UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August ~~3, 2019~~1, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from ________ to _________

Commission file number 1-11084

KOHL’S CORPORATION

(Exact name of registrant as specified in its charter)


Wisconsin		39-1630919
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin		53051
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (262) 703-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on

which registered

Common Stock, $.01 par value

KSS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large ~~accelerated filer~~Accelerated Filer	☒	Accelerated ~~filer~~Filer	☐
~~Non-accelerated filer~~Non-Accelerated Filer	☐	Smaller ~~reporting company~~Reporting Company	☐
		Emerging ~~growth company~~Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: August ~~30, 2019~~28, 2020 Common Stock, Par Value $0.01 per Share, ~~159,126,736~~157,775,065 shares outstanding.

KOHL’S CORPORATION

INDEX

PART I	FINANCIALINFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets	3
	Consolidated Statements of ~~Income~~Operations	4
	Consolidated Statements of Changes in Shareholders' Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1512
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2119
Item 4.	Controls and Procedures	2120

PART II	OTHER INFORMATION
Item 1A.	Risk Factors	2221
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2221
Item 6.	Exhibits	2322
	Signatures	2423

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KOHL’S CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in Millions)	August 3, 2019			February 2, 2019			August 4, 2018			August 1, 2020			February 1, 2020			August 3, 2019
Assets
Current assets:
Cash and cash equivalents	$	625		$	934		$	1,066		$	2,428		$	723		$	625
Merchandise inventories		3,656			3,475			3,572			2,698			3,537			3,656
Income tax receivable											205			15			16
Other		397			426			404			357			374			381
Total current assets		4,678			4,835			5,042			5,688			4,649			4,678
Property and equipment, net		7,276			7,428			7,635			6,970			7,352			7,276
Operating leases		2,428			-			-			2,418			2,391			2,428
Other assets		160			206			238			159			163			160
Total assets	$	14,542		$	12,469		$	12,915		$	15,235		$	14,555		$	14,542

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,330		$	1,187		$	1,404		$	1,064		$	1,206		$	1,330
Accrued liabilities		1,199			1,364			1,174			1,130			1,233			1,199
Income taxes payable		34			64			70			86			48			34
Current portion of:
Finance leases and financing obligations		119			115			122
Finance lease and financing obligations											126			124			119
Operating leases		158			-			-			160			158			158
Total current liabilities		2,840			2,730			2,770			2,566			2,769			2,840
Long-term debt		1,855			1,861			2,273			3,450			1,856			1,855
Finance leases and financing obligations		1,270			1,523			1,537
Finance lease and financing obligations											1,356			1,367			1,270
Operating leases		2,647			-			-			2,637			2,619			2,647
Deferred income taxes		254			184			188			122			260			254
Other long-term liabilities		221			644			660			267			234			221
Shareholders’ equity:
Common stock		4			4			4			4			4			4
Paid-in capital		3,236			3,204			3,163			3,290			3,272			3,236
Treasury stock, at cost		(11,353	)		(11,076	)		(10,835	)		(11,594	)		(11,571	)		(11,353	)
Accumulated other comprehensive loss		-			-			(8	)
Retained earnings		13,568			13,395			13,163			13,137			13,745			13,568
Total shareholders’ equity		5,455			5,527			5,487		$	4,837		$	5,450		$	5,455
Total liabilities and shareholders’ equity	$	14,542		$	12,469		$	12,915		$	15,235		$	14,555		$	14,542

See accompanying Notes to Consolidated Financial Statements

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KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

(Unaudited)

	Three Months Ended				Six Months Ended				Three Months Ended					Six Months Ended
(Dollars in Millions, Except per Share Data)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		August 1, 2020			August 3, 2019		August 1, 2020			August 3, 2019
Net sales	$	4,169	$	4,310	$	7,990	$	8,263	$	3,213		$	4,169	$	5,373		$	7,990
Other revenue		261		260		527		515		194			261		462			527
Total revenue		4,430		4,570		8,517		8,778		3,407			4,430		5,835			8,517
Cost of merchandise sold		2,550		2,605		4,965		5,101		2,149			2,550		3,936			4,965
Operating expenses:
Selling, general, and administrative		1,269		1,272		2,544		2,532		1,050			1,269		2,116			2,544
Depreciation and amortization		228		241		458		483		219			228		446			458
Impairments, store closing and other costs		7		—		56		—
Operating income		376		452		494		662
Impairments, store closing, and other costs										(2	)		7		64			56
(Gain) on sale of real estate										(127	)	—			(127	)	—
Operating income (loss)										118			376		(600	)		494
Interest expense, net		53		65		105		135		78			53		136			105
Loss on extinguishment of debt		—		—		—		42
Income before income taxes		323		387		389		485
Provision for income taxes		82		95		86		117
Net income	$	241	$	292	$	303	$	368
Net income per share:
Income (loss) before income taxes										40			323		(736	)		389
(Benefit) provision for income taxes										(7	)		82		(242	)		86
Net income (loss)									$	47		$	241	$	(494	)	$	303
Net income (loss) per share:
Basic	$	1.52	$	1.77	$	1.90	$	2.23	$	0.31		$	1.52	$	(3.21	)	$	1.90
Diluted	$	1.51	$	1.76	$	1.89	$	2.21	$	0.30		$	1.51	$	(3.21	)	$	1.89

See accompanying Notes to Consolidated Financial Statements

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KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
(Dollars in Millions, Except per Share Data)	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018			August 1, 2020			August 3, 2019			August 1, 2020			August 3, 2019
Common stock
Balance, beginning of period	$	4		$	4		$	4		$	4		$	4		$	4		$	4		$	4
Stock options and awards		-			-			-			-
Stock-based awards														—			—			—			—
Balance, end of period	$	4		$	4		$	4		$	4		$	4		$	4		$	4		$	4

Paid-in capital
Balance, beginning of period	$	3,223		$	3,125		$	3,204		$	3,078		$	3,289		$	3,223		$	3,272		$	3,204
Stock options and awards		13			38			32			85
Stock-based awards														1			13			18			32
Balance, end of period	$	3,236		$	3,163		$	3,236		$	3,163		$	3,290		$	3,236		$	3,290		$	3,236

Treasury stock
Treasury stock, at cost
Balance, beginning of period	$	(11,221	)	$	(10,737	)	$	(11,076	)	$	(10,651	)	$	(11,593	)	$	(11,221	)	$	(11,571	)	$	(11,076	)
Treasury stock purchases		(133	)		(95	)		(254	)		(165	)		—			(133	)		(8	)		(254	)
Stock options and awards		(2	)		(4	)		(27	)		(21	)
Stock-based awards														(1	)		(2	)		(21	)		(27	)
Dividends paid		3			1			4			2			—			3			6			4
Balance, end of period	$	(11,353	)	$	(10,835	)	$	(11,353	)	$	(10,835	)

Accumulated other comprehensive loss
Balance, beginning of period	$	-		$	(8	)	$	-		$	(11	)
Other comprehensive income		-			-			-			3
Balance, end of period	$	-		$	(8	)	$	-		$	(8	)	$	(11,594	)	$	(11,353	)	$	(11,594	)	$	(11,353	)

Retained earnings
Balance, beginning of period	$	13,436		$	12,972		$	13,395		$	13,006		$	13,090		$	13,436		$	13,745		$	13,395
Change in accounting standard (a)		-			-			88			(7	)		—			—			—			88
Net earnings		241			293			303			368
Net income (loss)														47			241			(494	)		303
Dividends paid		(109	)		(102	)		(218	)		(204	)		—			(109	)		(114	)		(218	)
Balance, end of period	$	13,568		$	13,163		$	13,568		$	13,163		$	13,137		$	13,568		$	13,137		$	13,568

