Kohl's 2007 Annual Report Download - page 5

inventory management and the in-store
shopping experience, ultimately posi-
tioning Kohl’s as the store just for her.
Expanding our merchandise offering
is critical to increasing market share
and engaging a broader range of cus-
tomers. In the updated and contempo-
rary categories, we introduced Simply
Vera Vera Wang and Food Network
nationwide in September 2007, along
with the ELLE Contemporary Collection
in about half the chain. The ELLE
Contemporary Collection will be avail-
able in all stores spring 2008. These
brands were eagerly embraced by our
customers. Brands such as Chaps
continue to attract our core classic
customer while the introduction
of Dana Buchman in spring 2009
will enhance our classic offerings.
In 2008, we will add even more variety
and innovation to our merchandise
with the nationwide rollout of the ELLE
Contemporary Collection, an expan-
sion of our Food Network relationship
through a partnership with Bobby Flay,
the introduction of Gold Toe and the
introduction of FILA SPORT in the
fall. To support our growing portfolio
of world-class brands, we opened a
design offi ce in 2007 in the heart of
New York’s garment district to speed
the collaboration process with many
of our exclusive partners.
Our marketing program is designed
to differentiate Kohl’s in the market-
place. The program uses a strategically
selected variety of mediums to build
awareness and desire for our national,
private and exclusive brands and
increase traffi c and sales. We focused
our efforts on encouraging our cus-
tomer to explore the store to increase
the number of areas of the store she
shops for her family and herself. This
will be a continued focus in 2008 in all
of our advertising and marketing.
Improving inventory fl ow and increasing
speed-to-market continue to be impor-
tant initiatives. Our goal is to reduce
our average product cycle time from
40 weeks to 25 by the end of 2009
for most products. Brands requiring
“fast fashion,” such as the ELLE
Contemporary Collection, can be devel-
oped in as few as 12–16 weeks. We
will remain conservative in our inventory
planning and will rely on our supplier
partnerships to replenish merchandise
quickly as business conditions improve.
Enhancing the in-store shopping
experience revolves around making
our stores more visually exciting
and easier to shop. Introduced in 2006,
our innovation store design is aimed
directly at broadening customer appeal.
Phase II of the innovation store was
implemented in our fall 2007 new stores
and focused on encouraging cross-
shopping in our stores. Elements
included a redesign of the juniors’
area, including new fi tting rooms, and
improved presentation of handbags,
intimate apparel and jewelry. In fall,
we begin phase III of our innovation in
select stores focusing on enhance-
ments in children’s and shoes. We
continue to evaluate customer reaction
to these changes and expect that store
innovations will be a continual process.
Kohl’s Cares
With our Kohl’s Cares for Kids
program, we continue to donate signifi -
cant resources, hours and merchandise
to improve children’s lives in communi-
ties nationwide. We also have focused
our efforts on being a good corporate
citizen in environmental matters and
are proud of our recognition by the
Environmental Protection Agency (EPA)
as a leader in the retail industry and
in the use of “green” power.
We wish to take this opportunity to
say thank you to James D. Ericson and
R. Elton White for their 11 and 14 years
of service, respectively, as members
of Kohl’s board of directors. They both
will be retiring in April 2008.
Stephanie A. Streeter joined our board
of directors in 2007, bringing her exper-
ience in technology and supply-chain
management, including six years with
Banta Corporation, to Kohl’s. We also
welcomed Don Brennan and John
Worthington as principals and senior
executive vice presidents in charge of
merchandising and stores, respectively.
Looking Forward
We expect 2008 to be a challenging
year from a macroeconomic perspec-
tive. We are planning conservatively
in our sales expectations, inventory
levels and expenses. We will continue
to invest the necessary resources to
ensure our profi table growth over the
long term through investments in asso-
ciates and technology. We also will
utilize our strong fi nancial position to
continue to expand in new and existing
markets in order to grow market share
in a diffi cult environment.
With prudent fi nancial management in
2008, we are confi dent we will emerge
as an even stronger company. While
we have a lot of work to do, I believe
our business is well positioned thanks
to our 125,000 dedicated associates,
shareholders, customers and business
partners. It is because of them that you
can continue to “expect great things”
from Kohl’s in 2008 and beyond.
3
1 Compounded Annual Growth Rate
Operating Income
(in millions of dollars)
17.4% CAGR1
$1,804
$1,416
$1,193
$1,815
’03 ’04 ’05 ’06
$951
’07
LARRY MONTGOMERY
Chairman and Chief Executive Officer