Kohl’s Annual Report 2015

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 30, 2016or¨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 July 31, 2015, the aggregate market value of the voting stock of the Registrant held by stockholders who were not affiliates of the Registrant was approximately $12.0billion (based upon the closing price of Registrant’s Common Stock on the New York Stock Exchange on such date). At March 9, 2016, the Registrant had outstanding anaggregate of 185,168,909 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 11, 2016 are incorporated into Parts II and III.Table of ContentsKOHL’S CORPORATIONINDEX PART I Item 1.Business3Item 1A.Risk Factors5Item 1B.Unresolved Staff Comments9Item 2.Properties9Item 3.Legal Proceedings11Item 4.Mine Safety Disclosures11 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities12Item 6.Selected Consolidated Financial Data15Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations16Item 7A.Quantitative and Qualitative Disclosures About Market Risk29Item 8.Financial Statements and Supplementary Data29Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosures29Item 9A.Controls and Procedures30Item 9B.Other Information32 PART III Item 10.Directors, Executive Officers and Corporate Governance32Item 11.Executive Compensation33Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters33Item 13.Certain Relationships and Related Transactions, and Director Independence33Item 14.Principal Accountant Fees and Services33 PART IV Item 15.Exhibits and Financial Statement Schedules34 Signatures35 Exhibit Index36 Index to Consolidated Financial StatementsF-1Table of ContentsPART IItem 1. BusinessKohl’s Corporation (the “Company” or “Kohl’s”) was organized in 1988 and is a Wisconsin corporation. As of January 30, 2016, we operated 1,164department 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 consistent merchandise with assortment differences attributable to localpreferences. Our website includes merchandise which is available in our stores, as well as merchandise which is available only on-line.Our merchandise mix includes both national brands and private and exclusive brands which are available only at Kohl's. National brands generallyhave higher selling prices, but lower gross margins, than private and exclusive brands. Most of our private brands are well-known established brands such asApt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Goods for Life. Despite having lower selling prices, private brands generally have higher grossmargins than exclusive and national brands. Exclusive brands are developed and marketed through agreements with nationally-recognized brands. Examplesof our exclusive brands include Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang. Exclusive brands have sellingprices which are generally lower than national brands, but higher than private brands. Their gross margins are generally higher than national brands, butlower than private brands.As reflected in the chart below, our merchandise mix by line of business hasremained generally consistent over the last three years.As reflected in the chart below, we have increased our emphasis on nationalbrands in recent years as we believe they drive customer traffic. 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 ofWeeks2015January 30, 2016 522014January 31, 2015 522013February 1, 2014 52For 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 States, ship merchandise toeach store by contract carrier several times a week. On-line sales may be picked up in our stores or are shipped from a Kohl’s fulfillment center, retaildistribution center or store; by a third-party fulfillment center; or directly by a third-party vendor.3Table of ContentsSee Item 2, “Properties,” for additional information about our distribution centers.EmployeesAs of January 30, 2016, we employed approximately 140,000 associates, including approximately 32,000 full-time and 108,000 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, loyalty programs, credit availability, and customer experience and convenience are also key competitive factors. Ourprimary competitors are traditional department stores, upscale mass merchandisers, off-price retailers, specialty stores, internet and catalog businesses andother forms of retail commerce. Our specific competitors vary from market to market.Merchandise VendorsWe purchase merchandise from numerous domestic and foreign suppliers. All business partners must meet certain requirements in order to do businesswith us. These Terms of Engagement include provisions regarding laws and regulations, employment practices, ethical standards, environmental and legalrequirements, communication, monitoring/compliance, record keeping, subcontracting and corrective action. Our expectation is that all business partnerswill comply with these Terms of Engagement and quickly remediate any deficiencies, if noted, in order to maintain our business relationship.Approximately 30% of the merchandise we sell is sourced through a third-party purchasing agent. None of our vendors individually accounted formore than 5% of our net purchases during 2015. We have no significant long-term purchase commitments or arrangements with any of our suppliers, andbelieve that 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.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 190 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 “Investors” portion of this website, we make available, free of charge, our proxystatements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, SEC Forms 3, 4 and 5 and any amendments tothose 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 “Investors”:•Committee charters of our Board of Directors’ Audit Committee, Compensation Committee and Governance & Nominating Committee•Corporate Governance Guidelines•Code of EthicsOur Corporate Social Responsibility report can be found on our corporate website under the caption "Corporate Responsibility" and sub-heading"Sustainability".4Table of ContentsAny amendment to or waiver from the provisions of the Code of Ethics that is applicable to our Chief Executive Officer, Chief Financial Officer orother key finance associates will be disclosed on the “Corporate Governance” portion of the website.Information contained on our website is not part of this Annual Report on Form 10-K. Paper copies of any of the materials listed above will be 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 "2016 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. Themoderate income consumer, which is our core customer, is especially sensitive to these factors. A continued or incremental slowdown in the U.S.economy and the uncertain economic outlook could continue to adversely affect consumer spending habits. As all of our stores are located in the UnitedStates, 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 industry 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.5Table of Contents•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 relationships with our customers. Additionally, failure to accurately predict changing consumer tastesmay result in excess inventory, which could result in additional markdowns and adversely affect our operating results.•We may be unable to source merchandise in a timely and cost-effective manner.Approximately 30% of the merchandise we sell is sourced through a third-party purchasing agent. The remaining merchandise is sourced from 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, substantially all of which is shipped by ocean toports in the United States. Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs, workstoppages, port strikes, port congestion and delays and other factors relating to foreign trade are beyond our control and could adversely impact ourperformance.Increases in the price of merchandise, raw materials, fuel and labor or their reduced availability could increase our cost of merchandise sold. Theprice and availability of raw materials may fluctuate substantially, depending on a variety of factors, including demand, weather, supply conditions,transportation costs, energy prices, work stoppages, government regulation and government policy, economic climates, market speculation and otherunpredictable factors. An inability to mitigate these cost increases, unless sufficiently offset with our pricing actions, might cause a decrease in ourprofitability. Any related pricing actions might cause a decline in our sales volume. Additionally, a decrease in the availability of raw materials couldimpair our ability to meet our production or purchasing requirements in a timely manner. Both the increased cost and lower availability of merchandise,raw materials, fuel and labor may also have an adverse impact on our cash and working capital needs as well as those of our suppliers.If any of our significant vendors were to become subject to bankruptcy, receivership or similar proceedings, we may be unable to arrange 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. These Terms ofEngagement include provisions regarding laws and regulations, employment practices, ethical standards, environmental and legal requirements,communication, monitoring/compliance, record keeping, subcontracting and corrective action. From time to time, suppliers may not be in compliancewith these standards or applicable laws. Significant or continuing noncompliance with such standards and laws by one or more suppliers could have anegative 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 and loyalty programs to increaseawareness of our brands and to build personalized connections with our customers. We believe these programs will strengthen customer loyalty, increasethe number and frequency of customers that shop our stores and website and increase our sales. If our marketing and loyalty programs are not successful,our sales and operating results could be adversely affected.6Table of Contents•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/or private litigation. Reputational damage caused by real or perceived product safety concerns,could have a negative impact on our sales and operating results.•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 an omni-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.Customer expectations about the methods by which they purchase and receive products or services are also evolving. Customers are increasinglyusing technology and mobile devices to rapidly compare products and prices and to purchase products. Once products are purchased, customers areseeking alternate options for delivery of those products. We must continually anticipate and adapt to these changes in the purchasing process. Ourability to compete with other retailers and to meet our customer expectations may suffer if we are unable to provide relevant customer-facing technology.Our ability to compete may also suffer if Kohl’s, our suppliers, or our third-party shipping and delivery vendors are unable to effectively and efficientlyfulfill and deliver orders, especially during the holiday season when sales volumes are especially high. Consequently, our results of operations could beadversely 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 has been rapid growth in penetration of these less profitable omni-channel sales. There can be no assurances that futureprofitability will return to historical levels.7Table of ContentsOur 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, we mayexperience system interruptions that make our website unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods wesell and the attractiveness of our products and services. Also, third-party delivery, direct ship vendors and customer service co-sourcers may be unable todeliver merchandise on a timely basis.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.Our inability to raise additional capital and maintain bank credit on favorable terms could adversely affect our business and financial condition.We have historically relied on the public debt markets to raise capital to partially fund our operations and growth. We have also historically 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.8Table of ContentsAn 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. Competitive and regulatory pressures have alreadysignificantly increased our labor costs. Further changes that adversely impact our ability to attract and retain quality associates could adversely affect ourperformance and/or profitability. In addition, changes in federal and state laws relating to employee benefits, including, but not limited to, sick time, paidtime off, leave of absence, wage-and-hour, overtime, meal-and-break time and joint/co-employment could cause us to incur additional costs, which couldnegatively 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.Unauthorized 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 30, 2016, we operated 1,164 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.9Table of ContentsThe following tables summarize key information about our stores as of January 30, 2016: Number ofStores byState Number ofStores byState Mid-Atlantic Region: South Central Region: Delaware5 Arkansas8Maryland23 Kansas12Pennsylvania50 Louisiana9Virginia30 Missouri27West Virginia7 Oklahoma11Total Mid-Atlantic115 Texas84Midwest Region: Total South Central151Illinois66 Southeast Region: Indiana39 Alabama14Iowa18 Florida53Michigan45 Georgia35Minnesota26 Kentucky17Nebraska7 Mississippi5North Dakota4 North Carolina31Ohio58 South Carolina16South Dakota3 Tennessee20Wisconsin40 Total Southeast191Total Midwest306 West Region: Northeast Region: Alaska1Connecticut22 Arizona26Maine5 California125Massachusetts25 Colorado24New Hampshire11 Idaho5New Jersey38 Montana3New York51 Nevada12Rhode Island3 New Mexico5Vermont1 Oregon11Total Northeast156 Utah12 Washington19 Wyoming2 Total West245 Total Kohl’s1,164 Number of Stores by Store Type Location OwnershipPrototype986 Strip centers782 Owned414Small178 Community & regional malls85 Leased510 1,164 Freestanding297 Ground leased240 1,164 1,164 10Table of ContentsDistribution CentersThe following table summarizes key information about each of our distribution centers. YearOpened SquareFootageStore distribution centers: Findlay, Ohio1994 780,000Winchester, Virginia1997 420,000Blue Springs, Missouri1999 540,000Corsicana, Texas2001 540,000Mamakating, New York2002 605,000San Bernardino, California2002 575,000Macon, Georgia2005 560,000Patterson, California2006 360,000Ottawa, Illinois2008 328,000On-line fulfillment centers: Monroe, Ohio2001 1,200,000San Bernardino, California2010 970,000Edgewood, Maryland2011 1,450,000DeSoto, Texas2012 1,200,000We 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 applicable11Table 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 2015 and 2014. 