Kohl's 1998 Annual Report Download - page 3

With the growth and geographic expansion of our company,
the demands placed upon each of us have grown dramatically.
Over the last few years, we have developed a very strong and
talented group of senior executives. The stage is set for the next
generation of management to begin to lead our company.
In February 1999, Kevin Mansell was promoted to president,
succeeding Jay Baker who will retire at the end of this year.
Until then, Jay will assist in our executive transitions as well as
concentrate on specific merchandising initiatives for our new
geographic markets. In his new position, Kevin draws on his 16
years of experience with Kohl’s and has responsibility for mer-
chandising, marketing, planning and allocation and distribution. His
new responsibilities bring the entire merchandising effort, includ-
ing the crucial supply chain, under one organization for added
focus and efficiency. Kevin will also join our Board.
Kevin has a great team working with him. Jack Moore was pro-
moted to executive vice president and general merchandise
manager of children’s, footwear and home. Rick Leto continues
as executive vice president and general merchandise manager of
apparel and accessories with added responsibility for product
development. Caryn Blanc has been appointed executive vice
president of merchandise planning and logistics. Gary Vasques
continues in his position as executive vice president of marketing.
We also strengthened our executive team in other areas during
1998. Don Sharpin was promoted to executive vice president of
human resources, bringing over 10 years of experience with
Kohl’s to this important position. Jeff Rusinow, our executive
vice president and regional director of stores, added responsibility
for store administration to his position. In addition, three senior
executives will continue to serve Kohl’s with their exceptional
leadership. They are John Herma, our chief operating officer;
John Lesko, our executive vice president-chief information offi-
cer; and Arlene Meier, our executive vice president-chief financial
officer.
It is with a great deal of pride that we discuss these promotions.
This is a continuation of all of the steps we have been taking to
ensure strong operations and a well-developed senior manage-
ment team. This team is the successful combination of people
who have grown with Kohl’s and talented individuals who have
come to us from other retailers, strengthening our organization
with their experience and knowledge. Together they give us the
skills we need to carry out our growth strategy.
Infrastructure for Future Growth
The second building block for our infrastructure is technology.
We continue to invest in integrated, company-wide systems and
solutions as well as the technological skills of our Associates to
support our growth. Our objective is cost-effective use of tech-
nology that enables us to improve sales and profitability and bet-
ter serve our customers. As an example, Kohl’s supply chain
model links merchandising, planning and allocation, buying, logis-
tics, distribution and point-of-sale to maximize the value we pass
along to our customers.
The third component of our infrastructure is our distribution sys-
tem. New store openings in new markets are big news,
but solid support in the form of new distribution centers in
these new markets is critical to ensuring that we always have
the items and brands customers expect to find at Kohl’s. We are
expanding our distribution center in Winchester, Virginia, and our
fourth distribution center will open in Blue Springs, Missouri, by
early Spring 2000 to serve our stores in the western states. In
addition, new planning and allocation systems are helping our
buyers put the right items in the right
quantities in the right stores at the
right time.
This is an exciting time for Kohl's, as
we continue to grow and plan for our
future. As always, we want to take
this opportunity to recognize and thank our talented and dedicat-
ed Associates for another tremendous year. We could never
have achieved our position as one of the top performing retailers
in the country without your hard work and commitment.
We’d also like to extend our appreciation to our vendors and sup-
pliers for their great partnerships, as well as to our customers
and shareholders for their continued loyalty.
Thanks to all of you, Kohl’s truly is on the move.
Bill Kellogg Larry Montgomery
Chairman Vice Chairman and
Chief Executive Officer
D ear Shareholders,
We are pleased to report another outstanding year for Kohl’s.
We can all take pride in our many accomplishments in 1998 as
Kohl's continued to grow in size and scope, in the number of
satisfied customers and in superior financial performance.
For the year ended January 30, 1999, net sales rose 20 percent
to approximately $3.7 billion. Comparable store sales rose eight
percent for the year. Net income increased 36 percent to
$192.3 million or $1.18 per share. Selling, general and adminis-
trative (SG&A) expenses declined 0.2 percent to 22.0 percent
of sales. Sales for the fourth quarter rose 20 percent, and net
income for the period increased about 30 percent. Our stock
price has increased 95 percent from the end of fiscal 1997 to
the end of fiscal 1998, as adjusted for the 2-for-1
stock split in April 1998. In recognition of our strong perfor-
mance, Kohl’s was added to the Standard & Poor’s 500
Index during 1998.
Our success is driven by our Associates and the strong
customer acceptance of the Kohl’s concept: our winning
combination of national and private brands,
great value, convenience and a pleasant
shopping experience.
We opened 32 new stores and closed one
store in 1998, increasing our total to 213
stores in 22 states, compared to 182 stores
in 21 states at the end of 1997.
While our fast-paced growth is a great story,
it takes a well-developed management team
to continue our successful expansion strate-
gy. As you’ll see throughout this report,
we’ve continued the steps we have been tak-
ing over the last few years to build the infra-
structure that will carry out our long term growth strategy. This
infrastructure is comprised of our people, our technology and our
distribution systems.
D eveloping an Experienced Team
Because Kohl’s Associates are the key to our future, developing a
strong management team has been critical. Our Associate growth
and development program is a comprehensive, detailed initiative
that involves evaluation of every manager twice each year. Our
goal is twofold: to plan for our future growth and to assure that
our Associates find their jobs both challenging and rewarding.
Our significant growth provides opportunities for development
and advancement for all Associates. For example, in 1998, we
created over 4,500 new store jobs; over 65 percent of all new
executive jobs were promotions of Associates from within the
company. And of the 100 Associates who successfully com-
pleted our Executive Training Program, over 40 percent came
from inside the Kohl’s organization.
We’ve laid the groundwork.
Strong Management Team
Kohl's experienced management team has
the skills and talent to continue the compa-
ny's successful growth strategy.
Left photo
From left: J ack Moore, Caryn Blanc, Gary Vasques,
Kevin Mansell and Rick Leto.
Right photo
Seated from left: J ay Baker, J eff Rusinow, J ohn Lesko and
Don Sharpin. Standing: Arlene Meier and J ohn Herma.
Bill Kellogg and Larry Montgomery
32
In February 1999,
Larry Montgomery
was promoted to chief
executive officer. He will
continue to serve as vice
chairman and a member
of the Board of Directors.
Larry’s primary responsi-
bilities will be day-to-day
operations, while Bill
Kellogg continues as
chairman, focusing his
time and efforts on Kohl’s
aggressive expansion.