During the Initial Term and the Renewal Term, Executive may be eligible to participate in stock option, phantomstock, restricted stock or other similar equity incentive plans or programs which the Company may establish from time to time. The terms of any such plans orprograms, and Executive's eligibility to participate in them, shall be established by the Board at its sole discretion. Executive acknowledges and agrees thatthe Company may amend, modify or terminate any of such plans or programs at any time at its discretion.In no event will the reimbursements or in-kind benefits to be provided by the Company pursuant to this Agreement in one taxable year affect theamount of reimbursements or in-kind benefits to be provided in any other taxable year, nor will Executive's right to reimbursement or in-kind benefits besubject to liquidation or exchange for another benefit. Further, any reimbursements to be provided by the Company pursuant to this Agreement shall be paidto the Executive no later than the calendar year following the calendar year in which the Executive incurs the expenses.ARTICLE IIITERMINATION3.1 Right to Terminate; Automatic Termination.(a) Termination Without Cause. Subject to Section 3.2, below, the Company may terminate Executive's employment and all of theCompany's obligations under this Agreement at any time and for any reason.(b) Termination For Cause. Subject to Section 3.2, below, the Company may terminate Executive's employment and all of the Company'sobligations under this Agreement at any time for Cause (defined below) by giving notice to Executive stating the basis for such termination, effectiveimmediately upon giving such notice or at such other time thereafter as the Company may designate. “Cause” shall mean any of the following: (i) Executive'scontinuous failure to substantially perform Executive's duties after a written demand for substantial performance is delivered to Executive thatspecifically identifies the manner in which the Company believes that Executive has not substantially performed his duties, and Executive has failed todemonstrate substantial efforts to resume substantial performance of Executive's duties on a continuous basis within sixty (60) calendar days after receivingsuch demand; (ii) Executive's violation of a material provision of “Kohl's Ethical Standards and Responsibilities” which is materially injurious to theCompany, monetarily or otherwise; (iii) any dishonest or fraudulent conduct which results, or is intended to result, in gain to Executive or Executive'spersonal enrichment at the expense of the Company; (iv) any material breach of this Agreement by Executive after a written notice of such breach is deliveredto Executive that specifically identifies the manner in which the Company believes that Executive has breached this Agreement, and Executive has failed tocure such breach within thirty (30) calendar days after receiving such demand; provided, however, that no cure period shall be required for breaches ofArticles IV, V, VI or VII, below, of this Agreement; or (v) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, of anycrime. Notwithstanding the conviction of a crime as described in the preceding subsection (v), the Board, in its sole discretion, may waive such termination inthe event it determines that such crime does not discredit the Company or is not detrimental to the Company's reputation or goodwill, and any decision bythe Board with respect to such waiver shall be final.(c) Termination for Good Reason. Subject to Section 3.2, below, Executive may terminate Executive's employment and all of theCompany's obligations under this Agreement at any time for Good Reason (defined below) by giving written notice to the Company stating the basis for suchtermination, effective immediately upon giving such notice. “Good Reason” shall mean any of the following: (i) a material reduction in Executive's status,title, position, responsibilities or Base Salary; (ii) any material breach by the Company of this Agreement; (iii) any purported termination of the Executive'semployment for Cause which does not comply with the terms of this Agreement; or (iv) a mandatory relocation of Executive's employment with the Companyfrom the Milwaukee, Wisconsin area, except for travel reasonably required in the performance of Executive's duties and responsibilities; provided, however,that no termination shall be for Good Reason until Executive has provided the Company with written notice of the conduct alleged to have caused GoodReason and at least thirty (30) calendar days have elapsed after the Company's receipt of such written notice from Executive, during which the Company hasfailed to demonstrate substantial efforts to cure any such alleged conduct.(d) Termination by Death or Disability. Subject to Section 3.2, below, Executive's employment and the Company's obligations under thisAgreement shall terminate automatically, effective immediately and without any notice being necessary, upon Executive's death or a determinationof Disability of Executive. For purposes of this Agreement, “Disability” means the Executive: (i) is unable to engage in any substantial gainful activity byreason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuousperiod of not less than twelve (12) months, or (ii) has been, by reason of any medically determinable physical or mental impairment which can be expected toresult in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period ofnot less than three (3) months under an accident and health plan covering employees of the Company. A determination of Disability shall be made bythe Company, which may, at its sole discretion, consult with a physician or physicians satisfactory to the Company, and Executive shall cooperate with anyefforts to make such determination. Any such determination shall be conclusive and binding on the parties. Any determination of Disability under thisSection 3.1(d) is not intended to alter any benefits any party may be entitled to receive under any disability insurance policy carried by either the Companyor Executive with respect to Executive, which benefits shall be governed solely by the terms of any such insurance policy.