2015 2014 High Low Dividend High Low Dividend Fourth Quarter$50.86 $42.85 $0.45 $61.54 $54.95 $0.39Third Quarter61.60 44.06 0.45 62.50 53.74 0.39Second Quarter74.51 61.17 0.45 55.89 51.00 0.39First Quarter79.07 61.44 0.45 57.89 49.09 0.39On February 24, 2016, our Board of Directors approved an 11% increase in our dividend to $0.50 per common share which will be paid on March 23,2016 to shareholders of record as of March 9, 2016. In 2015, we paid aggregate cash dividends of $349 million.(b) HoldersAs of March 9, 2016, there were approximately 4,100 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 11, 2016 Annual Meeting ofShareholders, which information is incorporated herein by reference.12Table 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 11, 2016 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.C.Penney 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 29, 2011 and reinvestment of dividends. The calculations exclude trading commissions and taxes.Company / IndexJan 29, 2011 Jan 28, 2012 Feb 2, 2013 Feb 1, 2014 Jan 31, 2015 Jan 30, 2016Kohl’s Corporation$100.00 $93.05 $94.23 $106.55 $129.22 $111.10S&P 500 Index100.00 105.33 123.87 149.02 170.22 169.09Peer Group Index100.00 118.84 143.36 158.29 202.09 190.58(e) Recent Sales of Unregistered Securities; Use of Proceeds from Registered SecuritiesWe did not sell any equity securities during 2015 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.13Table 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 30, 2016:PeriodTotalNumberof SharesPurchasedDuringPeriod AveragePricePaid PerShare Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPlans orPrograms ApproximateDollar Value ofShares that MayYet Be Purchased Underthe Plans orPrograms (Dollars inMillions)November 1 – November 28, 20151,232,778 $45.75 1,231,525 $799November 29, 2015 – January 2, 20161,847,094 46.94 1,845,092 712January 3 – January 30, 20161,442,582 48.64 1,416,962 643Total4,522,454 $47.16 4,493,579 $64314Table 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. 2015 2014 2013 2012 (d) 2011 (Dollars in Millions, Except per Share and per Square Foot Data)Statements of Income Data: Net sales$19,204 $19,023 $19,031 $19,279 $18,804Cost of merchandise sold12,265 12,098 12,087 12,289 11,625Gross margin6,939 6,925 6,944 6,990 7,179Selling, general and administrative expenses4,452 4,350 4,313 4,267 4,243Depreciation and amortization934 886 889 833 778Operating income1,553 1,689 1,742 1,890 2,158Interest expense, net327 340 338 329 299Loss on extinguishment of debt169 — — — —Income before income taxes1,057 1,349 1,404 1,561 1,859Provision for income taxes384 482 515 575 692Net income$673 $867 $889 $986 $1,167Basic earnings per share$3.48 $4.28 $4.08 $4.19 $4.33Diluted earnings per share$3.46 $4.24 $4.05 $4.17 $4.30Dividends per share$1.80 $1.56 $1.40 $1.28 $1.00Operating and Other Data: Net sales growth1.0% 0.0 % (1.3)% 2.5% 2.2%Comparable sales growth (a)0.7% (0.3)% (1.2)% 0.3% 0.5%Net sales per selling square foot (b)$228 $226 $227 $231 $232As a percent of sales: Gross margin36.1% 36.4 % 36.5 % 36.3% 38.2%Operating income8.1% 8.9 % 9.2 % 9.8% 11.5%Return on average shareholders’ equity (c)11.8% 14.7 % 14.8 % 15.8% 16.4%Excluding loss on extinguishment of debt: Net income$781 $867 $889 $986 $1,167Diluted earnings per share$4.01 $4.24 $4.05 $4.17 $4.30Return on average shareholders' equity (c)13.5% 14.7 % 14.8 % 15.8% 16.4%Total square feet of selling space (in thousands)$83,810 $83,750 $83,671 $83,098 $82,226Number of stores (end of period)1,164 1,162 1,158 1,146 1,127Working capital$2,362 $2,721 $2,412 $2,061 $2,111Total assets$13,606 $14,333 $14,228 $13,761 $14,021Long-term debt$2,792 $2,780 $2,777 $2,478 $2,128Capital lease and financing obligations$1,916 1,968 $2,069 $2,061 $2,103Shareholders’ equity$5,491 $5,991 $5,978 $6,048 $6,508Cash flow from operations$1,474 $2,024 $1,884 $1,265 $2,139Capital expenditures$690 $682 $643 $785 $927 (a)Comparable sales include sales for stores (including relocated or remodeled stores) which were open throughout both the full current and prior year periods. We also includeomni-channel sales in our comparable sales. Adjustments for omni-channel sales that have been shipped, but not yet received by the customer are included in net sales, but arenot included in our comparable sales. Fiscal 2013 comparable sales growth compares the 52 weeks ended February 1, 2014 to the 52 weeks ended February 2, 2013. Fiscal2012 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 omni-channel 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; interestwas approximately $2 million; net income was approximately $15 million and diluted earnings per share was approximately $0.06.15Table of ContentsItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsExecutive SummaryAs of January 30, 2016, we operated 1,164 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 2014, we introduced a multi-year strategic framework which we refer to as "the Greatness Agenda". It is built on five pillars - amazing product,incredible savings, easy experience, personalized connections and winning teams. All of the Greatness Agenda initiatives are designed to increase sales,primarily by increasing the number of customers that shop at our stores and on-line.As a retailer, product is the core of our business. During 2015, we increased our emphasis on national brands as we believe they drive customer traffic.Driven by strong sales in Nike, Skechers, Levi’s and Carters, national brand sales increased 6.2% and represented 52% of our sales in 2015. Active andwellness merchandise sales were also stronger than the company average in both national brands and our own private and exclusive brands.During 2015, we expanded our localization assortment strategy which tailors product mix to the specific customer preferences at each of our stores.Approximately 40% of our sales were tailored by store at the end of 2015. We plan to have unique store assortments in 90% of our stores by the end of 2016.In addition to offering amazing product, we must offer an easy and desirable shopping experience for customers both in our stores and from their digitaldevices. During 2015, we launched new mobile and tablet platforms which improved the digital shopping experience. We also launched buy on-line andpick-up in store (“BOPUS”) in all stores. In addition to offering a convenient shopping option for our customers, BOPUS is driving incremental sales.Customers picking up BOPUS orders have made additional in-store purchases of approximately 25% of their original order.In 2016, we plan to make several updates to our store formats and omni-channel strategy. In the first half of the year, we intend to pilot seven new smallformat stores which will help inform both future store size and rationalization, and identify omni-channel opportunities. We also plan to test two moreclearance stores, which are operated as Off-Aisle stores, and 12 FILA outlet stores.We believe our personalized connections and incredible savings strategies will increase sales by strengthening the loyalty of existing customers andattracting new customers. Key to the success of these initiatives are understanding our customers and ensuring they get the most from every dollar that theyspend at Kohl’s. We believe our Yes2You loyalty program will continue to drive both strategies. In 2015, approximately 65% of our sales were attributed toYes2You members. Yes2You members consistently shop more frequently and spend more than customers who are not enrolled in the program.To execute our Greatness Agenda vision, we rely on winning teams of engaged, talented, results-oriented and empowered management and employees.During 2015, we rounded out our leadership team by hiring Sona Chawla as our Chief Operating Officer.We believe that the strategic framework of the Greatness Agenda is working. We are making progress towards our goal of being the most engagingretailer in America, but realize that it will take additional time to fully implement our initiatives and achieve the goals we initially established.In 2015, comparable sales increased 0.7%; an improvement over the sales declines that we reported prior to launching the Greatness Agenda. Grossmargin as a percentage of sales decreased approximately 30 basis points from 36.4% in 2014 to 36.1% in 2015. Gross margin was especially challenging inthe fourth quarter due to a very competitive holiday season and deeper discounts on cold-weather apparel which did not sell due to unseasonably warmweather. Selling, general and administrative expenses increased 2% in 2015. Expenses were again well-managed against the sales increases. Excluding theloss on extinguishment of debt, our net income was $781 million and our diluted earnings per share decreased 5% to $4.01.See "Results of Operations" and "Liquidity and Capital Resources" for additional details about our financial results, how we define comparable sales,and the loss on extinguishment of debt.16Table of Contents2016 OutlookOur current expectations for 2016 are as follows: Total salesDecrease (0.5%) - Increase 0.5%Comparable salesIncrease 0 - 1%Gross margin as a percent of salesIncrease 0 - 20 bpsSelling, general and administrative expensesIncrease 1 - 2%Depreciation$940 millionInterest$310 millionEffective tax rate37%Earnings per diluted share$4.05 - $4.25Capital expenditures$825 millionShare repurchases: Total repurchases$600 millionCost per share$50We continue to explore ways to enhance shareholder value through the optimization of our existing store portfolio. In 2016, we intend to close 18underperforming stores, representing less than one percent of total sales. We announced the specific locations in March. The closures are expected to generateannual SG&A savings of approximately $45 million and annual depreciation savings of approximately $10 million. We currently expect to incurapproximately $150 - $170 million in charges as a result of these planned closures and the organizational realignment at our corporate offices which wereannounced in February. We estimate that approximately $55 - $65 million of the charges will be recorded in the first quarter of 2016, with the remainderrecorded in the second quarter.Results of OperationsNet SalesAs our omni-channel strategy continues to mature, it is increasingly difficult to distinguish between a "store" sale and an "on-line" sale. Below is a listof some omni-channel examples:•Stores increase on-line sales by providing customers opportunities to view, touch and/or try on physical merchandise before ordering on-line.•On-line purchases can easily be returned in our stores.•Kohl's Cash coupons and Yes2You rewards can be earned and redeemed on-line or in store regardless of where they were earned.•In-store customers can order from on-line kiosks in our stores.•Order on-line and pick-up in store is available in all stores.•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 on-line fulfillment center, a store, a retail distribution center, direct ship vendors or any combinationof the above.Because we do not have a clear distinction between "store" sales and "on-line" sales, we do not separately report on-line 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. Adjustments for omni-channel sales that have been shipped, but not yet been received by thecustomer are included in net sales, but are not included in our comparable sales.17Table of ContentsThe following table summarizes net sales: 2015 2014 2013Net sales (in Millions)$19,204 $19,023 $19,031Increase (decrease) in sales: Total1.0% 0.0 % (1.3)%Comparable0.7% (0.3)% (1.2)%Net sales per selling square foot (a)$228 $226 $227(a) Net sales per selling square foot includes on-line sales and stores open for the full current period.Drivers of the changes in comparable sales were as follows: 2015 2014Selling price per unit1.3 % 2.8 %Units per transaction(0.4)% (1.7)%Average transaction value0.9 % 1.1 %Number of transactions(0.2)% (1.4)%Comparable sales0.7 % (0.3)%The increases in selling price per unit were a combination of increased penetration and selling prices in our national brand portfolio. The changes inunits per transaction reflect customer reaction to the price changes. Generally, customers purchase more items as prices decrease and fewer items as pricesincrease. Transactions decreased in both periods, however trends have improved since the launch of the Greatness Agenda.From a regional perspective, including on-line originated sales, the West, Southeast, and Midwest outperformed the Company average in 2015. TheSouth Central, Mid-Atlantic and Northeast underperformed the Company average.By line of business, Footwear and Home outperformed the Company average in 2015. Men's and Women's were consistent with the Company averagewhile Children's and Accessories both underperformed the Company average.Net sales per selling square foot (which includes omni-channel sales and stores open for the full current period), increased 0.9% to $228 in 2015, whichis consistent with the increase in comparable sales.Net sales for 2014 were generally consistent with 2013 net sales. From a line of business perspective, Children's, Footwear, and Men's