Kohl's 2014 Annual Report Download - page 17

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Table of Contents


As of January 31, 2015, we operated 1,162 family-focused, value-oriented department stores 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 a consistent merchandise
assortment with some differences attributable to regional preferences. Our website includes merchandise which is available in our stores, as well as
merchandise which is available only on-line.
In the first quarter of 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.
To ensure newness and excitement in our merchandise assortment, we added new brands, including Fitbit, IZOD, Juicy Couture, Gaiam, Nespresso,
PUMA and various Jumping Beans collections featuring Disney characters, and improved the beauty department in many of our stores. We renewed our
emphasis on national brands as the name recognition of these brands often increases customer traffic.
We improved the Kohl’s mobile shopping experience and personalized our marketing. We also launched the Yes2You rewards program which has
increased customer loyalty by providing future discounts based on past purchases.
We knew that 2014 would be a transitional year as we implemented Greatness Agenda initiatives. Though we are early in the program, we are pleased
with the results that we saw in its first year. Comparable sales and number of transactions improved throughout the year. In the fourth quarter, both
comparable sales and number of transactions were higher than the prior year.
Net sales for the year were $19.0 billion, consistent with 2013. Comparable sales decreased 0.3%.
Gross margin as a percentage of sales was 36.4% in 2014, 8 basis points lower than in 2013. Merchandise margin increased, but was more than offset by
higher shipping losses attributable to growth in the number of on-line orders.
Selling, general and administrative ("SG&A") expenses increased both in dollars and as a percentage of sales. We increased our marketing expenses to
launch our new loyalty program and to increase customer traffic and invested in omni-channel technology initiatives. Variable expenses, including store
payroll, were well managed throughout the year.
For the year, net income was $867 million, 2% lower than last year, and diluted earnings per share was $4.24, an increase of 5% over 2013.
We generated $1.2 billion of free cash flow in 2014, a 9% increase over 2013. We ended the year with $1.4 billion of cash and cash equivalents.
See Results of Operations and Liquidity and Capital Resources for additional details about our financial results and how we define comparable sales
and free cash flow (a non-GAAP financial measure).
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