(e) Termination by Resignation. Subject to Section 3.2, below, Executive's employment and the Company's obligations under thisAgreement shall terminate automatically, effective immediately upon Executive's provision of written notice to the Company of Executive's resignation fromemployment with the Company or at such other time as may be mutually agreed between the Parties following the provision of such notice.(f) Separation of Service. A termination of employment under this Agreement shall only occur to the extent Executive has a “separationfrom service” from Company in accordance with Section 409A of the Code. Under Section 409A, a “separation from service” occurs when Executive and theCompany reasonably anticipate that no further services will be performed by Executive after a certain date or that the level of bona fide services Executivewould perform after such date (whether as an employee or as a consultant) would permanently decrease to no more than 20 percent of the average level ofbona fide services performed by Executive over the immediately preceding 36-month period.3.2 Rights Upon Termination.(a) Termination By Company for Cause, By Executive Other Than For Good Reason or By Executive's Non-Renewal. If Executive'semployment is terminated by the Company pursuant to Section 3.1(b), above, by Executive pursuant to Section 3.1(e), above, or due to non-renewal byExecutive pursuant to Section 1.1, above, Executive shall have no further rights against the Company hereunder, except for the right to receive (i) any unpaidBase Salary with respect to the period prior to the effective date of termination together with payment of any vacation that Executive has accrued but notused through the date of termination; (ii) reimbursement of expenses to which Executive is entitled under Section 2.2, above; and (iii) Executive's unpaidbonus, if any, attributable to any complete fiscal year of the Company ended before the date of termination (in the aggregate, the “Accrued Benefits”). Anysuch bonus payment shall be made at the same time as any such bonus is paid to other similarly situated executives of the Company. Furthermore, under thisSection 3.2(a), vesting of any Company stock options granted to Executive ceases on the effective date of termination, and any unvested stock options lapseand are forfeited immediately upon the effective date of termination.(b) Termination By Company's Non-Renewal or Due to Executive's Death. If Executive's employment is terminated due to non-renewal bythe Company pursuant to Section 1.1, above, Executive shall have no further rights against the Company hereunder, except for the right to receive (i)Accrued Benefits; and (ii) the Pro Rata Bonus (as defined in Section 3.2(d)(i), below). If Executive's employment is terminated due to Executive's deathpursuant to Section 3.1(d), above, Executive shall have no further rights against the Company hereunder, except for the right to receive (i) Accrued Benefits;and (ii) a share of any bonus attributable to the fiscal year of the Company during which the effective date of termination occurs determined as follows: theproduct of (x) the average bonuses paid or payable, including any amounts that were deferred in respect of the three (3) fiscal years immediately precedingthe fiscal year in which the effective date of termination occurs and (y) a fraction, the numerator of which is the number of days completed in the fiscal year inwhich the effective date of termination occurs through the effective date of termination and the denominator of which is three hundred sixty-five (365) (the“Historic Pro Rata Bonus”). The Pro Rata Bonus or the Historic Pro Rata Bonus shall be paid at the same time as any such bonuses are paid to other similarlysituated executives of the Company. Upon termination due to either non-renewal by the Company or the Executive's death, Executive shall also be entitledto a severance payment equal to fifty percent (50%) of Executive's Base Salary payable for one (1) year following the effective date of termination pursuant tonormal payroll practices. Furthermore, under this Section 3.2(b), vesting of any Company stock options granted to Executive shall cease on the effective dateof termination, and any unvested stock options shall lapse and be forfeited as of such date; provided,however, that if Executive's termination is due to Executive's death, all Company stock options granted to Executive shall immediately vest upon the date ofExecutive's death.(c) Termination Due to Disability. If Executive's employment is terminated due to Executive's Disability pursuant to Section 3.1(d),above, Executive shall have no further rights against the Company hereunder, except for the right to receive (i) Accrued Benefits; (ii) the Historic Pro RataBonus; and (iii) a Severance Benefit. The Historic Pro Rata Bonus payment shall be made at the same time as any such bonuses are paid to other similarlysituated executives of the Company. For purposes of this Section 3.2(c), “Severance Benefit” means six (6) months of Base Salary, payable in equalinstallments during the six (6) month period following Executive's exhaustion of any short-term disability benefits provided by the Company, in accordancewith the normal payroll practices and schedule of the Company. The amount of such Severance Benefit shall be reduced by any compensation (including anypayments from the Company or any benefit plans, policies or programs sponsored by the Company) earned or received by Executive during the six (6) monthperiod following the date of termination and the six (6) month period during which Executive receives the Severance Benefit, and Executive agrees toreimburse the Company for the amount of any such reduction. Executive acknowledges and agrees that, upon the cessation, if any, of such Disability duringthe period of the payment of the Severance Benefit, he has an obligation to use his reasonable efforts to secure other employment consistent with Executive'sstatus and experience and that his failure to do so, as determined at the sole discretion of the Board, is a breach of this Agreement. Furthermore, under thisSection 3.2(c), vesting of any Company stock options granted to Executive shall cease on the effective date of termination, and any unvested stock optionsshall lapse and be forfeited as of such date.