Total shareholders' equity, end of period	$	5,455		$	5,487		$	5,455		$	5,487
Total shareholders' equity, end of period													$	4,837		$	5,455		$	4,837		$	5,455

Common stock
Shares, beginning of period		375			374			374			373			377			375			375			374
Stock options and awards		-			-			1			1
Stock-based awards														—			—			2			1
Shares, end of period		375			374			375			374			377			375			377			375
Treasury stock
Shares, beginning of period		(213	)		(206	)		(211	)		(205	)		(219	)		(213	)		(219	)		(211	)
Treasury stock purchases		(2	)		(1	)		(4	)		(2	)		—			(2	)		—			(4	)
Shares, end of period		(215	)		(207	)		(215	)		(207	)		(219	)		(215	)		(219	)		(215	)
Total shares outstanding, end of period		160			167			160			167
Total shares outstanding, end of period														158			160			158			160

Dividends paid per common share	$	0.67		$	0.61		$	1.34		$	1.22		$	—		$	0.67		$	0.704		$	1.34

(a)

~~Refer to Note 4 for details on the adoption~~Adoption of ~~the~~ new lease accounting ~~standard.~~standard in 2019.

See accompanying Notes to Consolidated Financial Statements

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KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended						Six Months Ended
(Dollars in Millions)	August 3, 2019			August 4, 2018			August 1, 2020			August 3, 2019
Operating activities
Net income	$	303		$	368
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							$	(494	)	$	303
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		458			483			446			458
Share-based compensation		27			50			14			27
Deferred income taxes		41			(25	)		(132	)		41
Impairments, store closing and other costs		45			-
Loss on extinguishment of debt		-			42
Impairments, store closing, and other costs								48			45
(Gain) on sale of real estate								(127	)		—
Non-cash inventory costs								187			—
Non-cash lease expense		75			-			74			75
Other non-cash expenses		3			13
Other non-cash expense								10			3
Changes in operating assets and liabilities:
Merchandise inventories		(175	)		(24	)		656			(175	)
Other current and long-term assets								20			29
Accounts payable								(142	)		143
Accrued and other long-term liabilities		(177	)		(88	)		(23	)		(177	)
Accounts payable		143			133
Other current and long-term assets		29			89
Income taxes		(8	)		6			(151	)		(8	)
Operating lease liabilities		(88	)		-			(82	)		(88	)
Net cash provided by operating activities		676			1,047			304			676
Investing activities
Acquisition of property and equipment		(439	)		(312	)		(196	)		(439	)
Other		-			6
Proceeds from sale of real estate								193			—
Net cash used in investing activities		(439	)		(306	)		(3	)		(439	)
Financing activities
Proceeds from issuance of debt								2,097			—
Deferred financing costs								(19	)		—
Treasury stock purchases		(254	)		(165	)		(8	)		(254	)
Shares withheld for taxes on vested restricted shares		(27	)		(21	)		(20	)		(27	)
Dividends paid		(214	)		(202	)		(108	)		(214	)
Reduction of long-term borrowings		(6	)		(528	)		(497	)		(6	)
Premium paid on redemption of debt		-			(35	)
Finance lease and financing obligation payments		(60	)		(64	)		(44	)		(60	)
Proceeds from stock option exercises								—			2
Proceeds from financing obligations		13			-			3			13
Proceeds from stock option exercises		2			32
Net cash used in financing activities		(546	)		(983	)
Net decrease in cash and cash equivalents		(309	)		(242	)
Cash at beginning of period		934			1,308
Cash at end of period	$	625		$	1,066
Net cash provided by (used in) financing activities								1,404			(546	)
Net increase (decrease) in cash and cash equivalents								1,705			(309	)
Cash and cash equivalents at beginning of period								723			934
Cash and cash equivalents at end of period							$	2,428		$	625
Supplemental information
Interest paid, net of capitalized interest	$	105		$	141		$	108		$	105
Income taxes paid		77			164			137			77
Property and equipment acquired through:
Finance lease liabilities		73			-			56			73
Operating lease liabilities		67			-			103			67
Financing obligations		-			7

See accompanying Notes to Consolidated Financial Statements

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KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying ~~consolidated financial statements~~Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for fiscal year end ~~consolidated financial statements.~~Consolidated Financial Statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the ~~consolidated financial statements~~Consolidated Financial Statements and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended February ~~2, 2019~~1, 2020 (Commission File No. 1-11084) as filed with the Securities and Exchange Commission.

Due to the seasonality of ~~our~~the business of Kohl’s Corporation (the “Company,” “Kohl’s,” “we,” “our,” or “us”) and the uncertainty surrounding the financial impact of the novel coronavirus (“COVID-19”) pandemic, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

We operate as a single business unit.

Accounting Policies

The accounting policies the Company follows are set forth in its most recently filed Annual Report on Form 10-K. There have been no material changes to these accounting policies except as discussed below.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. We believe that our accounting estimates are appropriate and reflect the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic. Actual results could differ from those estimates.

Leases

In the first quarter of 2020, we negotiated rent deferrals for a significant number of our stores, with repayment at later dates, primarily in the third and fourth quarter of 2020 and first and second quarter of 2021. These concessions provide a deferral of rent payments with no substantive changes to the original contract. Consistent with updated guidance from the Financial Accounting Standards Board (“FASB”) in April 2020, we have elected to treat the COVID-19 pandemic-related rent deferrals as accrued liabilities. We will continue to recognize expense during the deferral periods.

A sale leaseback was completed during the quarter ended August 1, 2020 for our San Bernardino E-commerce fulfillment and distribution center. The properties were sold for $195 million and generated net proceeds of $193 million after fees. A gain of $127 million was recognized during the second quarter of 2020 and is recorded in Gain on sale of real estate. An initial operating lease liability and a corresponding right of use asset of $84 million were recorded for these leased locations.

Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market using the Retail Inventory Method ("RIM"). Under RIM, the valuation of inventory at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail value of inventory. RIM is an averaging method that has been widely used in the retail industry due to its practicality. The use of RIM will result in inventory being valued at the lower of cost or market since permanent markdowns are taken as a reduction of the retail value of inventories. A reserve would be recorded if the future estimated selling price is less than cost.

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In the first quarter of 2020, as a result of the COVID-19 pandemic and store closures, we recorded a reserve of $163 million for excess seasonal inventory where the expected selling price was less than cost for the quarter ended May 2, 2020. NaN reserve was required for the quarter ended August 1, 2020 or August 3, 2019.

Property and Equipment and Long Lived Assets

All property and equipment and other long-lived assets are reviewed for potential impairment at least annually or when events or changes in circumstances indicate that the asset’s carrying value may not be recoverable. If such indicators are present, it is determined whether the sum of the estimated undiscounted future cash flows attributable to such assets is less than the carrying value of the assets. A potential impairment has occurred if projected future undiscounted cash flows are less than the carrying value of the assets. Given the substantial reduction in our sales and the reduced cash flow projections as a result of the store closures due to the COVID-19 pandemic, we determined that a triggering event occurred in the first quarter of 2020 and an impairment assessment was warranted for certain stores and other long lived assets. Based on this assessment, we recorded impairment charges of $51 million in the first quarter of 2020 in Impairments, store closing, and other costs. In connection with the closure of 4 stores in the first quarter of 2019, we recorded impairment charges of $49 million in the first quarter of 2019 in Impairments, store closing, and other costs. We recorded impairment charges of $10 million in the second quarter of 2019 related to the closure of our 4 Off-Aisle clearance centers in Impairments, store closing, and other costs.