reported salesincreases. Accessories was slightly above the Company average. Home and Women's both underperformed the Company average. From a regionalperspective, including on-line originated sales, the West, Southeast, and Midwest reported higher sales, which were offset by sales decreases in the Northeast,Mid-Atlantic, and South Central regions.Gross margin 2015 2014 2013 (Dollars in Millions)Gross margin$6,939 $6,925 $6,944As a percent of net sales36.1% 36.4% 36.5%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 omni-channel sales; and terms cash discount. Our gross margin may not be comparable with that ofother retailers because we include distribution center and buying costs in selling, general and administrative expenses while other retailers may include theseexpenses in cost of merchandise sold.18Table of ContentsGross margin as a percentage of sales decreased approximately 30 basis points from 36.4% in 2014 to 36.1% in 2015. The decrease was due to anincrease in shipping costs resulting from growth in on-line originated sales, partially offset by an increase in our merchandise margin.Gross margin as a percentage of sales decreased approximately 10 basis points from 36.5% in 2013 to 36.4% in 2014. Higher merchandise margin wasmore than offset by an increase in shipping costs, which was in line with our omni-channel business growth.Selling, general and administrative expenses 2015 2014 2013 (Dollars in Millions)Selling, general, and administrative expenses ("SG&A")$4,452 $4,350 $4,313As a percent of net sales23.2% 22.9% 22.7%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; marketing 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: 2015 2014 (Dollars in Millions)Store expenses$77 $(4)Corporate expenses58 34Distribution costs(3) 10Marketing costs, excluding credit card operations(4) 21Net revenues from credit card operations(26) (24)Total increase$102 $37 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 sales increased over the prior year, the expense "deleveraged" and indicates that sales growth was less than expense growth. SG&A asa percent of sales increased, or "deleveraged," by approximately 30 basis points in 2015.The increase in store expenses are primarily attributable to higher store payroll due to on-going wage pressure and omni-channel support of ship-from-store and buy on-line, pick-up in store operations. Property taxes and common area maintenance also increased.Corporate expense increased over 2014 due to technology and infrastructure investments related to our omni-channel strategy and other variouscorporate costs.Distribution costs, which exclude payroll related to on-line originated orders that were shipped from our stores, were $278 million for 2015, $281million for 2014 and $271 million for 2013. Distribution costs decreased in 2015 due to lower store distribution costs and were partially offset by higherfulfillment costs related to our growing on-line business, particularly in the fourth quarter.Marketing costs decreased in 2015 as we decreased our spending in newspaper inserts and direct mail through optimized circulation and shiftedspending to digital media.19Table of ContentsRevenues from our credit card operations were $456 million in 2015, $430 million in 2014 and $406 million in 2013. The increases in net revenuesfrom credit card operations are due to higher finance charge revenues and late fees, partially offset by higher bad debt expense, all which were the result ofgrowth in the portfolio. Additionally, lower marketing spend was partially offset by increased servicing costs.SG&A for 2014 increased $37 million, or 1%, over 2013. As a percentage of sales, SG&A increased, or "deleveraged", by approximately 20 basispoints in 2014. The increase in SG&A was due primarily to higher distribution costs, increased marketing, and investments in technology and infrastructurerelated to our on-line business, offset by higher credit card revenue.Other Expenses 2015 2014 2013 (Dollars in Millions)Depreciation and amortization$934 $886 $889Interest expense, net327 340 338Loss on extinguishment of debt169 — —Provision for income taxes384 482 515Effective tax rate36.3% 35.7% 36.7%Depreciation and amortization was higher in 2015 than 2014, as higher information technology ("IT") amortization was partially offset by lower storedepreciation due to maturing of our stores. Depreciation and amortization was consistent in 2014 and 2013, as lower store depreciation was only partiallyoffset by higher IT amortization.Net interest expense decreased $13 million, or 4%, in 2015 as a result of refinancing our debt at lower interest rates during 2015. Net interest expenseincreased $2 million, or 1%, in 2014 due to higher outstanding long-term debt following the September 2013 debt issuance.During 2015, we completed a cash tender offer and redemption for $1,085 million of senior unsecured debt. We recognized a $169 million loss onextinguishment of debt which included a $163 million bond tender premium paid to holders of the debt and a $6 million non-cash write-off of deferredfinancing costs and original issue discounts associated with the extinguished debt.Changes in our effective tax were primarily due to favorable state audit settlements during 2014.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.Liquidity and Capital ResourcesThe following table presents the primary cash requirements and sources of funds.Cash Requirements Sources 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.20Table of ContentsThe following table includes cash balances and changes. 2015 2014 2013 (Dollars in Millions)Cash and cash equivalents$707 $1,407 $971 Net cash provided by (used in): Operating activities$1,474 $2,024 $1,884Investing activities(681) (593) (623)Financing activities(1,493) (995) (827) Free Cash Flow (a)$671 $1,234 $1,127(a) See the Free Cash Flow discussion later in this Liquidity and Capital Resources section for additional discussion of this non-GAAP financialmeasure.Operating activitiesCash provided by operations decreased $550 million, or 27%, in 2015 to $1.5 billion.Merchandise inventory increased $224 million in 2015 to $4.0 billion. Inventory per store increased 5.7% and units per store increased 5% over 2014.The increases are primarily in national brands.Accounts payable as a percent of inventory was 31.0% at January 30, 2016, compared to 39.6% at January 31, 2015. Almost half of the decrease wasdue to the anniversary of the port strike in 2014. Lower year-over-year January receipts and higher inventory levels also contributed to the decrease.Cash provided by operations increased $140 million to $2.0 billion in 2014. The increase was primarily due to decreased inventory spending in 2014.Investing activitiesNet cash used in investing activities increased $88 million to $681 million in 2015.Capital expenditures of $690 million in 2015 were generally consistent with 2014 as higher IT spending in 2015 was offset by the purchase and buildout of a call center in Texas in 2014.The following table summarizes expected and actual capital expenditures by major category as a percentage of total capital expenditures: 2016Estimate 2015 2014 2013Information technology45% 45% 45% 45%Store strategies30 36 33 31Base capital25 20 22 24Total100% 100% 100% 100%We expect total capital expenditures of approximately $825 million in fiscal 2016. 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.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 were $82 million in 2014. All of our auction rate securities were sold in 2014. Despite thenon-liquid nature of these investments following market conditions that arose in 2008, we were able to sell substantially all of our investments at par.21Table of ContentsFinancing activitiesOur financing activities used cash of $1.5 billion in 2015 and $1.0 billion in 2014. The increase was primarily due to greater share repurchases andpremium paid on redemption of debt.We repurchased 17 million shares of our common stock for $1.0 billion in 2015 and 12 million shares for $677 million in 2014. Share repurchases arediscretionary in nature. The timing and amount of repurchases is based upon available cash balances, our stock price and other factors.During 2015, we completed a cash tender offer and redemption for $1.1 billion of our higher coupon senior unsecured debt. We recognized a $169million loss on extinguishment of debt which included a $163 million bond tender premium paid to holders of the debt and a $6 million non-cash write-offof deferred financing costs and original issue discounts associated with the extinguished debt.In July 2015, we issued $650 million of 4.25% notes due in July 2025 and $450 million of 5.55% notes due in July 2045. Both notes include semi-annual, interest-only payments beginning January 17, 2016. Proceeds of the issuances and cash on hand were used to pay the principal, premium and accruedinterest of the acquired and redeemed debt.On July 1, 2015, we entered into an Amended and Restated Credit Agreement with various lenders which provides for $1.0 billion senior unsecuredfive-year revolving credit facility that will mature in June 2020. Among other things, the agreement includes a maximum leverage ratio financial covenant(which is consistent with the ratio under our prior credit agreement) and restrictions on liens and subsidiary indebtedness.As of January 30, 2016, our credit ratings were as follows: Moody’s Standard & Poor’s FitchLong-term debtBaa1 BBB BBB+Though we have no current intentions to do so, we may again seek to retire or purchase our outstanding debt through open market cash purchases,privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractualrestrictions and other factors. The amounts involved could be material.During 2015, we paid cash dividends of $349 million as detailed in the following table: First Quarter Second Quarter Third Quarter Fourth QuarterDeclaration dateFebruary 25 May 13 August 11 November 11Record dateMarch 11 June 10 September 9 December 9Payment dateMarch 25 June 24 September 23 December 23Amount per common share$0.45 $0.45 $0.45 $0.45On February 24, 2016, our Board of Directors approved an 11% increase in our dividend to $0.50 per common share which will be paid on March 23,2016 to shareholders of record as of March 9, 2016.22Table of ContentsKey financial ratiosThe following ratios provide additional measures of our liquidity, return on investments, and capital structure. 2015 2014 2013Liquidity Ratios:(Dollars in Millions)Working capital$2,362 $2,721 $2,412Current ratio1.87 1.95 1.87Free cash flow (a)$671 $1,234 $1,127Return on Investment Ratios: Ratio of earnings to fixed charges3.1 3.6 3.7Return on assets4.7% 6.1% 6.3%Return on gross investment (a)14.5% 15.2% 15.5%Capital Structure Ratios: Debt/capitalization46.3% 44.3% 44.8%Adjusted Debt to EBITDAR (a)2.52 2.45 2.42 (a) Non-GAAP financial measureLiquidity ratiosLiquidity measures our ability to meet short-term cash needs. In 2015, working capital decreased $359 million and our current ratio decreased 8 basispoints from year-end 2014 due to a decrease in cash, which was partially offset by an increase in inventory and decrease in accounts payable. In 2014,working capital increased $309 million and our current ratio increased 8 basis points over year-end 2013 due to an increase in cash, which was partially offsetby a decrease in inventory and increase in accounts payable.We generated $671 million of free cash flow for 2015; a decrease of $563 million from 2014. As discussed above, the decrease is primarily the result ofa decrease in cash provided by operating activities in 2015. Free cash flow is a non-GAAP financial measure which we define as net cash provided byoperating activities and proceeds from financing obligations (which generally represent landlord reimbursements of construction costs) less capitalexpenditures and capital lease and financing obligation payments. Free cash flow should be evaluated in addition to, and not considered a substitute for,other financial measures such as net income and cash flow provided by operations. We believe that free cash flow represents our ability to generate additionalcash flow from our business operations. See the key financial ratio calculations section above.Return on investment ratiosLower earnings, including the loss on extinguishment of debt, caused decreases in all three of our return on investment ratios - ratio of earnings to fixedcharges, return on assets and return on gross investment ("ROI"). See Exhibit 12.1 to this Annual Report on Form 10-K for the calculation of our ratio ofearnings to fixed charges and the key financial ratio calculations below for the return on assets and ROI calculations.We believe that ROI is a useful financial measure in evaluating our operating performance. When analyzed in conjunction with our net earnings 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 ratiosOur debt agreements contain various covenants including limitations on additional indebtedness and a maximum permitted debt ratio. As of January30, 2016, we were in compliance with all debt covenants and expect to remain in compliance during 2016. See the key financial ratio calculations sectionbelow for our debt covenant calculation.Our debt/capitalization ratio was 46.3% at year-end 2015 and 44.3% at year-end 2014. The increase is primarily due to treasury stock purchases in2015.23Table of ContentsOur Adjusted Debt to EBITDAR ratio was 2.52 for 2015, 2.45 for 2014, and 2.42 for 2013. 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. We arecurrently exceeding our target goal to take advantage of a favorable, low interest rate debt environment. We expect to manage our business and debt levels toget our overall ratio back to our target goal over the next several years. We currently have no plans for new debt in 2016. Our Adjusted Debt to EBITDARcalculation may not be comparable to similarly-titled measures reported by other companies. Adjusted Debt to EBITDAR should be evaluated in addition to,and not considered a substitute for, other financial measures such as debt/capitalization. See the key financial ratio calculations section below for ourAdjusted Debt to EBITDAR calculation.Key financial ratio calculationsThe following table reconciles net cash provided by operating activities (a GAAP measure) to free cash flow (a non-GAAP measure). 