(d) Termination By Company Without Cause or By Executive for Good Reason.i. No Change of Control. If Executive's employment is terminated by the Company pursuant to Section 3.1(a), above, or byExecutive pursuant to Section 3.1(c), above, and such termination does not occur three (3) months prior to or within one (1) year after the occurrenceof a Change of Control (defined below), Executive shall have no further rights against the Company hereunder, except for the right to receive(A) Accrued Benefits; (B) a Severance Payment (defined below); (C) the Pro Rata Bonus (defined below); provided, however, that the Pro RataBonus payment shall be made at the same time as any such bonuses are paid to other similarly situated executives of the Company; (D)outplacement services from an outplacement service company of the Company's choosing at a cost not to exceed Twenty Thousand Dollars($20,000.00), payable directly to such outplacement service company (“Outplacement Services”); and (E) Health Insurance Continuation (definedbelow) for a period of two (2) years following the effective date of Executive's termination.For purposes of this Section 3.2(d)(i), “Severance Payment” means an amount equal to the sum of:(x) Executive's Base Salary for the remainder of the then current Initial Term or Renewal Term of this Agreement, but not to exceed two andnine-tenths (2.9) years; plus(y) an amount equal to the average (calculated at the sole discretion of the Company) of the three (3) most recent annual incentive com-pensation plan payments, if any, paid to Executive prior to the effective date of termination.The Severance Payment shall be paid to Executive in a lump sum within forty (40) days after the effective date of termination, subject to Section3.2(e) below.For purposes of this Section 3.2(d)(i), the “Pro Rata Bonus” means an amount equal to the product of:(x) the bonus attributable to the fiscal year of the Company during which the Executive's termination occurs equal in amount to the bonusthe Executive would have received for the full fiscal year had the Executive's employment not terminated and determined, whereapplicable, by taking into account the actual performance of the Company at year-end; and(y) a fraction, the numerator of which is the number of days completed in the fiscal year in which the effective date of termination occursthrough the effective date of termination and the denominator of which is three hundred sixty-five (365).Furthermore, under this Section 3.2(d)(i), vesting of any Company stock options granted to Executive prior to the date of termination shall continueas scheduled until the term of this Agreement expires, after which such vesting ceases and any unvested stock options lapse and are forfeited.ii. Change of Control. If Executive's employment is terminated by the Company pursuant to Section 3.1(a), above, or by theExecutive pursuant to Section 3.1(c), above, and such termination occurs within three (3) months prior to or one (1) year after the occurrence of aChange of Control (defined below), Executive shall have no further rights against the Company hereunder, except for the right to receive (A)Accrued Benefits; (B) a Severance Payment (defined below); (C) the Historic Pro Rata Bonus; provided, however, that such bonus payments shall bemade at the same time as any such bonuses are paid to other similarly situated executives of the Company; (D) Health Insurance Continuation(defined below) for a period of one (1) year following the effective date of Executive's termination; and (E) Outplacement Services.For purposes of this Section 3.2(d)(ii), “Severance Payment” means an amount equal to the sum of:(x) Executive's Base Salary for the period of time equal to the remainder of the then-current Renewal Term, but not to exceed two and nine-tenths (2.9) years; plus(y) an amount equal to the average (calculated at the sole discretion of the Company) of the three (3) most recent annual incentive com-pensation plan payments, if any, paid to Executive prior to the effective date of termination times the number of years, rounded to thenearest tenth, remaining in the then-current Renewal Term, but not to exceed two and nine-tenths (2.9).The Severance Payment shall be paid to Executive in a lump sum within forty (40) days after the effective date of termination, subject to Section3.2(e) below.Furthermore, under this Section 3.2(d)(ii), vesting of any Company stock options granted to Executive prior to termination shall occur immediatelyupon the date of termination.iii. Definition - Change of Control. “Change of Control” means the occurrence of (1) the acquisition (other than from theCompany) by any person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended(“Exchange Act”)), other than the Company, a subsidiary of the Company or any employee benefit plan or plans sponsored by the Company or anysubsidiary of the Company, directly or indirectly, of beneficial ownership (within the meaning of Exchange Act Rule 13d-3) of thirty-three percent(33%) or more of the then outstanding shares of common stock of the Company or voting securities representing thirty-three percent (33%) or moreof the combined voting power of the Company's then