Kohl's 2006 Annual Report Download - page 4

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Dear Shareholder,
Larry Montgomery, Chairman and Chief
Executive Offi cer; Kevin Mansell, President; and
Tom Kingsbury, Senior Executive Vice President
Our fi scal 2006 performance can best
be described in one word: growth. We
delivered solid top- and bottom-line
performance. We opened 85 exciting
new stores and we successfully executed
on our four strategic initiatives.
Strong Financial Growth
Our sales have grown by 50% over
the past three years, from $10 billion
in 2003 to a record $15.5 billion this
year. No other major department
store has a growth rate that comes
even close. For this year, comparable
store sales rose 5.9%, increasing in all
regions and all four quarters, boosting
us to the top of the rankings among
our peer group.
Operating income grew 28% to $1.8
billion and the operating margin reached
an all-time high of 11.7%. This puts us
well on our way to achieving our goal of
12.5% operating margin by 2010.
Net income increased 32% to a record
$1.1 billion or $3.31 per diluted share,
driven by strong improvement in our
gross margin and prudent expense
management. Our balance sheet
remained strong and we again
generated significant flow from
operations.
In April, we completed the sale of our
proprietary credit card business to
JPMorgan Chase and intered into a multi-
year agreement with Chase to share in the
profitability of the credit card portfolio. We
used the net proceeds to begin our authorized
$2 billion share repurchase program,
purchasing 27 million shares in fiscal 2006
Growth across the Nation
We continue to deliver on our real estate
growth strategy. Our ability to successfully
add new stores and new markets reached
new heights with the grand opening of 65
stores across the country on a single day in
October, the largest one-day grand opening
in our history.
Looking ahead, we see many more
opportunities for strategic, profitable
growth. By the end of 2010, we expect to
be operating more than 1,200 stores and to
generate approximately $24 billion in sales
and $1.9 billion in net income. We believe
these goals are both realistic and achievable.
Growth throughout the Business
Our strategic initiatives are the roadmap
for our future growth. These initiatives
focus on merchandise content, marketing,
inventory management and the in-store
shopping experience.
Vision
Operating Income
(in millions of dollars)
2001 2002 2003 2004 2005 2006
$1,021 $951
$1,416
$1,815
$1,193
18.1%CAGR
(1)
$790
(1) Compounded Annual Growth Rate.