2015 2014 2013 (Dollars in Millions)Net cash provided by operating activities$1,474 $2,024 $1,884Acquisition of property and equipment(690) (682) (643)Capital lease and financing obligation payments(114) (114) (115)Proceeds from financing obligations1 6 1Free cash flow$671$1,234$1,127The following table includes our ROI and return on assets (the most comparable GAAP measure) calculations: 2015 2014 2013 (Dollars in Millions)Operating income$1,553 $1,689 $1,742Depreciation and amortization934 886 889Rent expense279277270EBITDAR$2,766$2,852$2,901Average: (a) Total assets$14,288 $14,286 $14,196Cash equivalents and long-term investments (b)(703) (647) (382)Other assets(40) (32) (46)Accumulated depreciation and amortization6,203 5,743 5,457Accounts payable(1,623) (1,624) (1,556)Accrued liabilities(1,175) (1,119) (1,082)Other long-term liabilities(556) (551) (536)Capitalized rent (c)2,672 2,667 2,625Gross Investment (“AGI”)$19,066 $18,723 $18,676Return on Assets (“ROA”) (d)4.7%6.1%6.3%Return on Gross Investment (“ROI”) (e)14.5% 15.2% 15.5%(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 Investment24Table of ContentsThe following table includes our debt ratio calculation, as defined by our debt agreements, as of January 30, 2016: (Dollars in Millions)Included Indebtedness Total debt$4,731Permitted exclusions(5) Subtotal4,726Rent x 82,232 Included Indebtedness$6,958 Adjusted Debt Compliance EBITDAR Net income$673Loss on debt extinguishment169Rent expense279Depreciation and amortization934Net interest327Provision for income taxes384EBITDAR2,766Stock based compensation48Other non-cash revenues and expenses8Adjusted Debt Compliance EBITDAR$2,822 Debt Ratio (a)2.47Maximum 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: 2015 2014 2013 (Dollars in Millions)Total Debt (net of discount)$4,726 $4,761 $4,861Rent x 82,232 2,216 2,160Adjusted Debt$6,958 $6,977 $7,021Total Equity$5,491 $5,991 $5,978EBITDAR per above$2,766 $2,852 $2,901Debt/capitalization (a)46.3% 44.3% 44.8%Adjusted Debt to EBITDAR (b)2.52 2.45 2.42(a) Total debt divided by total debt and total equity(b) Adjusted debt divided by EBITDAR25Table of ContentsContractual ObligationsOur contractual obligations as of January 30, 2016 were as follows: Maturing in: Total 2016 2017and2018 2019and2020 2021andafter (Dollars in Millions)Recorded contractual obligations: Long-term debt$2,815 $— $— $— $2,815Capital lease and financing obligations1,460 118 230 197 915 4,275 118 230 197 3,730Unrecorded contractual obligations: Interest payments: Long-term debt1,848 132 269 258 1,189Capital lease and financing obligations2,509 175 323 287 1,724Operating leases (a)5,627 244 491 484 4,408Purchase obligations (b)4,681 4,681 — — —Other (c)1,030 313 291 170 256 15,695 5,545 1,374 1,199 7,577Total$19,970 $5,663 $1,604 $1,396 $11,307 (a) Our leases typically require that we pay real estate taxes, insurance and maintenance costs in addition to the minimum rental paymentsincluded in the table above. Such costs vary from period to period and totaled $179 million for 2015 and $175 million for both 2014 and 2013.The lease term includes cancelable option periods where failure to exercise such options would result in an economic penalty.(b) Purchase obligations consist mainly of purchase orders for merchandise. Amounts committed under open purchase orders for merchandise 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 2016 or later, as well as paymentsassociated with technology and marketing agreements.We have not included $162 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 2015.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.26Table 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 2015,2014 or 2013. 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.We routinely record permanent markdowns for potentially obsolete merchandise, and, therefore, did not have a markdown reserve as of January 30,2016. Changes in the assumptions used to estimate our markdown reserve requirement would not have had a material impact on our financial statements. A10 basis point 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 marketing) that we have incurred to promote the vendors’merchandise. These allowances are netted against marketing or the other related costs as the costs are incurred. Marketing allowances in excess of costsincurred 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 marketing and other reimbursed costs.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 30, 2016, estimated liabilities for workers’compensation and general liability claims were approximately $45 million.27Table of ContentsA 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 assumptions could also have an impact on estimated reserves.Historically, our actuarial estimates have not been materially different from actual results.We are fully self-insured for employee-related health care benefits, a portion of which is paid by our associates. We use a third-party actuary to 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 30, 2016, we had recorded approximately $13 million for medical, pharmacy and dental claims which were incurred in 2015 and expected to be paidin 2016. Historically, our actuarial estimates have not been materially different from actual results.Impairment of AssetsAs of January 30, 2016, 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 $139 million as of January 30, 2016.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.LeasesAs of January 30, 2016, 750 of our 1,164 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 No. 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.28Table of ContentsIf 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.The most significant estimates used by management in accounting for property leases and the impact of these estimates are as follows:•Expected lease term—Our expected lease term includes both contractual lease periods and cancelable option periods where failure to exercise 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 2015 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 DisclosuresNone29Table 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" is defined by Rule 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 30, 2016. 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 30, 2016, 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.30Table 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 30, 2016, 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’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.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 30, 2016, 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 30, 2016 and January 31, 2015, 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 30, 2016 of Kohl’s Corporation and our report datedMarch 18, 2016 expressed an unqualified opinion thereon./s/ Ernst & Young LLPMilwaukee, WisconsinMarch 18, 201631Table of ContentsItem 9B. Other InformationNonePART IIIItem 10. Directors, Executive Officers and Corporate GovernanceFor information with respect to our Directors, the Board of Directors’ committees 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 11, 2016 Annual Meeting of Shareholders (“our 2016 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 2016Proxy, which information is incorporated herein by reference.Our executive officers as of January 30, 2016 were as follows:NameAge PositionKevin Mansell63 Chairman, Chief Executive Officer and PresidentSona Chawla48 Chief Operating OfficerMichelle Gass47 Chief Merchandising and Customer OfficerWesley S. McDonald53 Chief Financial OfficerRichard D. Schepp55 Chief Administrative OfficerMr. 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. Chawla joined Kohl's in November 2015 as Chief Operating Officer and is responsible for Kohl's full omni-channel operations. She oversees allstore operations, logistics and supply chain network, information and digital technology, omni-channel strategy, planning and operations, and storeconstruction and design. Previously, she had served with Walgreens as President of Digital and Chief Marketing Officer from February 2014 to November2015 and President, E-commerce from January 2011 to February 2014. From August 2012 to November 2015, she served as a director of Express Inc., aspecialty retail apparel chain. Ms. Chawla began her retail and digital career in 2000.Ms. Gass joined Kohl's in June 2013 as Chief Customer Officer and was named Chief Merchandising and Customer Officer in June 2015. She isresponsible for all of Kohl's merchandising, planning and allocation, and product development functions as well as the company's overall customerengagement strategy, including marketing, public relations, social media and philanthropic efforts. Previously, she had served as President, StarbucksEurope, Middle East and Africa. Ms. Gass began her retail career in 1991. She is currently a director of Cigna Corporation, a global health service company.Mr. McDonald was promoted to the principal officer position of Chief Financial Officer in June 2015 and is responsible for financial planning andanalysis, investor relations, financial reporting, accounting operations, tax, treasury, non-merchandise purchasing, credit and capital investment. Previously,he had served as Senior Executive Vice President, Chief Financial Officer since December 2010. Mr. McDonald began his retail career in 1988.Mr. Schepp was promoted to the principal officer position of Chief Administrative Officer in June 2015 and is responsible for Kohl's human resources,legal, risk management and compliance, real estate and business development functions. He previously served as Senior Executive Vice President, HumanResources, General Counsel and Secretary from April 2013 to June 2015, Senior Executive Vice President General Counsel and Secretary from May 2011 toApril 2013 and Executive Vice President, General Counsel and Secretary from August 2001 to May 2011. Mr. Schepp began his retail career in 1992.32Table of ContentsMembers of our Board of Directors as of January 30, 2016 were as follows: Kevin MansellChairman, President, Chief Executive Officer,Kohl’s Corporation Peter Boneparth (b) (c)Former Senior Advisor,Irving Place Capital PartnersFormer President and Chief Executive Officer,Jones Apparel Group Steven A. Burd (b) (c)Founder and Chief Executive Officer,Burd Health LLCFormer Chairman, Chief Executive Officerand President,Safeway Inc. Dale E. Jones (b) (c)Chief Executive Officer and President,Diversified Search Jonas Prising (c)Chairman and Chief Executive Officer,ManpowerGroup John E. Schlifske (a) (c)Chairman and Chief Executive Officer,Northwestern Mutual Life Insurance Company Frank V. Sica (b)* (c)Managing Partner,Tailwind Capital Stephanie A. Streeter (a) (c)*Former Chief Executive Officer and Director,Libbey, Inc. Nina G. Vaca (a) (c)Chairman and Chief Executive Officer,Pinnacle Technical Resources, Inc. Stephen E. Watson (a)* (c)Former President, Chief Executive Officer,Gander Mountain, L.L.C. Former Chairman, Chief Executive Officer,and President,Department Store Division,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 2016 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 2016 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 Person Transactions” section of our 2016 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 2016 Proxy, which information is incorporated herein by reference.33Table 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.34Table 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 Chief Financial Officer (Principal Financial and Accounting Officer)Dated: March 18, 2016Pursuant 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/ JONAS PRISINGJonas PrisingDirector /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 35Table 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 November 13, 2015. 4.1 Amended and Restated Credit Agreement dated as of July 1, 2015 by and among the Company, the Lenders party thereto, Bank ofAmerica, N.A., as Administrative Agent, an Issuing Bank and a Swing Line Lender, U.S. Bank National Association and Wells Fargo Bank,National Association, as Issuing Banks, Swing Line Lenders and Syndication Agents, Morgan Stanley Senior Funding, Inc., asDocumentation Agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, U.S. Bank National Association and Wells FargoSecurities, LLC, as Joint Lead Arrangers and Bookrunners, incorporated by reference to Exhibit 4.1 of the Company's Current Report onForm 8-K filed on July 2, 2015. 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.* 36Table 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 filed on 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 (5-year vesting),incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 1,2010.* 10.13(b) Form of Executive Restricted Stock Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan (4-year vesting),incorporated herein by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on January 15, 2014.* 10.13(c) Form of Executive Restricted Stock Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan (2-year vesting),incorporated herein by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 3,2014.* 10.14 Form of Outside Director Stock Option Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan, 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 Amended and Restated Employment Agreement between Kohl’s Department Stores, Inc. and Kohl’s Corporation and Michelle Gasseffective as of June 10, 2015, incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on June 12,2015.