outstanding voting securities ordinarily entitled to vote in the election of directors unless theIncumbent Board (defined below), before such acquisition or within thirty (30) days thereafter, deems such acquisition not to be a Change ofControl; or (2) individuals who, as of the date of this Agreement, constitute the Board (as of such date, “Incumbent Board”) ceasing for any reason toconstitute at least a majority of such Board; provided, however, that any person becoming a director subsequent to the date of this Agreement whoseelection, or nomination for election by the shareholders of the Company, was approved by a vote of at least a majority of the directors thencomprising the Incumbent Board shall be for purposes of this Agreement, considered as though such person were a member of the Incumbent Boardbut excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contestwhich was (or, if threatened, would have been) subject to Exchange Act Rule 14a-12(c); or (3) the consummation of any merger, consolidation orshare exchange of the Company with any other corporation, other than a merger, consolidation or share exchange which results in more than sixtypercent (60%) of the outstanding shares of the common stock, and voting securities representing more than sixty percent (60%) of the combinedvoting power of then outstanding voting securities entitled to vote generally in the election of directors, of the surviving, consolidated or resultingcorporation being then beneficially owned, directly or indirectly, by the persons who were the Company's shareholders immediately prior to suchtransaction in substantially the same proportions as their ownership, immediately prior to such transaction, of the Company's then outstandingCommon Stock or then outstanding voting securities, as the case may be; or (4) the consummation of any liquidation or dissolution of the Companyor a sale or other disposition of all or substantially all of the assets of the Company.Following the occurrence of an event which is not a Change of Control whereby there is a successor company to the Company, orif there is no such successor whereby the Company is not the surviving corporation in a merger or consolidation, the surviving corporation orsuccessor holding company (as the case may be), for purposes of this Agreement, shall thereafter be referred to as the Company.(iv) Definition - Health Insurance Continuation. For purposes of Sections 3.2(d)(i) and 3.2(d)(ii) above, the term “HealthInsurance Continuation” means that, if Executive (and Executive's eligible dependents), following termination from employment under Sections3.2(d)(i) and 3.2(d)(ii) above, timely elects to participate in the Company's group health insurance plans pursuant to the Consolidated OmnibusBudget Reconciliation Act of 1985, as amended (“COBRA”), the Company will pay the normal monthly employer's cost of coverage under theCompany's group health insurance plans for full-time employees toward such COBRA coverage for the specified period of time, if any, set forth inSections 3.2(d)(i) and 3.2(d)(ii). If the specified period of time provided for in this Agreement is longer than the end of the 18-month period forwhich Executive is eligible for COBRA, the Company will, until the end of such longer period, pay the normal monthly employer's cost of coverageunder the Company's group health insurance plans to, at its sole discretion, allow Executive to continue to participate in such plans (ifallowed by law and the Company's policies, plans and programs) or allow Executive to purchase reasonably comparable individual health insurancecoverage through the end of such longer period. Executive acknowledges and agrees that Executive is responsible for paying the balance of anycosts not paid for by the Company under this Agreement which are associated with Executive's participation in the Company's health insuranceplans or individual health insurance and that Executive's failure to pay such costs may result in the termination of Executive's participation in suchplans or insurance. Executive acknowledges and agrees that the Company may deduct from any Severance Payment Executive receives pursuant tothis Agreement, amounts that Executive is responsible to pay for Health Insurance Continuation. Any Health Insurance Continuation provided forherein will cease on the date on which Executive becomes eligible for health insurance coverage under another employer's group health insuranceplan, and, within five (5) calendar days of Executive becoming eligible for health insurance coverage under another employer's group healthinsurance plan, Executive agrees to inform the Company of such fact in writing.In no event will the Health Insurance Continuation to be provided by the Company pursuant to this Agreement in one taxable year affectthe amount of Health Insurance Continuation to be provided in any other taxable year, nor will Executive's right to Health Insurance Continuationbe subject to liquidation or exchange for another benefit.(e) Delay of Payments if Required by Section 409A. If amounts paid to Executive pursuant to any Subsection of Section 3.2 would besubject to a penalty under Section 409A of the Internal Revenue Code because Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i), such payments will be delayed until a date which is six (6) months after Executive's termination of employment, at which point any such delayedpayments will be paid to Executive in a lump sum.3.3 Return of Records. Upon termination of employment, for whatever reason, or upon request by the Company at any time, Executive shallimmediately return to the Company all documents, records, and materials belonging and/or relating to the Company, and all copies of all such materials.Upon termination of employment, for whatever reason, or upon request by the Company at any time, Executive further agrees to destroy such recordsmaintained by Executive on