In the second quarter of 2020, we recorded an impairment charge of $2 million related to assets held for sale in Impairments, store closing and other costs. As of August 1, 2020, we had assets held for sale of $22 million.

Restructuring Reserve

The following table summarizes changes in the restructuring reserve during the six months ended August 1, 2020:

(Dollars In Millions)	Severance
Balance - February 1, 2020	$	27
Payments and reversals		(17	)
Additions		2
Balance - August 1, 2020	$	12

Charges related to corporate restructuring efforts are recorded in Impairments, store closing, and other costs.

Recent Accounting Pronouncements

We adopted the new accounting standard on accounting for expected credit losses (ASU 2016-13), effective at the beginning of fiscal 2020. We applied the new principle using a modified retrospective approach. There was no material impact on our financial statements due to adoption of the new standard.

We adopted the new accounting standard on recognizing implementation costs related to a cloud computing arrangement (ASU 2018-15), effective at the beginning of fiscal 2020. We applied the new principle using a prospective approach. There was no material impact on our financial statements due to adoption of the new standard.

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The following table provides a brief description of issued, but not yet effective, accounting standards:

Standard

Description

Effect on our Financial Statements

~~Cloud Computing~~Income Taxes

(ASU ~~2018-15)~~2019-12)

Issued ~~August 2018~~December 2019

Effective Q1 ~~2020~~2021

Under the new standard, implementation costs related to a cloud computing arrangement will be deferred or expensed as incurred, in accordance with the existing internal-use software guidance for similar costs.

The new standard ~~also prescribes~~is designed to simplify the ~~balance sheet,~~accounting for income ~~statement, and cash flow classification of~~taxes by removing certain exceptions to the ~~capitalized implementation costs and related amortization expense.~~general principles as outlined in U.S. GAAP.

We are evaluating the impact of the new standard ~~but believe it is generally consistent with our current accounting for cloud computing arrangements and will not have a material impact~~ on our ~~financials.~~financial statements.

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~~KOHL’S CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

2. Revenue Recognition

The following table summarizes net sales by line of business:

Three Months Ended

Six Months Ended

(Dollars in Millions)
August 3, 2019

August 4, 2018 (1)

August 3, 2019

August 4, 2018 (1)

Women's
$
1,373

$
1,439

$
2,592

$
2,694

Men's

933

955

1,717

1,745

Home

651

678

1,280

1,369

Children's

458

464

914

919

Footwear

447

465

867

902

Accessories

307

309

620

634

Net Sales
$
4,169

$
4,310

$
7,990

$
8,263

~~(1)~~

~~Certain businesses do not agree to previously reported amounts due to changes in category classification.~~

	Three Months Ended				Six Months Ended
(Dollars in Millions)	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Women's	$	951	$	1,377	$	1,544	$	2,601
Home		657		575		1,140		1,147
Men’s		598		890		961		1,639
Children's		395		459		664		916
Footwear		337		452		570		873
Accessories		275		416		494		814
Net Sales	$	3,213	$	4,169	$	5,373	$	7,990

~~Liabilities for performance obligations resulting from our rewards programs, return reserves, and unredeemed~~Unredeemed gift cards and merchandise return ~~cards~~card liabilities totaled ~~$354~~$283 million as of August 1, 2020, $334 million as of February 1, 2020, and $258 million as of August 3, ~~2019, $413~~2019. Revenue of $100 million ~~as of~~ was recognized during the current year from the February ~~2, 2019 and $358 million as of August 4, 2018.~~

1, 2020 ending balance.

3. Debt

Long-term debt, which includes draws on the revolving credit facility, consists of the following unsecured and secured senior debt:

							Outstanding									Effective Rate		Coupon Rate		Outstanding
Maturity by fiscal year (Dollars in Millions)	Effective Rate			Coupon Rate			August 3, 2019			February 2, 2019			August 4, 2018			Effective Rate		Coupon Rate
2021		4.81	%		4.00	%	$	-		$	-		$	413
Maturity (Dollars in Millions)																Effective Rate		Coupon Rate		August 1, 2020			February 1, 2020			August 3, 2019
2023		3.25	%		3.25	%		350			350			350		Effective Rate		Coupon Rate		$	350		$	350		$	350
2023		4.78	%		4.75	%		184			184			184		4.78	%	4.75	%		184			184			184
2025																9.50	%	9.50	%		600			—			—
2025		4.25	%		4.25	%		650			650			650		4.25	%	4.25	%		650			650			650
2029		7.36	%		7.25	%		42			42			42		7.36	%	7.25	%		42			42			42
2033		6.05	%		6.00	%		113			113			112		6.05	%	6.00	%		113			113			113
2037		6.89	%		6.88	%		101			101			101		6.89	%	6.88	%		101			101			101
2045		5.57	%		5.55	%		427			433			435		5.57	%	5.55	%		427			427			427
Outstanding long-term debt								1,867			1,873			2,287
Outstanding unsecured senior debt																					2,467			1,867			1,867
Unamortized debt discounts and deferred financing costs								(12	)		(12	)		(14	)						(17	)		(11	)		(12	)
Long-term debt							$	1,855		$	1,861		$	2,273
Unsecured senior debt																					2,450			1,856			1,855
Effective interest rate								4.74	%		4.74	%		4.76	%						5.90	%		4.74	%		4.74	%
Secured senior debt																					1,000			—			—
Total long-term debt																				$	3,450		$	1,856		$	1,855

Table of Contents

Our unsecured senior long-term debt is classified as Level 1, financial instruments with unadjusted, quoted prices listed on active market exchanges. The estimated fair value of our ~~long-term~~unsecured senior debt was $2.5 billion at August 1, 2020, $2.0 billion at February 1, 2020, and $1.9 billion at August 3, ~~2019, $1.8 billion at February 2, 2019, and $2.3 billion at August 4, 2018.~~2019.

~~On July 25, 2019,~~In March 2020, we ~~amended and extended~~fully drew down our ~~existing credit facility with various lenders which provides for a~~ $1.0 billion senior unsecured ~~five-year~~revolver. In April 2020, we replaced and upsized the unsecured credit facility with a $1.5 billion senior secured, asset based revolving credit facility ~~that will mature~~maturing in July 2024. ~~Among~~The revolver is secured by substantially all of our assets other ~~things, the agreement includes~~than real estate, and contains customary events of default and financial, affirmative, and negative covenants, including but not limited to, a ~~maximum leverage ratio~~springing financial covenant ~~(which is generally consistent with the~~related to our fixed charge coverage ratio ~~under our prior agreement)~~ and restrictions on indebtedness, liens, investments, asset dispositions, and ~~subsidiary indebtedness.~~restricted payments, including a restriction on dividends in 2020 if our outstanding borrowings under the credit facility exceed $1.0 billion. At August 1, 2020, $1.0 billion was outstanding on the credit facility bearing an effective interest rate of 3.41%. Outstanding borrowings under the credit facility bear interest at a variable rate based on LIBOR plus the applicable margin. NaN amounts were outstanding on the credit facility atin place as of February 1, 2020 or August 3, ~~2019, February 2, 2019,~~2019.