* 10.19 Amended and Restated Employment Agreement between Kohl’s Department Stores, Inc. and Kohl’s Corporation and Wesley S. McDonaldeffective as of June 10, 2015, incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on June 12,2015.* 10.20 Amended and Restated Employment Agreement between Kohl’s Department Stores, Inc. and Kohl’s Corporation and Richard D. Scheppeffective as of June 10, 2015, incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed on June 12,2015.* 10.21(a) 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, incorporated by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K for thefiscal year ended January 31, 2015.* 37Table of ContentsExhibitNumber Description10.21(b) Agreement dated as of April 17, 2015 by and between Ken Bonning and Kohl's Department Stores Inc. incorporated by reference toExhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2015.* 10.22 Employment Agreement dated as of November 16, 2015 by and between Kohl's Department Stores, Inc., Kohl's Corporation and SonaChawla.* 12.1 Ratio of Earnings to Fixed Charges. 21.1 Subsidiaries of the Registrant, incorporated by reference to Exhibit 21.1 of the Company's Annual Report on Form 10-K for the fiscal yearended January 31, 2015. 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.38Table of ContentsIndex to Consolidated Financial Statements PageConsolidated Financial Statements Report of Independent Registered Public Accounting FirmF-2Consolidated Balance SheetsF-3Consolidated Statements of IncomeF-4Consolidated Statements of Comprehensive IncomeF-4Consolidated Statements of Changes in Shareholders’ EquityF-5Consolidated Statements of Cash FlowsF-6Notes to Consolidated Financial StatementsF-71. Business and Summary of Accounting PoliciesF-72. DebtF-143. Lease CommitmentsF-154. Benefit PlanF-155. Income TaxesF-166. Stock-Based CompensationF-177. ContingenciesF-208. Quarterly Financial Information (Unaudited)F-209. Subsequent EventsF-20Schedules have been omitted as they are not applicable.F-1Table 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 30, 2016 and January 31, 2015,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 30, 2016. 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 30, 2016 and January 31, 2015, and the consolidated results of its operations and its cash flows for each of the three years in theperiod ended January 30, 2016, 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 30, 2016, 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 18, 2016 expressed an unqualifiedopinion thereon./s/ Ernst & Young LLPMilwaukee, WisconsinMarch 18, 2016F-2Table of ContentsKOHL’S CORPORATIONCONSOLIDATED BALANCE SHEETS(Dollars in Millions) January 30, 2016 January 31, 2015Assets Current assets: Cash and cash equivalents$707 $1,407Merchandise inventories4,038 3,814Other331 359Total current assets5,076 5,580Property and equipment, net8,308 8,515Other assets222 238Total assets$13,606 $14,333 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable$1,251 $1,511Accrued liabilities1,206 1,160Income taxes payable130 78Current portion of capital lease and financing obligations127 110Total current liabilities2,714 2,859Long-term debt2,792 2,780Capital lease and financing obligations1,789 1,858Deferred income taxes257 298Other long-term liabilities563 547Shareholders’ equity: Common stock - 370 and 367 million shares issued4 4Paid-in capital2,944 2,743Treasury stock, at cost, 184 and 166 million shares(9,769) (8,744)Accumulated other comprehensive loss(17) (20)Retained earnings12,329 12,008Total shareholders’ equity5,491 5,991Total liabilities and shareholders’ equity$13,606 $14,333See accompanying Notes to Consolidated Financial StatementsF-3Table of ContentsKOHL’S CORPORATIONCONSOLIDATED STATEMENTS OF INCOME(Dollars in Millions, Except per Share Data) 2015 2014 2013Net sales$19,204 $19,023 $19,031Cost of merchandise sold12,265 12,098 12,087Gross margin6,939 6,925 6,944Operating expenses: Selling, general and administrative4,452 4,350 4,313Depreciation and amortization934 886 889Operating income1,553 1,689 1,742Interest expense, net327 340 338Loss on extinguishment of debt169 — —Income before income taxes1,057 1,349 1,404Provision for income taxes384 482 515Net income$673 $867 $889Net income per share: Basic$3.48 $4.28 $4.08Diluted$3.46 $4.24 $4.05 Dividends declared and paid per share$1.80 $1.56 $1.40See accompanying Notes to Consolidated Financial StatementsKOHL’S CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Dollars in Millions) 2015 2014 2013Net income$673 $867 $889Other comprehensive income, net of tax: Reclassification adjustment for interest expense on interest ratederivatives included in net income3 3 3Unrealized gains on investments— 11 8Other comprehensive income3 14 11Comprehensive income$676 $881 $900See accompanying Notes to Consolidated Financial StatementsF-4Table of ContentsKOHL’S CORPORATIONCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(Dollars in Millions, Except per Share Data) Common Stock Paid-In Treasury Stock AccumulatedOtherComprehensive Retained Shares Amount CapitalShares Amount Loss Earnings TotalBalance 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 (1) (19) — — 126Dividends paid ($1.56 per common share)— — — — 4 — (321) (317)Treasury stock purchases— — — (12) (677) — — (677)Balance at January 31, 2015367 4 2,743 (166) (8,744) (20) 12,008 5,991Comprehensive income— — — — — 3 673 676Stock options and awards, net of tax3 — 201 (1) (27) — — 174Dividends paid ($1.80 per common share)— — — — 3 — (352) (349)Treasury stock purchases— — — (17) (1,001) — — (1,001)Balance at January 30, 2016370 $4 $2,944 (184) $(9,769) $(17) $12,329 $5,491See accompanying Notes to Consolidated Financial StatementsF-5Table of ContentsKOHL’S CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in Millions) 2015 2014 2013Operating activities Net income$673 $867 $889Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization934 886 889Share-based compensation48 48 55Excess tax benefits from share-based compensation(10) (3) (3)Deferred income taxes(38) 49 (4)Other non-cash expenses, net24 31 43Loss on extinguishment of debt169 — —Changes in operating assets and liabilities: Merchandise inventories(215) 68 (116)Other current and long-term assets43 (30) (7)Accounts payable(260) 146 58Accrued and other long-term liabilities53 30 142Income taxes53 (68) (62)Net cash provided by operating activities1,474 2,024 1,884Investing activities Acquisition of property and equipment(690) (682) (643)Sales of investments in auction rate securities— 82 1Other9 7 19Net cash used in investing activities(681) (593) (623)Financing activities Treasury stock purchases(1,001) (677) (799)Shares withheld for taxes on vested restricted shares(27) (19) (13)Dividends paid(349) (317) (302)Proceeds from issuance of debt1,098 — 300Deferred financing costs(10) — (4)Reduction of long-term borrowings(1,085) — —Premium paid on redemption of debt(163) — —Capital lease and financing obligation payments(114) (114) (115)Proceeds from stock option exercises147 123 102Excess tax benefits from share-based compensation10 3 3Proceeds from financing obligations1 6 1Net cash used in financing activities(1,493) (995) (827)Net (decrease) increase in cash and cash equivalents(700) 436 434Cash and cash equivalents at beginning of period1,407 971 537Cash and cash equivalents at end of period$707 $1,407 $971Supplemental information: Interest paid, net of capitalized interest$318 $329 $326Income taxes paid372 502 561Non-Cash Investing and Financing Activities Property and equipment acquired through capital lease and financing obligations$63 $41 $121See accompanying Notes to Consolidated Financial StatementsF-6Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Business and Summary of Accounting PoliciesBusinessAs of January 30, 2016, we operated 1,164 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 consistent merchandise with assortmentdifferences attributable to local preferences. Our website includes merchandise which is available in our stores, as well as merchandise which is available onlyon-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 ofWeeks2015January 30, 2016 522014January 31, 2015 522013February 1, 2014 52Use 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 $92 million at January 30, 2016 and $95 million at January 31, 2015.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 would record anadditional reserve if the future estimated selling price is less than cost.F-7Table of ContentsKOHL’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 30, 2016 Jan 31, 2015 (Dollars in Millions)Land$1,110 $1,103Buildings and improvements: Owned7,999 7,844Leased1,848 1,848Fixtures and equipment1,804 2,032Computer hardware and software1,590 1,368Construction in progress167 210Total property and equipment, at cost14,518 14,405Less accumulated depreciation(6,210) (5,890)Property and equipment, net$8,308 $8,515Construction in progress includes buildings, building 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 material impairments were recorded in 2015, 2014, or 2013 as a result of the tests performed.F-8Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)Accrued LiabilitiesAccrued liabilities consist of the following: Jan 30, 2016 Jan 31, 2015 (Dollars in Millions)Gift cards and merchandise return cards$323 $307Payroll and related fringe benefits117 135Sales, property and use taxes184 185Credit card liabilities88 106Marketing77 63Accrued capital64 73Shipping and other distribution costs79 27Other274 264Accrued liabilities$1,206 $1,160Self-InsuranceWe use a combination of insurance and self-insurance for a number of risks. Liabilities associated with workers’ compensation, general liability, andemployee-related health care benefits losses include estimates of both reported losses and losses incurred but not yet reported. We use a third-party actuary,which considers historical claims experience, demographic factors, severity factors and other actuarial assumptions, to estimate the liabilities associated withthese risks. Total estimated liabilities for workers’ compensation, general liability and employee-related health benefits were approximately $58 million atJanuary 30, 2016 and $53 million at January 31, 2015. Although these amounts are actuarially determined based on analysis of historical trends, the amountsthat we will ultimately disburse could differ from these estimates.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 building damages, we are self insuredfor the first $250,000 of property loss claims.Treasury StockWe account for repurchases of common stock and shares withheld in lieu of taxes when restricted stock vests using the cost method with common stockin treasury classified in the Consolidated Balance Sheets as a reduction of shareholders’ equity.Accumulated Other Comprehensive Loss and Other Comprehensive IncomeAccumulated other comprehensive loss consists of the following: Loss onInterestRateDerivatives UnrealizedLosses onInvestments AccumulatedOtherComprehensiveLoss (Dollars in Millions)Balance at February 1, 2014$(23) $(11) $(34)Other comprehensive income3 11 14Balance at January 31, 2015(20) — (20)Other comprehensive income3 — 3Balance at January 30, 2016$(17) $— $(17) F-9Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)The tax effects of each component of other comprehensive income are as follows: 2015 2014 2013 (Dollars in Millions)Interest rate derivatives: Before-tax amounts$5 $5 $5Tax expense(2) (2) (2)After-tax amounts3 3 3Unrealized gains on investments: Before-tax amounts— 18 12Tax expense— (7) (4)After-tax amounts— 11 8Other comprehensive income$3 $14 $11Revenue 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 omni-channel sales • 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 • Marketing expenses, offset by vendor payments for reimbursementof specific, incremental and identifiable costs • Other administrative revenues and expensesThe classification of these expenses varies across the retail industry. F-10Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)Vendor AllowancesWe receive consideration for a variety of vendor-sponsored programs, such as markdown allowances, volume rebates and promotion and marketingsupport. 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 andmarketing allowances are intended to offset our marketing costs to promote vendors’ merchandise. Markdown allowances and volume rebates are recorded asa reduction of inventory costs.Loyalty ProgramWe maintain a customer loyalty program in which customers earn points based on their spending and other promotional activities. Upon accumulatingcertain point levels, customers receive rewards to apply to future purchases. We accrue the cost of anticipated redemptions related to the program when thepoints are earned at the initial purchase. The costs of the program are recorded in cost of merchandise sold.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 No. 840, “Leases,” to determine if we can remove the assets from our Balance Sheet. In many of our leases, we are reimbursed aportion of the construction costs via adjusted rental payments and/or cash payments or have terms which fix the rental payments for a significant percentageof the leased asset’s economic life. These items generally are considered “continuing involvement” which precludes us from derecognizing the assets fromour Balance Sheet when construction is complete. In conjunction with these leases, we also record financing obligations equal to the cash proceeds or fairmarket value of the assets received from the landlord. At the end of the lease term, including exercise of any renewal options, the net remaining financingobligation over 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 theproperties which are owned for accounting purposes. Rather, rental payments under the lease are recognized as a reduction of the financing obligation andinterest expense.