Kohl's 2014 Annual Report Download - page 8

Table of Contents
private litigation. Reputational damage caused by real or perceived product safety concerns, could have a negative impact on our sales.
•Disruptions in our information systems or an inability to adequately maintain and update those systems.
The efficient operation of our business is dependent on our information systems. In particular, we rely on our information systems to effectively
manage sales, distribution, and merchandise planning and allocation functions. We also generate sales though the operations of our Kohls.com website.
We frequently make investments that will help maintain and update our existing information systems. The potential problems and interruptions
associated with implementing technology initiatives or the failure of our information systems to perform as designed could disrupt our business and
harm sales and profitability.
•Weather conditions could adversely affect consumer shopping patterns.
A significant portion of our business is apparel and is subject to weather conditions. As a result, our operating results may be adversely affected by
severe or unexpected weather conditions. Frequent or unusually heavy snow, ice or rain storms; natural disasters such as earthquakes, tornadoes, floods
and hurricanes; or extended periods of unseasonable temperatures could adversely affect our performance by affecting consumer shopping patterns,
diminishing demand for seasonal merchandise and/or causing physical damage to our properties.
•Inability to successfully execute a profitable omni-channel strategy.
Our business has evolved from an in-store only shopping experience to a multi-channel experience which includes in-store, on-line, mobile, social
media and/or other interactions. We strive to offer a desirable omni-channel shopping experience for our customers and use social media as a way to
interact with our customers and enhance their shopping experiences.
Our ability to compete with other retailers and to meet our customer expectations may suffer if we are unable to execute a relevant customer-facing
technology in a timely manner. Our ability to compete may also suffer if Kohl’s, our suppliers, or our third-party shipping and delivery vendors are
unable to effectively and efficiently fulfill and deliver orders, especially during the holiday season when sales volumes are especially high.
Consequently, our results of operations could be adversely affected.
Our omni-channel business currently generates a lower operating margin than we have historically reported when we were primarily a store-only
retailer. This profitability variance is due to a variety of factors including, but not limited to, an increase in the volume of lower margin merchandise,
especially home products; costs to ship merchandise to our customers; and investments to provide the infrastructure necessary to expand our omni-
channel strategy. There can be no assurances that future profitability will return to historical levels.
Our revenues, operating results and cash requirements are affected by the seasonal nature of our business.
Our business is subject to seasonal influences, with a major portion of sales and income historically realized during the second half of the fiscal year,
which includes the back-to-school and holiday seasons.
If we do not properly stock or restock popular products, particularly during the back-to-school and holiday seasons, we may fail to meet customer
demand, which could affect our revenue and our future growth. If we overstock products, we may be required to take significant inventory markdowns or
write-offs, which could reduce profitability.
We may experience an increase in costs associated with shipping on-line orders due to complimentary upgrades, split shipments, and additional long-
zone shipments necessary to ensure timely delivery for the holiday season. If too many customers access our website within a short period of time due to
increased holiday demand, we may experience system interruptions that make our website unavailable or prevent us from efficiently fulfilling orders, which
may reduce the volume of goods we sell and the attractiveness of our products and services. Also, third-party delivery, direct ship vendors and customer
service co-sourcers may be unable to meet the seasonal demand.
This seasonality causes our operating results and cash needs to vary considerably from quarter to quarter. Additionally, any decrease in sales or
profitability during the second half of the fiscal year could have a disproportionately adverse effect on our results of operations.
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