In April 2020, we issued $600 million of 9.50% notes with semi-annual interest payments beginning in November 2020. The notes include coupon rate step ups if our long-term debt is downgraded to below a BBB- credit rating by S&P Global Ratings or ~~August 4, 2018.~~

~~Table of Contents~~

~~KOHL’S CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~Year to date 2019, we have reduced our outstanding debt~~Baa3 by ~~$6 million~~Moody’s Investors Service, Inc. ~~through open market repurchases.~~

The notes mature in May 2025.

4. ~~Leases~~

~~Effective February 3, 2019 (the “adoption date”), we adopted ASC 842 Leases (the “new standard”).~~ The new standard requires lessees to recognize a liability for lease obligations and a corresponding right of use asset on the balance sheet. The guidance also requires disclosure of key information about leasing arrangements that is intended to give financial statement users the ability to assess the amount, timing, and potential uncertainty of cash flows related to leases. We adopted the new standard using a modified retrospective transition method and applied the transition provisions at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings. We did not restate prior period financial statements.

~~The new standard includes several transition practical expedients that were available to reduce the burden of implementing the standard.~~

•

~~We elected the package of practical expedients, which among other things, allowed us to carry forward our historical lease classifications.~~

•

~~We did not elect the hindsight practical expedient which would have allowed us to revisit key assumptions, such as lease term, that were made when we originally entered into the lease.~~

~~The following table summarizes changes in our Consolidated Balance Sheet upon adoption of the new standard:~~

(Dollars in Millions)

Assets

Property and equipment, net
$
(174
)
(a)
Operating leases

2,446

(b)
Other assets

(32
)
(c)
Total assets
$
2,240

Liabilities and Shareholders' Equity

Finance leases and financing obligations
$
(237
)
(a)
Operating leases

2,771

(b)
Accrued and other liabilities

(413
)
(c)
Deferred taxes

31

(d)
Shareholders' equity

88

(d)
Total liabilities and shareholders' equity
$
2,240

~~(a)~~

The reductions are primarily due to historical failed sale leaseback and build to suit arrangements where we were deemed owner for accounting purposes. In accordance with ASC 842 transition provisions, they became operating or finance leases.

~~(b)~~

~~The increases include land and other operating leases which were not previously recorded on our balance sheet or were previously recorded as financing obligations.~~

~~(c)~~

~~The reductions are primarily due to the reclassification of lease-related assets and liabilities such as straight-line rent and reserves for closed stores to operating lease assets and liabilities.~~

~~(d)~~

The cumulative effect of lease adjustments, net of the deferred tax impact, was recorded as an adjustment to retained earnings. In addition, retained earnings include a $26 million lease impairment charge.

~~Table of Contents~~

~~KOHL’S CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~These adjustments represent non-cash activities for Statement of Cash Flow purposes.~~

Adoption of the new standard is not expected to have a material impact on our net income prospectively. We expect immaterial increases in Selling, general and administrative expenses to be more than offset by decreases in Depreciation and amortization and Interest expense. Substantially all of the expected income statement changes are due to the reversal of accounting for build to suit arrangements where construction is complete which were accounted for as operating or finance leases in accordance with the transition provisions of ASC 842.

~~Finance and Operating Leases~~

We lease certain property and equipment used in our operations. Some of our store leases include additional rental payments based on a percentage of sales over contractual levels or which are adjusted periodically for inflation. Our typical store lease has an initial term of 20 to 25 years and four to eight five-year renewal options.

Lease assets represent our right to use an underlying asset for the lease term. Lease assets are recognized at commencement date based on the value of the lease liability and are adjusted for any lease payments made to the lessor at or before commencement date, minus any lease incentives received and any initial direct costs incurred by the lessee.

Lease liabilities represent our contractual obligation to make lease payments. At the commencement date, the lease liabilities equal the present value of minimum lease payments over the lease term. As the implicit interest rate is not readily identifiable in our leases, we estimate our collateralized borrowing rate to calculate the present value of lease payments. For leases that commenced prior to the adoption date, we used the February 3, 2019 rate for a term consistent with the original lease term for operating leases and the rate on the lease commencement date for finance leases.

For leases with terms of 12 months or less, we elected the practical expedient to exclude them from the balance sheet and recognize expense on a straight-line basis over the lease term. For leases beginning, modified, or reassessed in 2019 and later, we elected the practical expedient to combine lease and non-lease components.

~~Table of Contents~~

~~KOHL’S CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~The following tables summarize our operating and finance leases and where they are presented in our Consolidated Financial Statements:~~

Consolidated Balance Sheet
August 3,
2019
(Dollars in Millions)
Classification
Assets

Operating leases
Operating leases
$
2,428

Finance leases
Property and equipment, net

544

Total operating and finance leases

2,972

Liabilities

Current

Operating leases
Current portion of operating leases

158

Finance leases
Current portion of finance leases and financing obligations

72

Noncurrent

Operating leases
Operating leases

2,647

Finance leases
Finance leases and financing obligations

764

Total operating and finance leases

$
3,641

Consolidated Statement of Income
Three Months Ended

Six Months
Ended

(Dollars in Millions)
Classification
August 3, 2019

August 3, 2019

Operating leases
Selling, general, and administrative
$
79

$
157

Finance leases

Amortization of leased assets
Depreciation and amortization

18

35

Interest on lease liabilities
Interest expense, net

24

48

Total operating and finance leases

$
121

$
240

Consolidated Statement of Cash Flows
Six Months
Ended

(Dollars in Millions)
Classification
August 3, 2019

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases
$
169

Operating cash flows from finance leases

48

Financing cash flows from finance leases

37

~~Table of Contents~~

~~KOHL’S CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~The following table summarizes future lease payments by fiscal year:~~

August 3, 2019

(Dollars in Millions)
Operating Leases

Finance Leases

Total

2019
$
145

$
82

$
227

2020

309

168

477

2021

301

148

449

2022

287

131

418

2023

272

111

383

After 2023

3,603

1,686

5,289

Total lease payments

4,917

2,326

7,243

Amount representing interest

(2,112
)

(1,490
)

(3,602
)
Lease liabilities
$
2,805

$
836

$
3,641

Total lease payments include $2.9 billion related to options to extend operating lease terms that are reasonably certain of being exercised and $1.4 billion related to options to extend finance lease terms that are reasonably certain of being exercised.

~~The following table summarizes weighted-average remaining lease term and discount rates:~~

	~~August 3, 2019~~
~~Weighted-average remaining term (years)~~
~~Operating leases~~		20
~~Finance leases~~		17
~~Weighted-average discount rate~~
~~Operating leases~~		6	%
~~Finance leases~~		12	%

~~Financing Obligations~~

~~Historical failed sale leasebacks that did not qualify for sale leaseback accounting upon adoption of ASC 842 continue to be accounted for as financing obligations.~~

~~The following tables summarize our financing obligations and where they are presented in our Consolidated Financial Statements:~~

Consolidated Balance Sheet

(Dollars in Millions)
Classification
August 3, 2019

Assets

Financing obligations
Property and equipment, net
$
81

Liabilities

Current
Current portion of finance leases and financing obligations

47

Noncurrent
Finance leases and financing obligations

506

Total financing obligations

$
553

~~Table of Contents~~

~~KOHL’S CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Consolidated Statement of Income
Three Month Ended