Executive's own computer equipment.3.4 Release. As a condition to the receipt of any amounts or benefits after termination of employment for whatever reason, Executive, orhis personal representative, shall be required to execute a written release agreement in a form satisfactory to the Company containing, among other items, ageneral release of claims against the Company and, as an additional condition to the receipt of such amounts or benefits, Executive shall refuse to exerciseany right to revoke such release agreement during any applicable rescission period. Such written release under this Section 3.4 (A) shall be delivered toExecutive within three (3) business days after the date of termination of Executive's employment, and (B) must be executed by Executive and the rescissionperiod must expire without revocation of such release within 40 days following the date of termination of employment or Executive shall forfeit thecompensation and benefits provided under this Agreement that are conditioned upon the release. Where any payment or benefit under the Agreementconstitutes a nonqualified deferred compensation arrangement within the meaning of Section 409A of the Code, to the extent that (i) Executive is not a“specified employee” as defined in Section 409A of the Code and (ii) such payments would otherwise be paid or provided to Executive within the 40-dayperiod following the date of termination of employment, such payment(s) or benefit(s) shall commence following Executive's execution of the written releaseand the expiration of the applicable rescission period, except where the40-day period following the date of termination of employment spans two different calendar years, in which case such payment(s) or benefit(s) will notcommence until the later calendar year during the 40-day period.ARTICLE IVCONFIDENTIALITY4.1 Acknowledgments. Executive acknowledges and agrees that, as an integral part of its business, the Company has expended a great deal of time,money and effort to develop and maintain confidential, proprietary and trade secret information to compete against similar businesses and that thisinformation, if misused or disclosed, would be harmful to the Company's business and competitive position in the marketplace. Executive furtheracknowledges and agrees that in Executive's position with the Company, the Company provides Executive with access to its confidential, proprietary andtrade secret information, strategies and other confidential business information that would be of considerable value to competitive businesses. As a result,Executive acknowledges and agrees that the restrictions contained in this Article IV are reasonable, appropriate and necessary for the protection of theCompany's confidential, proprietary and trade secret information. For purposes of this Article IV, the term “Company” means Kohl's Department Stores, Inc.and its parent companies, subsidiaries and other affiliates.4.2. Confidentiality Obligations. During the term of Executive's employment under this Agreement, Executive will not directly or indirectly use ordisclose any Confidential Information or Trade Secrets (defined below) except in the interest and for the benefit of the Company. After the termination, forwhatever reason, of Executive's employment with the Company, Executive will not directly or indirectly use or disclose any Trade Secrets unless suchinformation ceases to be deemed a Trade Secret by means of one of the exceptions set forth in Section 4.3(c), below. For a period of two (2) years followingtermination, for whatever reason, of Executive's employment with the Company, Executive will not directly or indirectly use or disclose any ConfidentialInformation, unless such information ceases to be deemed Confidential Information by means of one of the exceptions set forth in Section 4.3(c), below.4.3 Definitions.(a) Trade Secret. The term “Trade Secret” shall have that meaning set forth under applicable law. This term is deemed by the Company tospecifically include all of Company's computer source, object or other code and any confidential information received from a third party with whom theCompany has a binding agreement restricting disclosure of such confidential information.(b) Confidential Information. The term “Confidential Information” shall mean all non-Trade Secret or proprietary information of theCompany which has value to the Company and which is not known to the public or the Company's competitors, generally, including, but not limited to,strategic growth plans, pricing policies and strategies, employment records and policies, operational methods, marketing plans and strategies, advertisingplans and strategies, product development techniques and plans, business acquisition and divestiture plans, resources, sources of supply, suppliers andsupplier contractual relationships and terms, technical processes, designs, inventions, research programs and results, source code, short-term and long-rangeplanning, projections, information systems, sales objectives and performance, profits and profit margins, and seasonal plans, goals and objectives.