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.F-11Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)All other leases are considered operating leases in accordance with ASC No. 840. Assets subject to an operating lease and the related lease payments arenot recorded 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.MarketingMarketing costs, which include primarily digital, direct mail, newspaper inserts, television, and radio broadcast, are expensed when the marketing isfirst seen. Marketing costs, net of related vendor allowances, were as follows: 2015 2014 2013 (Dollars in Millions)Gross marketing costs$1,171 $1,189 $1,185Vendor allowances(160) (165) (172)Net marketing costs$1,011 $1,024 $1,013Net marketing costs as a percent of net sales5.3% 5.4% 5.3%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 for stock options, nonvested stock and performance share units.The information required to compute basic and diluted net income per share is as follows: 2015 2014 2013 (Dollars in Millions, Except per Share Data)Numerator—net income$673 $867 $889Denominator—weighted average shares Basic193 203 218Impact of dilutive employee stock options (a)2 1 2Diluted195 204 220Net income per share: Basic$3.48 $4.28 $4.08Diluted$3.46 $4.24 $4.05(a) Excludes 1 million share-based awards for 2015, 3 million share-based awards for 2014 and 10 million share-based awards for 2013 as the impact ofsuch awards was antidilutive. F-12Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)1. Business and Summary of Accounting Policies (continued)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 PronouncementsIn May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contractswith Customers (Topic 606)", which supersedes the revenue recognition requirements in ASC No. 605, Revenue Recognition. In August 2015, the FASBissued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date", which defers the effective date of ASU 2014-09for all entities by one year. The original ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in anamount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective in the firstquarter of 2018. It will change the way we account for sales returns, our loyalty program and certain promotional programs. Based on current estimates, we donot expect this ASU to have a material impact on our financial statements and, therefore, we expect to use the modified retrospective method to adopt thestandard.In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)". The core principle of the standard is that a lessee should recognize theassets and liabilities that arise from leases. A lessee should recognize in its statement of financial position a liability to make lease payments (the leaseliability) and a right-of-use asset representing its right to use the underlying asset for the lease term. We will be required to adopt the new standard in the firstquarter of 2019. We are currently evaluating the impact this new standard will have on our financial statements. During 2015, we adopted ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30)" which requires us to present debtissuance costs on the balance sheet as a direct deduction from the related debt liability rather than as an asset. We also adopted ASU No. 2015-17, "BalanceSheet Classification of Deferred Taxes (Topic 740)" which requires us to present deferred tax liabilities and assets as noncurrent in our balance sheet andcorrected the presentation of certain other tax assets and liabilities.A summary of reclassifications is as follows: Prior Classification Current Classification 2015 2014 (Dollars in Millions)Debt issuance costs Other current and long-term assets Long-term debt $18 $13Deferred taxes Current deferred tax asset Long-term deferred tax liability $97 $84Deferred taxes Current deferred tax asset Other long-term assets $27 $32Deferred taxes Other long-term liabilities Long-term deferred tax liability $30 $15F-13Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)2. DebtLong-term debt consists of the following unsecured senior debt: January 30, 2016 Outstanding January 31,2015MaturityEffectiveRate Coupon Rate Outstanding (Dollars in Millions)20214.81% 4.00% $650 $65020233.25% 3.25% 350 35020234.78% 4.75% 300 30020254.25% 4.25% 650 —20297.36% 7.25% 99 20020336.05% 6.00% 166 30020376.89% 6.88% 150 35020455.57% 5.55% 450 —2017n/a n/a — 650 4.88% 2,815 2,800Unamortized debt discount(5) (7)Deferred financing costs(18) (13)Long-term debt$2,792 $2,780Based on quoted market prices (Level 1 per ASC No. 820, "Fair Value Measurements and Disclosures"), the estimated fair value of our long-term debtwas $2.8 billion at January 30, 2016 and $3.1 billion at January 31, 2015.During 2015, we completed a cash tender offer and redemption for $1,085 million of senior unsecured debt. We recognized a $169 million loss onextinguishment of debt which included a $163 million bond tender premium paid to holders of the debt and a $6 million non-cash write-off of deferredfinancing costs and original issue discounts associated with the extinguished debt.In July 2015, we issued $650 million of 4.25% notes due in July 2025 and $450 million of 5.55% notes due in July 2045. Both notes include semi-annual, interest-only payments which began January 17, 2016. Proceeds of the issuances and cash on hand were used to pay the principal, premium andaccrued interest of the debt which was settled in July and August 2015.In July 2015, we entered into an Amended and Restated Credit Agreement with various lenders which provides for a $1.0 billion senior unsecured five-year revolving credit facility that will mature in June 2020. Among other things, the agreement includes a maximum leverage ratio financial covenant (whichis consistent with the ratio under our prior credit agreement) and restrictions on liens and subsidiary indebtedness. As of January 30, 2016 and January 31,2015, there were no outstanding balances on the revolving credit facility. We borrowed $400 million during the third quarter of 2015 with an effectiveinterest rate of 1.27% and repaid the entire balance in the fourth quarter.Our various debt agreements contain covenants including limitations on additional indebtedness and certain financial tests. As of January 30, 2016, 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 $35 million at January 30, 2016, issued underuncommitted lines with two banks.F-14Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)3. Lease CommitmentsRent expense charged to operations was $279 million for 2015, $277 million for 2014, and $270 million for 2013. 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 30, 2016 were as follows: Capital Leaseand FinancingObligations OperatingLeases (Dollars in Millions)Fiscal year: 2016$293 $2442017286 2452018267 2462019249 2442020235 240Thereafter2,639 4,408 3,969 $5,627Non-cash gain on future sale of property456 Amount representing interest(2,509) Present value of lease payments$1,916 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, subject to certain statutorylimits.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 $49 million for 2015, $43 million for 2014, and $49 million for 2013.F-15Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)5. Income TaxesDeferred income taxes consist of the following: Jan 30, 2016 Jan 31, 2015 (Dollars in Millions)Deferred tax liabilities: Property and equipment$1,319 $1,385Deferred tax assets: Merchandise inventories24 24Accrued and other liabilities, including stock-based compensation151 168Capital lease and financing obligations752 773Accrued step rent liability106 100Unrealized loss on interest rate swap11 13Federal benefit on state tax reserves45 41 1,089 1,119Net deferred tax liability$230 $266Deferred tax assets included in other long-term assets totaled $27 million as of January 30, 2016 and $32 million as of January 31, 2015.The components of the provision for income taxes were as follows: 2015 2014 2013 (Dollars in Millions)Current federal$397 $400 $473Current state34 36 45Deferred federal(35) 48 6Deferred state(12) (2) (9) $384 $482 $515 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: 2015 2014 2013Provision at statutory rate35.0% 35.0% 35.0%State income taxes, net of federal tax benefit2.1 1.3 2.2Tax-exempt interest income— — (0.2)Other federal tax credits(0.8) (0.6) (0.3)Provision for income taxes36.3% 35.7% 36.7%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 2009 through 2015 tax years. State returns subject to examination varydepending upon the state. Generally, the 2012 through 2015 tax years are subject to state examination. The earliest open period is 2004. Certain states haveproposed adjustments which we are currently appealing. If we do not prevail on our appeals, we do not anticipate that the adjustments would result in amaterial change in our financial position.F-16Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)5. Income Taxes (continued)A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows: 2015 2014 (Dollars in Millions)Balance at beginning of year$123 $125Increases due to: Tax positions taken in prior years16 —Tax positions taken in current year19 21Decreases due to: Tax positions taken in prior years(6) (16)Settlements with taxing authorities(10) (2)Lapse of applicable statute of limitations(3) (5)Balance at end of year$139 $123Not included in the unrecognized tax benefits reconciliation above are gross unrecognized accrued interest and penalties of $23 million at bothJanuary 30, 2016 and January 31, 2015. We had no interest and penalty expense for 2015, $2 million for 2014, and $3 million for 2013.Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $101 million as of January 30, 2016 and $89 million asof January 31, 2015. It is reasonably possible that our unrecognized tax positions may change within the next 12 months, primarily as a result of ongoingaudits. While it is possible that one or more of these examinations may be resolved in the next year, it is not anticipated that a significant impact to theunrecognized tax benefit balance will occur.We have both payables and receivables for current income taxes recorded on our balance sheet. Receivables included in other current assets totaled $26million as of January 30, 2016 and $25 million as of January 31, 2015.6. 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 30, 2016, there were 18.5 million shares authorized and 11.2 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 are typically made in the first quarter of the fiscal year. Grants to newly-hired and promoted employees and other discretionary grants aremade periodically throughout the remainder of the year. We also have outstanding options which were granted under 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. Outstanding options granted todirectors have a term of 10 years.F-17Table of ContentsKOHL’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 awardwas estimated using a Black-Scholes option valuation model. The weighted average fair value of options granted in 2014 was $12.23 and in 2013 was$10.68.The following table summarizes our stock option activity: 2015 2014 2013 Shares WeightedAverageExercisePrice Shares WeightedAverageExercisePrice Shares WeightedAverageExercisePrice (Shares in Thousands)Balance at beginning of year6,211 $52.95 11,375 $56.05 15,212 $53.96Granted— — 186 54.69 575 47.86Exercised(2,815) 52.79 (2,647) 46.87 (2,494) 41.02Forfeited/expired(320) 57.36 (2,703) 72.21 (1,918) 56.59Balance at end of year3,076 $52.65 6,211 $52.95 11,375 $56.05The 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 $52million in 2015 and $30 million in both 2014 and 2013.Additional information related to stock options outstanding and exercisable at January 30, 2016, segregated by exercise price range, is summarizedbelow: Stock Options Outstanding Stock Options ExercisableRange of Exercise PricesShares WeightedAverageRemainingContractualLife (inyears) WeightedAverageExercisePrice Shares WeightedAverageRemainingContractualLife (inyears) WeightedAverageExercisePrice (Shares in Thousands)$ 36.13 – $ 46.00272 1.7 $42.75 219 1.2 $42.30$ 46.01 – $ 49.00759 3.4 47.76 385 3.6 47.84$ 49.01 – $ 51.00439 2.6 50.07 339 2.3 50.08$ 51.01 – $ 55.00749 2.8 52.73 447 2.3 52.87$ 55.01 – $ 65.00525 2.0 57.32 454 1.6 57.46$ 65.01 – $ 77.62332 1.0 67.75 332 1.0 67.75 3,076 2.5 $52.65 2,176 2.1 $53.71Intrinsic value (in thousands)$3,450 $2,393 The intrinsic value of outstanding and exercisable stock options represents the excess of our closing stock price on January 30, 2016 ($49.75) over theexercise price multiplied by the applicable number of stock options.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. Employee awards generally vest over five years. Director awards vest over the term to whichthe director was elected, generally one year. In lieu of cash dividends, nonvested stock awards are granted restricted stock equivalents which vest consistentlywith 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. F-18Table of ContentsKOHL’S CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)6. Stock-Based Compensation (continued)The following table summarizes nonvested stock activity, including restricted stock equivalents issued in lieu of cash dividends: 2015 2014 2013 Shares WeightedAverageGrantDate FairValue Shares WeightedAverageGrantDate FairValue Shares WeightedAverageGrantDate FairValue (Shares in Thousands)Balance at beginning of year2,431 $52.29 2,653 $50.56 2,323 $50.47Granted955 65.02 910 56.13 1,189 49.22Vested(957) 52.61 (818) 50.69 (706) 48.00Forfeited(218) 55.16 (314) 51.47 (153) 50.48Balance at end of year2,211 $57.37 2,431 $52.29 2,653 $50.56The aggregate fair value of awards at the time of vesting was $50 million in 2015, $41 million in 2014 and $34 million in 2013.Performance share unitsKohl's grants performance-based restricted stock units ("performance share units") to certain executives. The performance measurement period for theseperformance share units is three fiscal years. The fair market value of the grants are determined using a Monte-Carlo valuation on the date of grant.