Six Months Ended

(Dollars in Millions)
Classification
August 3, 2019

August 3, 2019

Amortization of financing obligation assets
Depreciation and amortization
$
3

$
6

Interest on financing obligations
Interest expense, net

9

19

Total financing obligations

$
12

$
25

Consolidated Statement of Cash Flows
Six Months
Ended
August 3, 2019
(Dollars in Millions)
Classification
Cash paid for amounts included in the measurement of financing obligations

Operating cash flows from financing obligations
$
19

Financing cash flows from financing obligations

23

Proceeds from financing obligations

13

~~The following table summarizes future financing obligation payments by fiscal year:~~

(Dollars in Millions)
August 3, 2019
2019
$
29

2020

72

2021

72

2022

68

2023

66

After 2023

249

Total financing obligations payments

556

Non-cash gain on future sale of property

238

Amount representing interest

(241
)
Financing obligation liability
$
553

~~Thefollowing table summarizes the weighted-average remaining term and discount rate for financing obligations:~~

	~~August 3, 2019~~
~~Weighted-average remaining term (years)~~		9
~~Weighted-average discount rate~~		7	%

~~Table of Contents~~

~~KOHL’S CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

5. Stock-Based Awards

The following table summarizes our stock-based awards activity for the six months ended August ~~3, 2019:~~1, 2020:

	Nonvested Stock Awards					Performance Share Units					Stock Options					Stock Warrants				Stock Options					Nonvested Stock Awards					Performance Share Units
(Shares and Units in Thousands)	Shares			Weighted Average Grant Date Fair Value		Units			Weighted Average Grant Date Fair Value		Shares			Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Grant Date Fair Value		Units			Weighted Average Grant Date Fair Value
Balance - February 2, 2019		2,601		$	51.90		1,046		$	52.08		136		$	51.48		-	$	-
Balance - February 1, 2020																					87		$	51.78		2,312		$	56.24		1,274		$	61.55
Granted		717			66.87		224			73.77		-			-		1,747		69.68		—			—		2,467			20.09		735			21.12
Exercised/vested		(753	)		52.59		(336	)		46.87		(39	)		51.10		-		-		—			—		(868	)		54.29		(826	)		42.72
Forfeited/expired		(113	)		57.49		(57	)		55.35		-			-		-		-		(33	)		51.07		(202	)		48.40		(25	)		73.55
Balance - August 3, 2019		2,452		$	55.79		877		$	59.40		97		$	51.64		1,747	$	69.68
Balance - August 1, 2020																					54		$	52.22		3,709		$	33.06		1,158		$	49.03

~~Effective April 18,~~In 2019, ~~in connection with our entry into a commercial agreement with Amazon.com Services, Inc. (“Amazon”),~~ we ~~issued~~granted 1,747,441 of stock warrants ~~to an affiliate~~. The total vested and unvested warrants as of Amazon, to purchase up to 1,747,441 shares of our common stock at an exercise price of $69.68, subject to customary anti-dilution provisions. The fair value was estimated to be $17.52 per warrant using a binomial lattice method. The warrants vest in 5 equal annual installments beginning on January 15,August 1, 2020 were 349,489 and ~~expire on April 18, 2026. Unvested warrants will not vest if the commercial agreement is terminated, not renewed, or if no substitute written returns arrangement is entered into between the parties.~~1,397,952, respectively.

6.5. Contingencies

We are subject to certain legal proceedings and claims arising out of the conduct of our business. In the opinion of management, the outcome of these proceedings and litigation will not have a material adverse impact on our ~~consolidated financial statements.~~Consolidated Financial Statements.

7.6. Net Income (Loss) Per Share

Basic ~~net~~Net income (loss) per share is ~~net~~Net income (loss) divided by the average number of common shares outstanding during the period. Diluted ~~net~~Net income (loss) per share includes incremental shares assumed for share-based awards and stock warrants. Potentially dilutive shares include stock options, unvested restricted stock units and awards, and warrants outstanding during the period, using the treasury stock method. Potentially dilutive shares are excluded from the computations of diluted earnings per share (“EPS”) if their effect would be anti-dilutive.

Table of Contents

The information required to compute basic and diluted ~~net~~Net income (loss) per share is as follows:

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
(Dollar and Shares in Millions, Except per Share Data)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		August 1, 2020		August 3, 2019		August 1, 2020			August 3, 2019
Numerator—Net income	$	241	$	292	$	303	$	368
Numerator—Net income (loss)									$	47	$	241	$	(494	)	$	303
Denominator—Weighted-average shares:
Basic		159		165		160		165		154		159		154			160
Dilutive impact		—		1		1		1		1		—		—			1
Diluted		159		166		161		166		155		159		154			161
Antidilutive shares		3		—		1		—
Net income per share:
Net income (loss) per share:
Basic	$	1.52	$	1.77	$	1.90	$	2.23	$	0.31	$	1.52	$	(3.21	)	$	1.90
Diluted	$	1.51	$	1.76	$	1.89	$	2.21	$	0.30	$	1.51	$	(3.21	)	$	1.89

The following potential shares of common stock were excluded from the diluted Net income (loss) per share calculation because their effect would have been anti-dilutive:

Three Months Ended

Six Months Ended

(Shares in Millions)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Anti-dilutive shares

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

For purposes of the following discussion, unless noted, all references to "the quarter” and “the second ~~quarter"~~quarter” are for the three fiscal months (13 weeks) ended August ~~3, 2019~~1, 2020 or August ~~4, 2018.~~ 3, 2019. References to “year to date” and “first half” are for the six fiscal months (26 weeks) ended August ~~3, 2019~~1, 2020 or August ~~4, 2018.~~3, 2019. References to “the first quarter” are for the ~~following~~ three fiscal months (13 weeks) ended May ~~4, 2019~~2, 2020 or May ~~5, 2018.~~4, 2019.

This Form 10-Q contains "forward-looking statements" made within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," “anticipates,” “plans,” "may," "intends," "will," "should," ~~“expects”~~“expects,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements may include comments about our future sales or financial performance and our plans, performance, and other objectives, expectations, or intentions, such as statements regarding our liquidity, debt service requirements, planned capital expenditures, future store initiatives, and adequacy of capital resources and ~~reserves.~~reserves and the competitive environment, including statements relating to the ongoing implications of COVID-19. Forward-looking statements are based on our management’s ~~then current~~then-current views and assumptions and, as a result, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Any such forward-looking statements are qualified by the important risk factors described in Part I Item 1A of our ~~2018~~2019 Form 10-K, Part II Item 1A of our first quarter 2020 Form 10-Q, or disclosed from time to time in our filings with the SEC, that could cause actual results to differ materially from those predicted by the forward-looking statements. Forward-looking statements relate to the date initially made and we undertake no obligation to update them.

Executive Summary

As of August ~~3, 2019,~~1, 2020, we operated ~~1,155~~1,163 Kohl's ~~Kohl's department~~ stores, a website (www.Kohls.com), and 12FILA outlets. Our Kohl's stores and website sell moderately-priced proprietary and national brand apparel, footwear, accessories, beauty, and home products. Our Kohl's stores generally carry a consistent merchandise assortment with some differences attributable to local preferences. Our website includes merchandise which is available in our stores, as well as merchandise that is available only online.