(c) Exclusions. Notwithstanding the foregoing, the terms “Trade Secret” and “Confidential Information” shall not include, and theobligations set forth in this Article IV shall not apply to, any information which: (i) can be demonstrated by Executive to have been known by Executiveprior to Executive's employment by the Company; (ii) is or becomes generally available to the public through no act or omission of Executive; (iii) isobtained by Executive in good faith from a third party who discloses such information to Executive on a non-confidential basis without violating anyobligation of confidentiality or secrecy relating to the information disclosed; or (iv) is independently developed by Executive outside the scope ofExecutive's employment without use of Confidential Information or Trade Secrets.ARTICLE VRESTRICTED SERVICES OBLIGATION5.1 Acknowledgments. Executive acknowledges and agrees that the Company is one of the leading retail companies in the United States, withdepartment stores throughout the United States, and that the Company compensates executives like Executive to, among other things, develop and maintainvaluable goodwill and relationships on the Company's behalf (including relationships with customers, suppliers, vendors, employees and other associates)and to maintain business information for the Company's exclusive ownership and use. As a result, Executive acknowledges and agrees that the restrictionscontained in this Article V are reasonable, appropriate and necessary for the protection of the Company's goodwill, customer, supplier, vendor, employee andother associate relationships and Confidential Information and Trade Secrets. Executive further acknowledges and agrees that the restrictions contained inthis Article V will not pose an undue hardship on Executive or Executive's ability to find gainful employment. For purposes of this Article V, the term“Company” means Kohl's Department Stores, Inc. and its parent companies, subsidiaries and other affiliates.5.2 Restricted Services Obligation. During the Initial Term and the Renewal Term and for the one (1) year period following termination, forwhatever reason, of Executive's employment with the Company, Executive will not, directly or indirectly, provide Restricted Services (defined below) for oron behalf of any Competitive Business (defined below) or directly or indirectly, provide any Competitive Business with any advice or counsel in the natureof the Restricted Services.5.3 Definitions. For purposes of this Article V, the following are defined terms:(a)Restricted Services. “Restricted Services” shall mean services of any kind or character comparable to those Executiveprovided to the Company during the eighteen (18) month period immediately preceding Executive's last date of employment with the Company.(b)Competitive Business. “Competitive Business” shall mean each of the following entities: J.C. Penney Company, Inc.,Macy's, Inc., The Gap, Inc., Target Corporation, Sears Holdings Corporation, and any successors, subsidiaries or affiliates of these entities engaged inthe operation of national retail department stores.ARTICLE VIBUSINESS IDEAS; NON-DISPARAGEMENT6.1 Assignment of Business Ideas. Executive shall immediately disclose to the Company a list of all inventions, patents, applications for patent,copyrights, and applications for copyright in which Executive currently holds an interest. TheCompany will own, and Executive hereby assigns to the Company, all rights in all Business Ideas. All Business Ideas which are or form the basis forcopyrightable works shall be considered “works for hire” as that term is defined by United States Copyright Law. Any works that are not found to be “worksfor hire” are hereby assigned to the Company. While employed by the Company and for one (1) year thereafter, Executive will promptly disclose all BusinessIdeas to the Company and execute all documents which the Company may reasonably require to perfect its patent, copyright and other rights to suchBusiness Ideas throughout the world. After Executive's employment with the Company terminates, for whatever reason, Executive will cooperate with theCompany to assist the Company in perfecting its rights to any Business Ideas including executing all documents which the Company may reasonablyrequire. For purposes of this Article VI, the term “Company” means Kohl's Department Stores, Inc. and its parent companies, subsidiaries and other affiliates.6.2 Business Ideas. The term “Business Ideas” as used in this Agreement means all ideas, inventions, data, software, developments andcopyrightable works, whether or not patentable or registrable, which Executive originates, discovers or develops, either alone or jointly with others whileExecutive is employed by the Company and for one (1) year thereafter and which are (a) related to any business known by Executive to be engaged in orcontemplated by the Company, (b) originated, discovered or developed during Executive's working hours during his employment with the Company, or(c) originated, discovered or developed in whole or in part using materials, labor, facilities, Confidential Information, Trade Secrets, or equipment furnishedby the Company.6.3 Non-Disparagement. Executive agrees not to engage at any time in any form of conduct or make any statements or representations, or directany other person or entity to engage in any conduct or make any statements or representations, that disparage, criticize or otherwise impair the reputation ofthe Company, its affiliates, parents and subsidiaries and their respective past and present officers, directors, stockholders, partners, members, agents andemployees. Nothing contained in this Section 6.3 shall preclude Executive from providing truthful testimony or statements pursuant to subpoena or otherlegal process or in response to inquiries from any government agency or entity.ARTICLE VIIEMPLOYEE NON-SOLICITATIONDuring the term of Executive's employment with the Company and for one (1) year thereafter, Executive shall not directly or indirectly encourageany Company employee to terminate his employment with the Company unless Executive does so in the course of performing his duties for the Companyand such encouragement is in the Company's best interests. For purposes of this Article VII, the term “Company” means Kohl's Department Stores, Inc. and itsparent companies, subsidiaries and other affiliates.ARTICLE VIIIGENERAL PROVISIONS8.1 Notices. Any and all notices, consents, documents or communications provided for in this Agreement shall be given in writing and shall bepersonally delivered, mailed by registered or certified mail (return receipt requested) or sent by courier, confirmed by receipt, and addressed as follows (or tosuch other address as the addressed party may have substituted by notice pursuant to this Section 8.1):(a) If to the Company:Kohl's Department Stores, Inc.N56 W17000 Ridgewood DriveMenomonee Falls, WI 53051Attn: Kevin Mansell, Chairman, President, and CEO(b) If to Executive: Any notice to be given to the Executive may be addressed to him at the address as it appears on the payroll records of theCompany or any subsidiary thereof.Such notice, consent, document or communication shall be deemed given upon personal delivery or receipt at the address of the party stated above or at anyother address specified by such party to the other party in writing, except that if delivery is refused or cannot be made for any reason, then such notice shallbe deemed given on the third day after it is sent.8.2 Executive Disclosures and Acknowledgments.