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.The following table summarizes performance share unit activity by year of grant: 2015 2014 2013Units outstanding (at Target)160,000 14,000 170,000Weighted average Monte-Carlo valuation at grant date$78.82 $62.39 $57.37Performance period2015-2017 2014-2016 2014-2016Other required disclosuresStock-based compensation expense is included in Selling, General and Administrative expense in our Consolidated Statements of Income. Suchexpense totaled $48 million for both 2015 and 2014 and $55 million for 2013. At January 30, 2016, we had approximately $93 million of unrecognizedshare-based compensation expense, which is expected to be recognized over a weighted-average period of 2 years.F-19Table of ContentsKOHL’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) 2015 First Second Third Fourth (Dollars in Millions, Except per Share Data)Net sales$4,123 $4,267 $4,427 $6,387Gross margin$1,523 $1,662 $1,643 $2,112Selling, general and administrative expenses$1,016 $1,005 $1,099 $1,332Loss on extinguishment of debt$— $131 $38 $—Net income$127 $130 $120 $296Basic shares200 196 191 187Basic net income per share$0.64 $0.66 $0.63 $1.58Diluted shares202 197 192 187Diluted net income per share$0.63 $0.66 $0.63 $1.58 2014 First Second Third Fourth (Dollars in Millions, Except per Share Data)Net sales$4,070 $4,242 $4,374 $6,337Gross margin$1,496 $1,654 $1,628 $2,147Selling, general and administrative$1,000 $981 $1,097 $1,272Net 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 $1.83Due 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. Subsequent EventsOn February 25, 2016, we announced plans to close 18 underperforming stores in fiscal 2016. We announced the specific locations in March 2016. Wecurrently expect to incur $150 to $170 million in charges as a result of these planned closures and the organizational realignment at our corporate officeswhich were announced in February 2016. We estimate that approximately $55-$65 million of the charges will be recorded in the first quarter of 2016, withthe remainder recorded in the second quarter of 2016.F-20EXHIBIT 10.16OUTSIDE DIRECTOR COMPENSATIONPursuant to our 2015 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. The restricted shares vest on the first anniversary of the date of grant.EXHIBIT 10.22EMPLOYMENT AGREEMENTTHIS EMPLOYMENT AGREEMENT (“Agreement”) is executed as of this 16th day of November, 2015, by and between Kohl’s Department Stores,Inc. and Kohl’s Corporation (collectively referred to in this Agreement as “Company”) and Sona Chawla (“Executive”). The Company desires to employ Executive, and Executive desires to be employed by the Company, on the terms and conditions set forth herein.The parties believe it is in their best interests to make provision for certain aspects of their relationship during and after the period in whichExecutive is employed by the Company.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 (the “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 November 30, 2015 (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 the Company shall give theExecutive 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, asapplicable or unless this Agreement is earlier terminated as set forth in Article III, below. If this Agreement is extended, the terms of this Agreement duringsuch Renewal Term shall be the same as the terms in effect immediately prior to such extension (including the early termination provisions set forth in ArticleIII, below), subject to any such changes or modifications as mutually may be agreed between the Parties as evidenced in a written instrument signed by boththe Company and Executive. If Executive’s employment is terminated for any reason specified in Section 3.1, below, after Company 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 Chief Operating Officer, and shall be subject to the authority of, and shallreport to, the Company’s Chief Executive Officer and/or Board of Directors (the “Board”). Executive’s duties and responsibilities shall include all thosecustomarily attendant to the position of Chief Operating Officer and such other duties and responsibilities as may be assigned from time to time byExecutive’s supervisor and/or the Company’s Board. Executive shall devote Executive’s entire business time, attention and energies exclusively to thebusiness 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 bodyof any for-profit entity other than the Company, unless first approved in writing by 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 plansor programs, and Executive’s eligibility to participate in them, shall be established by the Board at its sole discretion. Executive acknowledges and agreesthat the 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’s continuous failure to substantially perform Executive’s duties after a written demand for substantial performance is delivered to Executive thatspecifically identifies the manner in which the Company believes that Executive has not substantially performed his/her duties, and Executive has failed todemonstrate substantial efforts to resume substantial performance of Executive’s duties on a continuous basis within thirty (30) 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) Executive’s failure to permanently relocate her family to the Greater Milwaukee area by September1, 2016; or (v) any material breach of this Agreement by Executive after a written notice of such breach is delivered to Executive that specifically identifiesthe manner in which the Company believes that Executive has breached this Agreement, and Executive has failed to cure such breach within thirty (30)calendar days after receiving such demand; provided, however, that no cure period shall be required for breaches of Articles IV, V, VI or VII, below, of thisAgreement; or (vi) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, of any crime. Notwithstanding theconviction of a crime as described in the preceding subsection (vi), the Board, in its sole discretion, may waive such termination in the event it determinesthat such crime does not discredit the Company or is not detrimental to the Company's reputation or goodwill, and any decision by the Board with respect tosuch 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 basisfor such termination, effective immediately upon giving such notice. “Good Reason” shall mean any of the following: (i) the Company gives Executivewritten notice of non-renewal pursuant to Section 1.1; (ii) a material reduction in Executive’s status, title, position, responsibilities or Base Salary; (iii) anymaterial breach by the Company of this Agreement; (iv) any purported termination of the Executive’s employment for Cause which does not comply with theterms of this Agreement; or (v) a mandatory relocation of Executive’s employment with the Company from the Milwaukee, Wisconsin area, except for travelreasonably required in the performance of Executive’s duties and responsibilities. Notwithstanding the foregoing, no termination shall be for Good Reasonunless Executive has provided the Company with written notice of the conduct alleged to have caused Good Reason within thirty (30) calendar days of suchconduct 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 underthis Agreement 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 determinablephysical or mental impairment which can be expected to result in death or can be expected to last for a continuous period 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 to result in death or can be expected to lastfor a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under anaccident and health plan covering employees of the Company. A determination of Disability shall be made by the Company, which may, at its solediscretion, consult with a physician or physicians satisfactory to the Company, and Executive shall cooperate with any efforts to make such determination. Any such determina-tion shall be conclusive and binding on the parties. Any determination of Disability under this Section 3.1(d) is not intended to alterany benefits any party may be entitled to receive under any disability insurance policy carried by either the Company or 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 resignationfrom employment 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 Company’s Non-Renewal or By Executive Due to Resignation Other Than For Good Reason . If Executive’s employment is terminated by the Company pursuant to Section 3.1(b), above, by the Company due to non-renewal pursuant to Section 1.1,above, or by Executive pursuant to Section 3.1(e), above, Executive shall have no further rights against the Company hereunder, except for the right toreceive (i) any unpaid Base Salary with respect to the period prior to the effective date of termination together with payment of any vacation that Executivehas accrued but not used through the date of termination; (ii) reimbursement of expenses to which Executive is entitled under Section 2.2, above; and (iii)Executive’s unpaid bonus, if any, attributable to any complete fiscal year of the Company ended before the date of termination (in the aggregate, the“Accrued Benefits”). Any such bonus payment shall be made at the same time as any such bonus is paid to other similarly situated executives of theCompany. Furthermore, under this Section 3.2(a), vesting of any Company stock options granted to Executive ceases on the effective date of termination,and any unvested stock options lapse and are forfeited immediately upon the effective date of termination.(b) Termination Due to Executive’s Death. If Executive’s employment is terminated due to Executive’s death 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) Health InsuranceContinuation (defined below); and (iii) a share of any bonus attributable to the fiscal year of the Company during which the effective date of terminationoccurs determined as follows: the product of (x) the average bonuses paid or payable, including any amounts that were deferred in respect of the three (3)fiscal years immediately preceding the fiscal year in which the effective date of termination occurs and (y) a fraction, the numerator of which is the number ofdays completed in the fiscal year in which the effective date of termination occurs through the effective date of termination and the denominator of which isthree 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 suchbonuses are paid to other similarly situated executives of the Company. Upon termination due to the Executive’s death, Executive shall also be entitled to aseverance 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), if Executive’s termination is due to Executive’s death, all Company stock options grantedto Executive shall immediately vest upon the date of Executive’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) Health InsuranceContinuation (defined below); (iii) the Historic Pro Rata Bonus; and (iv) a Severance Benefit. The Historic Pro Rata Bonus payment shall be made at thesame time as any such bonuses are paid to other similarly situated executives of the Company. For purposes of this Section 3.2(c), “Severance Benefit”means six (6) months of Base Salary, payable in equal installments during the six (6) month period following Executive’s exhaustion of any short-termdisability benefits provided by the Company, in accordance with the normal payroll practices and schedule ofthe Company. The amount of such Severance Benefit shall be reduced by any compensation (including any payments from the Company or any benefitplans, policies or programs sponsored by the Company) earned or received by Executive during the six (6) month period following the date of terminationand the six (6) month period during which Executive receives the Severance Benefit, and Executive agrees to reimburse the Company for the amount of anysuch reduction. Executive acknowledges and agrees that, upon the cessation, if any, of such Disability during the period of the payment of the SeveranceBenefit, he/she has an obligation to use his/her reasonable efforts to secure other employment consistent with Executive’s status and experience and thathis/her failure to do so, as determined at the sole discretion of the Board, is a breach of this Agreement. Furthermore, under this Section 3.2(c), vesting of anyCompany stock options granted to Executive shall cease on the effective date of termination, and any unvested stock options shall lapse and be forfeited asof 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 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 bonuses paid or payable, including any amountsthat were deferred, in respect of the three (3) fiscal years immediately preceding the fiscal year in which the effective date of terminationoccurs. 