Key financial results for the ~~second~~ quarter ~~of 2019 include:~~included:

•

~~2.9%~~Strengthened financial position during the quarter, ending with $2.4 billion in cash

•

Disciplined management of expenses and inventory resulted in positive operating cash flow

•

22.9% decrease in ~~comparable~~net sales

•

72569 basis point decrease in gross margin as a percent of net sales

•

~~0.2%~~17.3% decrease in SG&A expenses

•

~~14% decrease in~~$0.30 diluted earnings per share

•

~~12% decrease in diluted earnings~~($0.25) loss per share ~~excluding non-recurring charges~~on a non-GAAP basis

~~We adopted~~Recent Developments

As discussed in our 2019 Form 10-K, the ~~new lease accounting standard~~World Health Organization declared the outbreak of COVID-19 as a pandemic in March 2020. Subsequently, COVID-19 has continued to spread throughout the United States. As a result, the President of the United States declared a national emergency. Federal, state, and local governing bodies mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus. The response to the COVID-19 pandemic has negatively affected the global economy, disrupted global supply chains, and created significant disruption in the financial and retail markets, including a decrease in consumer demand for our merchandise.

Table of Contents

The COVID-19 pandemic has had, and will likely continue to have, significant adverse effects on our business including, but not limited to the following:

•

On March 20, 2020, the Company furloughed 85,000 store and distribution center associates, as well as some corporate office associates, as a result of temporarily closing all of our stores which limited our business to the digital channel. As of August 1, 2020, the majority of the associates who were furloughed have returned to work.

•

Starting on May 4, 2020, we began reopening stores in locations where permitted. As of August 1, 2020, we have reopened all of our stores.

•

The Company experienced a significant decline in sales demand, and expects to continue to experience volatility in demand for its merchandise. We also experienced pressure in gross margin, and continue to expect pressures on gross margin as we expect digital penetration to remain elevated and the potential for a heightened promotional environment.

•

Additionally, social distancing measures or changes in consumer spending behaviors due to COVID-19 may continue to impact store traffic which could result in a loss of sales and profit. As our stores reopened, we have implemented numerous social distancing and safety measures. These include providing personal protective equipment to our associates, implementing a more rigorous cleaning process, including enhanced cleaning of high touch surfaces throughout the day, installing protective barriers at all registers, and requiring associates and customers to wear face coverings while inside our stores. To encourage social distancing, we installed social distancing signage and markers throughout the store, closed our fitting rooms, widened aisles by removing in-aisle fixtures, relocated Amazon returns to a separate area of the store, and are limiting occupancy in stores as appropriate. We have implemented a new process for handling merchandise returns, reduced store operating hours, and are providing dedicated shopping hours for at-risk individuals.

The chart below details costs that we believe are directly attributable to COVID-19:

(Dollars In Millions)		Three Months Ended		Six Months Ended
Decription	Classification	August 1, 2020		August 1, 2020
Inventory write-downs	Cost of merchandise sold	$	—	$	187
Net compensation and benefits	Selling, general, and administrative		6		40
Other costs	Selling, general, and administrative		21		27
Asset write-offs	Impairments, store closing, and other costs		—		53
Total		$	27	$	307

In response to COVID-19 we have taken the following actions to preserve financial liquidity and flexibility during the first ~~quarter~~half of ~~2019~~2020:

•

Managed inventory receipts meaningfully lower,

•

Significantly reduced expenses across all areas of the business including marketing, technology, operations, and payroll,

•

Decreased capital expenditures 55% year to date 2020,

•

Suspended share repurchase program,

•

Suspended regular quarterly cash dividend beginning in the second quarter of 2020,

•

Replaced and upsized the unsecured $1.0 billion revolver with a $1.5 billion secured facility, of which $1.0 billion was drawn as of quarter-end,

•

Issued $600 million of 9.5% notes due 2025, and

•

Completed a sale leaseback for our San Bernardino E-commerce fulfillment and distribution center which generated net proceeds of $193 million after fees and also resulted in a $127 million gain.

Table of Contents

We cannot estimate with certainty the length or severity of this pandemic, or the extent to which the disruption may materially impact our Consolidated Financial Statements. However, we do expect the impact to continue to have a material adverse effect on our business, financial condition, and ~~prior periods were not restated.~~results of operations for the full year 2020.

See "Results of Operations" and "Liquidity and Capital Resources" for additional details about our financial results.

Results of Operations

Total Revenue

	Three Months Ended							Six Months Ended							Three Months Ended							Six Months Ended
(Dollars in Millions)	August 3, 2019		August 4, 2018		Change			August 3, 2019		August 4, 2018		Change			August 1, 2020		August 3, 2019		Change			August 1, 2020		August 3, 2019		Change
Net sales	$	4,169	$	4,310	$	(141	)	$	7,990	$	8,263	$	(273	)	$	3,213	$	4,169	$	(956	)	$	5,373	$	7,990	$	(2,617	)
Other revenue		261		260		1			527		515		12			194		261		(67	)		462		527		(65	)
Total revenue	$	4,430	$	4,570	$	(140	)	$	8,517	$	8,778	$	(261	)	$	3,407	$	4,430	$	(1,023	)	$	5,835	$	8,517	$	(2,682	)

~~Table of Contents~~

~~Comparable~~Net sales ~~decreased 2.9%~~declined 22.9% for the second quarter of 2020 and ~~3.2%~~32.8% for year to ~~date.~~ date 2020.

•

The ~~decreases~~decrease in ~~comparable~~net sales reflects the temporary nationwide closure of our stores on March 20, 2020 due to COVID-19 which resulted in a decrease in transactions. All of our stores reopened during the second quarter ~~and year to date 2019 reflect decreases in transactions and average transaction value.~~

•

~~From a line~~ of business perspective, Accessories, Children’s, and Men’s outperformed the Company average for the second quarter and year to date 2019, and Footwear, Home, and Women’s performed below the Company average in both the second quarter and year to date 2019.2020.

•

~~Geographically, the strongest regions were the Midwest and Northeast for the second quarter and Midwest and Mid-Atlantic year to date 2019.~~

•

Digital sales increased 58% for the second quarter of 2020 and 41% for year to date 2020. Digital penetration represented 41% of net sales for the second quarter of 2020 and 43% of net sales for year to date 2020.

•

All lines of business reported increases in ~~the mid-teens~~digital sales for the second quarter and ~~low double digits~~ year to date ~~2019.~~2020 with Home and Children’s outperforming the Company average.

•

Active continues to be a key strategic initiative and outperformed the rest of the Company for the second quarter and year to date 2020.

Comparable sales is a measure that highlights the performance of our stores and digital channel by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales ~~include~~includes all store and digital sales, except sales from stores open less than 12 months, stores that have been closed, and stores where square footage has changed by more than 10%. We measure the change in digital sales by including all sales initiated online or through mobile applications, including omnichannel transactions which are fulfilled through our stores.

As our stores were closed for a period during the second quarter of 2020, we have not included a discussion of comparable sales as we do not believe it is a meaningful metric over this period of time.

We measure digital penetration as digital sales over net sales. These amounts do not take into consideration fulfillment node, digital returns processed in stores, and coupon behaviors.

Comparable sales and digital penetration measures vary across the retail industry. As a result, our comparable sales calculation and digital penetration are non-GAAP measures that may not be consistent with the similarly titled measures reported by other companies.

The decreases in Other revenue ~~increased $1 million to $261~~of $67 million for the second quarter of ~~2019~~2020 and ~~$12 million to $527~~$65 million for ~~the 6 months ended August 3, 2019 compared with the same periods in 2018. The increases~~year to date 2020 were driven by ~~higher~~lower credit ~~revenue.~~revenue due to lower accounts receivable balances associated with lower sales.