(a) Prior Obligations. Attached as Exhibit B is a list of prior obligations (written and oral), such as confidentiality agreements or covenantsrestricting future employment or consulting, that Executive has entered into which may restrict Executive's ability to perform Executive's duties as anemployee for the Company.(b) Confidential Information of Others. Executive certifies that Executive has not, and will not, disclose or use during Executive's time asan employee of the Company, any confidential information which Executive acquired as a result of any previous employment or under a contractualobligation of confidentiality or secrecy before Executive became an employee of the Company.(c) Scope of Restrictions. By entering into this Agreement, Executive acknowledges the nature of the Company's business and the natureand scope of the restrictions set forth in Articles IV, V and VII, above, including specifically Wisconsin's Uniform Trade Secrets Act, presently § 134.90, Wis.Stats. Executive acknowledges and represents that the scope of such restrictions are appropriate, necessary and reasonable for the protection of theCompany's business, goodwill, and property rights. Executive further acknowledges that the restrictions imposed will not prevent Executive from earning aliving in the event of, and after, termination, for whatever reason, of Executive's employment with the Company. Nothing herein shall be deemed to preventExecutive, after termination of Executive's employment with the Company, from using general skills and knowledge gained while employed by theCompany.(d) Prospective Employers. Executive agrees, during the term of any restriction contained in Articles IV, V and VII, above, to disclose suchprovisions to any future or prospective employer. Executive further agrees that the Company may send a copy of this Agreement to, or otherwise make theprovisions hereof known to, any such employer.8.3 Effect of Termination. Notwithstanding any termination of this Agreement, the Executive, in consideration of his employment hereunder, shallremain bound by the provisions of this Agreement which specifically relate to periods, activities or obligations upon or subsequent to the termination of theExecutive's employment.8.4 Confidentiality of Agreement. Executive agrees that, with the exception of disclosures pursuant to Section 8.2(d), above, Executive will notdisclose, directly or indirectly, any non-public terms of this Agreement to any third party; provided, however, that following Executive's obtaining a promiseof confidentiality for the benefit of the Company from Executive's tax preparer, accountant, attorney and spouse, Executive may disclose such terms to suchof these individuals who have made such a promise of confidentiality. This provision shall not prevent Executive from disclosing such matters in testifyingin any hearing, trial or other legal proceeding where Executive is required to do so.8.5 Cooperation. Executive agrees to take all reasonable steps during and after Executive's employment with the Company to make himself/herselfavailable to and to cooperate with the Company, at its request, in connection with any legal proceedings or other matters in which it is or may becomeinvolved. Following Executive's employment with the Company, the Company agrees to pay reasonable compensation to Executive and to pay allreasonable expenses incurred by Executive in connection with Executive's obligations under this Section 8.5.8.6 Effect of Breach. In the event that Executive breaches any provision of this Agreement, Executive agrees that the Company may suspend allpayments to Executive under this Agreement (including any Severance Payment), recover from Executive any damages suffered as a result of such breach andrecover from Executive any reasonable attorneys' fees or costs it incurs as a result of such breach. In addition, Executive agrees that the Company may seekinjunctive or other equitable relief, without the necessity of posting bond, as a result of a breach by Executive of any provision of this Agreement.8.7 Entire Agreement. This Agreement contains the entire understanding and the full and complete agreement of the Parties and supersedes andreplaces any prior understandings and agreements among the Parties with respect to the subject matter hereof, including without limitation the OriginalAgreement.8.8 Headings. The headings of sections and paragraphs of this Agreement are for convenience of reference only and shall not control or affect themeaning or construction of any of its provisions.8.9 Consideration. Execution of this Agreement is a condition of Executive's continued employment with the Company and Executive's continuedemployment by the Company, and the benefits provided to Executive under this Agreement, constitute the consideration for Executive's undertakingshereunder.8.10 Amendment. This Agreement may be altered, amended or modified only in a writing, signed by both of the Parties hereto.8.11 Assignability. This Agreement and the rights and duties set forth herein may