Kohl's 2004 Annual Report Download - page 4

2004 GOALS 2004 was a year in which we made considerable
progress toward advancing our financial and business objectives.
Our financial goals for 2004 were to return to positive comparable
store sales increases, restore the gross margin to historic levels
and appropriately manage expenses, while making the investments
needed to support our expansion. Achieving these objectives
would return us to earnings increases of 20% per year.
Here’s how we did. We achieved record sales for our thirteenth
consecutive year as a public company. Net sales were $11.7
billion, a 14% increase. Comparable store sales were up 0.3%.
Net income increased 26% to a record $730.4 million or $2.12
per diluted share. Our sales per square foot remains among the
highest in the industry and our operating margin of 10.6% is
one of the highest in the department store business.
While we are pleased with our progress, we know we can
do better.
2004 ACHIEVEMENTS We made excellent progress in 2004
in enhancing the customer shopping experience. We reduced
overall inventory levels, increased inventory turns and improved
our processes, enabling us to increase profitability by reducing
the amount of merchandise sold on clearance.
We adjusted the number and placement of fixtures to make it
easier for customers to navigate the store. New, visually strong
graphics were added to better highlight our various brands and
enable shoppers to quickly find what they need. We expanded
our merchandise offerings to appeal to a broader range of
customers and introduced new merchandise into our stores
more frequently. Seven new exclusive, private or national brands
were added in 2004, with more on the horizon in 2005.
MERCHANDISE STRATEGIES A major initiative in 2004 was
the introduction of exclusive brands that can only be found at
Kohl’s. We introduced daisy fuentes for misses and everGirl for
young girls in 2004, and the Oh Baby! by Motherhood maternity
collection became exclusive to Kohl’s in early 2005. Through our
strategic alliance with The Estée Lauder Companies Inc., we
added a major category we didn’t previously offer – cosmetics.
Our exclusive beauty products were introduced in 288 stores in
2004 and will be rolled-out to our remaining stores in 2005.
In the fall of 2005, Kohl’s will become the exclusive retailer for
Candie’s apparel in juniors and young girls. More exclusive lines
are planned for 2005, including The Backyardigans, a new
toddler line based on Nickelodeon’s hottest new show.
We expanded our selection of national brands by introducing
Laura Ashley Lifestyles and Gloria Vanderbilt for the home, and
Bongo for juniors in 2004. In early 2005, we added Chaps in
both casual and dress in mens, which we believe will offer a
tremendous opportunity to increase our market share in the
men’s business. Other new national brands in 2005 include
ROYAL VELVET in home.
We increased our private brand offerings in 2004 with the
introduction of Urban Pipeline for young men. We introduced
apt. 9 in both mens and misses to appeal to customers seeking
today’s contemporary fashions and will extend the brand further
in 2005.
We will continue our focus on developing new exclusive and
private brands that add excitement and variety to our stores, as
well as adding national brands our customers know and trust.
CAPITAL INVESTMENTS In 2004, we invested $890 million
in capital projects to expand our presence, remodel existing
stores, support our future growth and enhance productivity.
We added 95 stores in 2004, increasing our store base from 542
to 637 stores. California became our largest state with 62 stores,
as we entered five new markets: San Francisco, Sacramento, San
Larry Montgomery, Arlene Meier and Kevin Mansell
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Dear Shareholders