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Cost of Merchandise Sold and Gross Margin

	Three Months Ended										Six Months Ended										Three Months Ended										Six Months Ended
(Dollars in Millions)	August 3, 2019			August 4, 2018			Change				August 3, 2019			August 4, 2018			Change				August 1, 2020			August 3, 2019			Change				August 1, 2020			August 3, 2019			Change
Net sales	$	4,169		$	4,310		$	(141	)		$	7,990		$	8,263		$	(273	)		$	3,213		$	4,169		$	(956	)		$	5,373		$	7,990		$	(2,617	)
Cost of merchandise sold		2,550			2,605			(55	)			4,965			5,101			(136	)			2,149			2,550			(401	)			3,936			4,965			(1,029	)
Gross margin	$	1,619		$	1,705		$	(86	)		$	3,025		$	3,162		$	(137	)		$	1,064		$	1,619		$	(555	)		$	1,437		$	3,025		$	(1,588	)
Gross margin as a percent of net sales		38.8	%		39.5	%		(72	)	bp		37.9	%		38.3	%		(41	)	bp		33.1	%		38.8	%		(569	)	bps		26.8	%		37.9	%		(1,109	)	bps

Cost of merchandise sold includes the total cost of products sold, including product development costs, net of vendor payments other than reimbursement of specific, incremental, and identifiable costs; inventory shrink; markdowns; freight expenses associated with moving merchandise from our vendors to our distribution centers; shipping expenses for digital sales; and terms cash discount. Our Cost of merchandise sold may not be comparable with that of other retailers because we include distribution center and buying costs in Selling, general, and administrative expenses while other retailers may include these expenses in Cost of merchandise sold.

~~The decreases~~In the second quarter, the decrease in gross margin as a percent of net sales ~~were~~was driven by approximately 295 bps due to mix of business and increased promotional activity as well as approximately 275 bps due to higher shipping costs due to ~~increases in~~increased digital sales ~~penetration~~penetration. Year to date, the decrease was driven by approximately 275 bps due to the mix of business and increased promotional activity, approximately 265 bps due to higher shipping costs, as well as approximately 550 bps due to the inventory actions taken in the ~~second quarter and year to date 2019 and due to pricing and promotions implemented in the second~~first quarter of ~~2019. The year-to-date period also reflects an unfavorable mix shift between regular and clearance sales.~~2020.

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Selling, General, and Administrative Expenses ("SG&A")

	Three Months Ended										Six Months Ended										Three Months Ended										Six Months Ended
(Dollars in Millions)	August 3, 2019			August 4, 2018			Change				August 3, 2019			August 4, 2018			Change				August 1, 2020			August 3, 2019			Change				August 1, 2020			August 3, 2019			Change
SG&A	$	1,269		$	1,272		$	(3	)		$	2,544		$	2,532		$	12			$	1,050		$	1,269		$	(219	)		$	2,116		$	2,544		$	(428	)
As a percent of total revenue		28.6	%		27.8	%		(81	)	bp		29.9	%		28.8	%		(102	)	bp		30.8	%		28.6	%		217		bps		36.3	%		29.9	%		639		bps

SG&A expenses include compensation and benefit costs (including stores, headquarters, buying, and distribution centers); occupancy and operating costs of our retail, distribution, and corporate facilities; freight expenses associated with moving merchandise from our distribution centers to our retail stores and among distribution and retail facilities; marketing expenses, offset by vendor payments for reimbursement of specific, incremental, and identifiable costs; expenses related to our credit card operations; and other administrative revenues and expenses. We do not include depreciation and amortization in SG&A. The classification of these expenses varies across the retail industry.

Many of our expenses, including store payroll and distribution costs, are variable in nature. These costs generally increase as sales increase and decrease as sales decrease. We measure both the change in these variable expenses and the expense as a percent of sales. If the expense as a percent of sales decreased from the prior year, the expense "leveraged". If the expense as a percent of sales increased over the prior year, the expense "deleveraged".

The following table summarizes the ~~increases and (decreases)~~decreases in SG&A by expense type:

	Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
(Dollars In Millions)	August 3, 2019			August 3, 2019			August 1, 2020
Credit expenses							$	(17	)	$	(38	)
Corporate and other								(23	)		(83	)
Marketing								(72	)		(123	)
Store expenses	$	12		$	17			(107	)		(184	)
Marketing		5			20
Credit expenses		(1	)		(5	)
Technology		(3	)		1
Corporate and other		(16	)		(21	)
Total (decrease) increase	$	(3	)	$	12
Total decrease							$	(219	)	$	(428	)

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SG&A expenses decreased ~~0.2%~~$219 million, or 17.3%, to $1.0 billion in the second quarter of ~~2019, however,~~2020. As a percentage of revenue, SG&A deleveraged ~~81 basis points compared to the second quarter of 2018.~~by 217 bps. Year to date SG&A ~~increased 0.5% and~~expenses decreased $428 million, or 16.8%. As a percentage of revenue, SG&A deleveraged ~~102 basis points.~~by 639 bps. The ~~changes were~~decrease in SG&A was primarily driven by ~~an increase~~a reduction in store expenses ~~which reflect higher rent~~due to temporary store closures nationwide, lower marketing expense due to reductions in most working media channels, and lower credit expenses due to lower sales and payroll in the second quarter and year to date ~~2019,~~2020. Partially offsetting the decrease in SG&A expenses in the second quarter and year to date 2020 were expenses related to the COVID-19 pandemic which primarily consisted of incremental employee compensation and benefits as well as cleaning and protective supplies. Included in these expenses was the retention credit benefit we were eligible for under The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act, enacted on March 27, 2020, provides eligible employers with an employee retention credit equal to 50% of qualified wages paid to employees who were not providing services to the Company due to the new lease accounting standard. In addition, marketing expense increases were driven by continued investments to target market share gains over the long-term. Corporate and other expenses decreased due to lower general corporate costs in 2019 and expenses associated with leadership changes in 2018.impact of COVID-19.

Other Expenses

	Three Months Ended							Six Months Ended							Three Months Ended								Six Months Ended
(Dollars in Millions)	August 3, 2019		August 4, 2018		Change			August 3, 2019		August 4, 2018		Change			August 1, 2020			August 3, 2019		Change			August 1, 2020			August 3, 2019		Change
Depreciation and amortization	$	228	$	241	$	(13	)	$	458	$	483	$	(25	)	$	219		$	228	$	(9	)	$	446		$	458	$	(12	)
Interest expense, net		53		65		(12	)		105		135		(30	)		78			53		25			136			105		31
Impairments, store closing and other costs		7		—		7			56		—		56
Loss on extinguishment of debt		—		—		—			—		42		(42	)
Impairments, store closing, and other costs																(2	)		7		(9	)		64			56		8
(Gain) on Sale of Real Estate																(127	)		—		(127	)		(127	)		—		(127	)

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Depreciation and amortization decreases were driven by the maturity of our store portfolio, as well as ~~the adoption of the new lease accounting standard.~~

~~Interest expense, net decreased in the second quarter and year to date 2019 due primarily to the benefits of debt reductions in 2018 and adoption of the new lease accounting standard.~~capital reductions.

In the second quarter of 2020 we recognized a gain of $2 million in Impairments, store closing, and other costs which was the result of a gain due to a lease amendment partially offset by an asset impairment on assets held for sale. Additionally, we recognized a gain of $127 million from the sale leaseback transaction of our San Bernardino E-commerce fulfillment and distribution centers. In the first quarter of 2020, we incurred $51 million in asset write-offs, $2 million related to capital reductions and strategy changes due to COVID-19, and $13 million in brand exit costs. In the second quarter of 2019, we incurred $7 million in costs related to the closure of our four Off-Aisle clearance centers, ~~and~~ a voluntary role reduction program, ~~conducted during the period.~~and a gain on lease termination. In the first quarter of 2019, we incurred $49 million in lease ~~asset~~ impairment charges related to the closure of four ~~Kohl’s~~ stores.