not be assigned by Executive, but may be assigned bythe Company, in whole or in part. This Agreement shall be binding on and inure to the benefit of each party and such party's respective heirs, legalrepresentatives, successors and assigns.8.12 Severability. If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then suchinvalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force andeffect, and such invalid or unenforceable provision shall be construed in a manner so as to give the maximum valid and enforceable effect to the intent of theParties expressed therein.8.13 Waiver of Breach. The waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver ofany subsequent breach by either party.8.14 Governing Law; Construction. This Agreement shall be governed by the internal laws of the State of Wisconsin, without regard to any rulesof construction concerning the draftsman hereof.8.15 Section 409A Compliance. The Company and Executive intend that any amounts or benefits payable or provided under this Agreementcomply with the provisions of Section 409A of the Internal Revenue Code and the treasury regulations relating thereto so as not to subject Executive to thepayment of the tax, interest and any tax penalty which may be imposed under Code Section 409A. The provisions of this Agreement shall be interpreted in amanner consistent with such intent. In furtherance thereof, to the extent that any provision hereof would otherwise result in Executive being subject topayment of tax, interest and tax penalty under Code Section 409A, the Company and Executive agree to amend this Agreement in a manner that brings thisAgreement into compliance with Code Section 409A and preserves to the maximum extent possible the economic value of the relevant payment or benefitunder this Agreement to Executive.[Signatures on Following Page]IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year written above.KOHL'S DEPARTMENT STORES, INC.:By: /s/ Kevin Mansell Kevin Mansell,Chairman, President and Chief Executive OfficerEXECUTIVE:By: /s/ Kenneth G. BonningKenneth G. BonningEXHIBIT ABASE COMPENSATION Executive's annual base compensation as of the date of this Agreement is Seven Hundred Fifteen Thousand Eight Hundred and no/100 Dollars ($715,800).EXHIBIT BPRIOR OBLIGATIONSNone.Exhibit 12.1Kohl's CorporationRatio of Earnings to Fixed Charges(Dollars in Millions) 2014 2013 2012Earnings Income before income taxes$1,349 $1,404 $1,561 Fixed charges524 517 509 Less: interest capitalized during period(2) (1) (2) $1,871 $1,920 $2,068Fixed charges Interest (expensed or capitalized)$342 $339 $335 Portion of rent expense representative of interest180 176 172 Amortization of deferred financing fees2 2 2 $524 $517 $509Ratio of earnings to fixed charges3.6 3.7 4.1Exhibit 21.1SubsidiariesName State of Incorporation or FormationKohl's Department Stores, Inc. DelawareKohl's Illinois, Inc.* NevadaKohl's Indiana, Inc.* DelawareKohl's Indiana, L.P. DelawareKohl's Michigan, L.P. DelawareKohl's Value Services, Inc.* VirginiaKohl's Cares, LLC* WisconsinKWAL, LLC Wisconsin *These subsidiaries are wholly owned subsidiaries of Kohl's Department Stores, Inc.Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements (Form S-8 #33-49886, Form S-8 #333-26409, Form S-8 #33-84558,Form S-8 #333-105264, Form S-8 #333-143086, Form S-8 #333-167338 and Form S-3 #333-177252) of Kohl's Corporation, of our reports dated March 20,2015, with respect to the consolidated financial statements of Kohl's Corporation and the effectiveness of internal control over financial reporting of Kohl'sCorporation included in this Annual Report (Form 10-K) of Kohl's Corporation for the year ended January 31, 2015./s/ Ernst & Young LLPMilwaukee, WisconsinMarch 20, 2015Exhibit 31.1CERTIFICATION OF CHIEF EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Kevin Mansell, certify that:1.I have reviewed this Annual Report on Form 10-K of Kohl's Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. Dated:March 20, 2015/s/ Kevin Mansell Kevin Mansell Chairman, Chief Executive Officer and President (Principal Executive Officer)Exhibit 31.2CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Wesley S. McDonald, certify that:1.I have reviewed this Annual Report on Form 10-K of Kohl's Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. Dated:March 20, 2015/s/ Wesley S. McDonald Wesley S. McDonald Senior Executive Vice President and Chief Financial Officer (Principal Financial and Chief Accounting Officer)Exhibit 32.1CERTIFICATION OF PERIODIC REPORTBY CHIEF EXECUTIVE OFFICERPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Kevin Mansell, Chief Executive Officer of Kohl's Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18U.S.C. Section 1350, that, to the undersigned's knowledge, on the date of this Certification: 1.This Annual Report on Form 10-K of the Company for the annual period ended January 31, 2015 (the “Report”) fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.That the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Dated:March 20, 2015/s/ Kevin Mansell Kevin Mansell Chairman, Chief Executive Officer and President (Principal Executive Officer)Exhibit 32.2CERTIFICATION OF PERIODIC REPORTBY CHIEF FINANCIAL OFFICERPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Wes S. McDonald, Chief Financial Officer of Kohl's Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18U.S.C. Section 1350, that, to the undersigned's knowledge, on the date of this Certification: 1.This Annual Report on Form 10-K of the Company for the annual period ended January 31, 2015 (the “Report”) fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.That the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Dated:March 20, 2015/s/ Wesley S. McDonald Wesley S. McDonald Senior Executive Vice President and Chief FinancialOfficer (Principal Financial and Chief Accounting Officer)

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