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 the period of time equal to the remainder of the then-current Renewal Term, but not to exceed two and nine-tenths (2.9) yearsfollowing 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 bonuses paid or payable, including any amountsthat were deferred, in respect of the three (3) fiscal years immediately preceding the fiscal year in which the effective date of terminationoccurs, times the number of years, rounded to the nearest tenth, remaining in the then-current Renewal Term, but not to exceed two andnine-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 (b), 3.2 (c), 3.2(d)(i) and 3.2(d)(ii) above, the term“Health Insurance Continuation” means that, in the event the Executive's employment with the Company is terminated for any reason other than (A)a termination for Cause, (B) the Company’s non-renewal, or (C) a voluntary termination by the Executive for any reason other than "Good Reason"or other than approved by the Board of Directors of the Company, the Company shall continue to provide health insurance and a supplementalexecutive medical plan, as applicable, with coverage for Executive and Executive’s dependants eligible for coverage under such insurance andmedical plans (the “Executive’s Eligible Dependants”), substantially the same as that covering Executive and Executive’s Eligible Dependants as ofthe date of the effectivedate of termination (collectively the “Health Insurance Benefits”). In the event of Executive’s death, the Health Insurance Benefits shall continue tobe provided to Executive’s Eligible Dependants, in each case for as long as each individual would have continued to qualify as an eligibledependant under the terms of the applicable insurance and medical plans had Executive been living. The Company’s responsibility to provideHealth Insurance Continuation shall at all times be contingent upon:(1)The Health Insurance Benefits being reasonably available to the Company with respect to Executive and Executive’sEligible Dependants, as the case may be; and(2)Following the termination of Executive’s employment with the Company, Executive or Executive’s Eligible Dependants,as the case may be, shall reimburse the Company for all premiums paid for Executive’s Health Insurance Benefits, asdetermined by the Company in good faith from time to time. The Company shall provide Executive a quarterly invoicefor such reimbursement, and amounts due hereunder may be withheld from other amounts payable to Executive. Any Health Insurance Continuation provided for herein will cease forever on the date on which Executive becomes eligible for health insurancecoverage under another employer’s group health insurance plan, and, within five (5) calendar days of Executive becoming eligible for healthinsurance coverage under another employer’s group health insurance 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 affect the amountof Health Insurance Continuation to be provided in any other taxable year, nor will Executive’s right to Health Insurance Continuation be subject toliquidation 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. (f) Other Equity Awards. Future vesting of any equity awards not specifically addressed in this Section 3.2 shall be determined inaccordance with the terms of the equity award agreement and the Long Term Compensation Plan pursuant to which such awards were made.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, or his/herpersonal 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 differentcalendar years, in which case such payment(s) or benefit(s) will not commence 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 oftime, 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 During Employment. During the term of Executive’s employment under this Agreement, Executive will not directly orindirectly use or disclose any Confidential Information or Trade Secrets (defined below) except in the interest and for the benefit of the Company. 4.3 Trade Secrets Post-Employment. After the termination, for whatever reason, of Executive’s employment with the Company, Executive will notdirectly or indirectly use or disclose any Trade Secrets. Nothing in this Agreement shall limit or supersede any common law, statutory or other protections oftrade secrets where such protections provide the Company with greater rights or protections for a longer duration than provided in this Agreement.4.4 Confidential Information Post-Employment. For a period of two (2) years following termination, for whatever reason, of Executive’semployment with the Company, Executive will not directly or indirectly use or disclose any Confidential Information, unless such information ceases to bedeemed Confidential Information by means of one of the exclusions set forth in Section 4.5(c), below.4.5 Definitions.(a) Trade Secret. The term “Trade Secret” shall have that meaning set forth under applicable law.(b) Confidential Information. The term “Confidential Information” shall mean all non-Trade Secret information of, about or related to theCompany, whether created by, for or provided to the Company, which is not known to the public or the Company’s competitors, generally, including, but notlimited to: (i) strategic growth plans, pricing policies and strategies, employment records and policies, operational methods, marketing plans and strategies,advertising plans and strategies, product development techniques and plans, business acquisition and divestiture plans, resources, vendors, sources of supply,suppliers and supplier contractual relationships and terms, technical processes, designs, inventions, research programs and results, source code, short-term andlong-range planning, projections, information systems, sales objectives and performance, profit and profit margins, and seasonal plans, goals and objectives;(ii) information that is marked or otherwise designated or treated as confidential or proprietary by the Company; and (iii) information received by theCompany from others which the Company has an obligation to treat as confidential.(c) Exclusions. Notwithstanding the foregoing, the term “Confidential Information” shall not include, and the obligations set forth in thisArticle IV shall not apply to, any information which: (i) can be demonstrated by Executive to have been known by Executive prior to Executive’semployment by the Company; (ii) is or becomes generally available to the public through no act or omission of Executive; (iii) is obtained by Executive ingood faith from a third party who discloses such information to Executive on a non-confidential basis without violating any obligation of confidentiality orsecrecy relating to the information disclosed; or (iv) is independently developed by Executive outside the scope of Executive’s employment without use ofConfidential 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 and other associate relationships and Confidential Information and Trade Secrets. Executive further acknowledges andagrees that the restrictions contained in this Article V will not pose an undue hardship on Executive or Executive’s ability to find gainful employment. Forpurposes 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. In addition to the obligations Executive owes to the Company while an employee of the Company, for the one(1) year period following termination, for whatever reason, of Executive’s employment with the Company, Executive will not, directly or indirectly, provideRestricted Services (defined below) to or on behalf of any Competitor (defined below) to or for the benefit of any market in the continental United States andany other geographic market that the Company is, or is taking material steps to do business.5.3 Definitions.(a) Restricted Services. “Restricted Services” shall mean services of any kind or character comparable to those Executive provided to theCompany during the eighteen (18) month period immediately preceding Executive’s last date of employment with the Company.(b) Competitor. The term “Competitor” means Amazon.com, Inc., Belk, Inc., Bon-Ton Stores, Inc., Burlington Stores, Inc., Dillard’s, Inc.,J.C. Penney Company, Inc., Macy’s, Inc., Nordstrom Co., Ross Stores, Inc., Sears Holdings Corporation, Stage Stores, Inc., Target Corporation, The Gap, Inc.,The TJX Companies, Inc. and Walmart Stores, Inc., including any successors, subsidiaries or affiliates of such entities. 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 theCompany, all rights in all Business Ideas. All Business Ideas which are or form the basis for copyrightable works shall be considered “works for hire” as thatterm is defined by United States Copyright Law. Any works that are not found to be “works for hire” are hereby assigned to the Company. While employedby the Company and for one (1) year thereafter, Executive will promptly disclose all Business Ideas to the Company and execute all documents which theCompany may reasonably require to perfect its patent, copyright and other rights to such Business Ideas throughout the world. After Executive’semployment with the Company terminates, for whatever reason, Executive will cooperate with the Company to assist the Company in perfecting its rights toany Business Ideas including executing all documents which the Company may reasonably require. 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 orcontem-plated by the Company, (b) originated, discovered or developed during Executive’s working hours during his/her 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/her employment with the Company unless Executive does so in the course of performing his/her duties for theCompany and 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 its parent 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/her 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 orcovenants restricting future employment or consulting, that Executive has entered into which may restrict Executive’s ability to perform Executive’s dutiesas an employee 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 disclosesuch provisions to any future or prospective employer. Executive further agrees that the Company may send a copy of this Agreement to, or otherwise makethe provisions hereof known to, any such employer. 8.3 Effect of Termination. Notwithstanding any termination of this Agreement, the Executive, in consideration of his/her employment hereunder,shall remain bound by the provisions of this Agreement which specifically relate to periods, activities or obligations upon or subsequent to the termination ofthe Executive’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 promise of confidentiality for the benefit of the Company from Executive’s tax preparer,accountant, attorney and spouse, Executive may disclose such terms to such of these individuals who have made such a promise of confidentiality. Thisprovision shall not prevent Executive from disclosing such matters in testifying in any hearing, trial or other legal proceeding where Executive is required todo so.8.5 Cooperation. Executive agrees to take all reasonable steps during and after Executive’s employment with the Company to makehimself/herself available to and to cooperate with the Company, at its request, in connection with any legal proceedings or other matters in which it is or maybecome involved. 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 or any restrictive covenant agreement betweenCompany and Executive which is entered into subsequent to this Agreement, Executive agrees that the Company may suspend all payments to Executiveunder this Agreement (including any Severance Payment), recover from Executive any damages suffered as a result of such breach and recover fromExecutive any reasonable attorneys’ fees or costs it incurs as a result of such breach. In addition, Executive agrees that the Company may seek injunctive orother 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 employment with the Company and Executive’s continuedemployment by the Company, and the benefits provided to Executive under this Agreement as well as those described in the Company’s November 12, 2015offer of employment, constitute the consideration for Executive’s undertakings hereunder.8.10 Amendment. This Agreement may be altered, amended or modified only in 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. The obligations imposed by, and the provisions of, this Agreement are severable and should be construed independently ofeach other. If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity orunenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and suchinvalid or unenforceable provision shall not affect the validity of any other provision.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.8.16 Consistency With Applicable Law. Executive acknowledges and agrees that nothing in this Agreementprohibits Executive from reporting possible violations of law to any governmental agency or entity or making other disclosures that are protected under thewhistleblower provisions of federal, state or local laws or regulations.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 MansellChairman, President and Chief Executive OfficerEXECUTIVE:By: /s/ Sona Chawla Sona ChawlaEXHIBIT ABASE COMPENSATIONExecutive’s annual base compensation as of the date of this Agreement is One Million One Hundred Thousand and no/100 Dollars ($1,100,000). EXHIBIT BPRIOR OBLIGATIONSExecutive’s obligations set forth in “Walgreen Co. Restrictive Covenant Agreement”, as provided to Company’s executive search consultant.Exhibit 12.1Kohl's CorporationRatio of Earnings to Fixed Charges(Dollars in Millions) 2015 2014 2013Earnings Income before income taxes excluding loss on extinguishment of debt$1,057 $1,349 $1,404 Fixed charges512 524 517 Less: interest capitalized during period— (2) (1) $1,569 $1,871 $1,920Fixed charges Interest (expensed or capitalized)$329 $342 $339 Portion of rent expense representative of interest181 180 176 Amortization of deferred financing fees2 2 2 $512 $524 $517Ratio of earnings to fixed charges3.1 3.6 3.7Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements (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 #333-205569) of Kohl’s Corporation, of our reports dated March 18, 2016, with respect to theconsolidated financial statements of Kohl’s Corporation, and the effectiveness of internal control over financial reporting of Kohl’s Corporation, included inthis Annual Report (Form 10-K) of Kohl’s Corporation for the year ended January 30, 2016./s/ Ernst & Young LLPMilwaukee, WisconsinMarch 18, 2016Exhibit 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 18, 2016/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 18, 2016/s/ Wesley S. McDonald Wesley S. McDonald 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 30, 2016 (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 18, 2016/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 30, 2016 (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 18, 2016/s/ Wesley S. McDonald Wesley S. McDonald Chief Financial Officer (Principal Financial and Chief Accounting Officer)

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