~~In the first quarter of 2018, we recognized a $42 million loss on extinguishment of debt related to our $500 million cash tender offer.~~

~~Income Taxes~~

Three Months Ended
Six Months Ended
(Dollars in Millions)
August 3,
2019
August 4,
2018
Change
August 3, 2019
August 4, 2018
Change
Provision for income taxes
$
82

$
95

$
(13
)
$
86

$
117

$
(31
)
Effective tax rate

25.3
%

24.5
%

22.1
%

24.2
%

~~The decreases in the provision for income taxes were driven by lower taxable income~~Net interest expense increased in the second quarter and year to date ~~2019. Year~~2020 as a result of higher interest expense due to the outstanding balance on the revolving credit facility and the $600 million of notes issued in April 2020.

Income Taxes

	Three Months Ended									Six Months Ended
(Dollars in Millions)	August 1, 2020			August 3, 2019			Change			August 1, 2020			August 3, 2019			Change
(Benefit) provision for income taxes	$	(7	)	$	82		$	(89	)	$	(242	)	$	86		$	(328	)
Effective tax rate		(17.9	%)		25.3	%					32.9	%		22.1	%

The second quarter and year to date ~~2019,~~2020 resulted in a benefit for income taxes driven by a year to date 2020 net loss due to lower sales that resulted from the ~~provision also reflects a lower~~temporary closure of our stores. The second quarter change in our effective tax rate was primarily due to athe benefit from the net loss carryback which offset income from taxable years where the federal statutory tax rate was 35% versus the current federal statutory tax rate of 21%. In addition, the Company recognized favorable ~~state audit settlement~~items in the first half of 2020 that are more beneficial to the rate than those recognized in the first half of 2019, resulting in a negative rate for the second quarter and an increase in the rate for year to date 2020.

Table of ~~2019.~~Contents

Income ~~before~~(Loss) Before Income Taxes, Net Income (Loss), and Earnings (Loss) Per Diluted Share

2019

2018

(Dollars in Millions, Except per Share Data)
Income
before
Income Taxes

Net
Income

Earnings
Per Diluted
Share

Income
before
Income Taxes

Net
Income

Earnings
Per Diluted
Share

Three Months Ended:

GAAP
$
323

$
241

$
1.51

$
387

$
292

$
1.76

Impairments, store closings and other costs

7

6

0.04

—

—

—

Loss on extinguishment of debt

—

—

—

—

—

—

Adjusted (Non-GAAP)
$
330

$
247

$
1.55

$
387

$
292

$
1.76

Six Months Ended:

GAAP
$
389

$
303

$
1.89

$
485

$
368

$
2.21

Impairments, store closings and other costs

56

42

0.26

—

—

—

Loss on extinguishment of debt

—

—

—

42

31

0.19

Adjusted (Non-GAAP)
$
445

$
345

$
2.15

$
527

$
399

$
2.40

	August 1, 2020									August 3, 2019
(Dollars in Millions, Except per Share Data)	Income (Loss) before Income Taxes			Net Income (Loss)			Earnings (Loss) Per Diluted Share			Income before Income Taxes		Net Income			Earnings Per Diluted Share
Three Months Ended:
GAAP⁽¹⁾	$	40		$	47		$	0.30		$	323	$	241		$	1.51
Impairments, store closing, and other costs		(2	)		(2	)		(0.01	)		7		7			0.05
(Gain) on Sale of Real Estate		(127	)		(127	)		(0.82	)		—		—			—
Income tax impact of items noted above		—			43			0.28			—		(1	)		(0.01	)
Adjusted (non-GAAP)⁽²⁾	$	(89	)	$	(39	)	$	(0.25	)	$	330	$	247		$	1.55
Six Months Ended:
GAAP	$	(736	)	$	(494	)	$	(3.21	)	$	389	$	303		$	1.89
Impairments, store closing, and other costs		64			64			0.41			56		56			0.35
(Gain) on Sale of Real Estate		(127	)		(127	)		(0.82	)		—		—			—
Income tax impact of items noted above		—			23			0.15			—		(14	)		(0.09	)
Adjusted (non-GAAP)	$	(799	)	$	(534	)	$	(3.47	)	$	445	$	345		$	2.15

(1)	Weighted average diluted shares outstanding for purpose of calculating diluted earnings per share for the three months ended August 1, 2020 was 155 million, which includes the dilutive effect of share-based awards as determined under the treasury stock method.

(2)	Weighted average diluted shares outstanding for purposes of calculating diluted adjusted (loss) per share for the three months ended August 1, 2020 was 154 million as the effect of including dilutive shares would be antidilutive.

We believe the adjusted results in the table above are useful because they provide enhanced visibility into our results for the periods excluding ~~non-recurring expenses.~~the impact of certain items such as those included in the table above. However, these non-GAAP financial measures are not intended to replace the comparable GAAP measures.

Seasonality and Inflation

Our business, like that of ~~most~~other retailers, is subject to seasonal ~~influences, with the majority of sales~~influences. Sales and income are typically ~~realized~~higher during ~~the second half of each fiscal year, which includes~~ the back-to-school and holiday seasons. ~~Approximately 15% of annual sales typically occur during the back-to-school season and 30% during the~~

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~~holiday season.~~ Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.Due to the impact of COVID-19, typical sales patterns may not occur this year.

WeIn addition to COVID-19, we expect that our operations will continue to be influenced by general economic conditions, including food, fuel, and energy prices, higher ~~wages~~unemployment, and by costs to source our merchandise, including tariffs. There can be no assurances that such factors will not impact our business in the future.

Liquidity and Capital Resources

Financial liquidity and flexibility are a key focus of our response to COVID-19. As previously mentioned, we took various actions during the first half of 2020 to preserve our financial liquidity and flexibility.

The following table presents our primary uses and sources of ~~cash.~~cash:

Cash Uses

Cash Sources

•Operational needs, including salaries, rent, taxes, and other costs of running our business

•Capital expenditures

•Inventory

•Share repurchases

•Dividend payments

•Debt reduction

•Cash flow from operations

•Short-term trade credit, in the form of extended payment terms

•Line of credit under our revolving credit facility

•Issuance of debt

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Our working capital and inventory levels typically build throughout the fall, peaking during the November and December holiday selling season. Due to COVID-19, typical working capital and inventory patterns may not recur this fiscal year.

	Six Months Ended									Six Months Ended
(Dollars in Millions)	August 3, 2019			August 4, 2018			Change			August 1, 2020			August 3, 2019			Change
Net cash provided by (used in):
Operating activities	$	676		$	1,047		$	(371	)	$	304		$	676		$	(372	)
Investing activities		(439	)		(306	)		(133	)		(3	)		(439	)		436
Financing activities		(546	)		(983	)		437			1,404			(546	)		1,950

Operating Activities

Operating activities generated ~~$676~~$304 million of cash in the first half of ~~2019~~2020 compared to ~~$1,047~~$676 million in the first half of ~~2018.~~ 2019.The decrease was primarily due to ~~increased inventory purchases and changes in operating liabilities.~~decreased sales resulting from temporary nationwide store closures due to COVID-19.

Investing Activities

Investing activities used cash of $3 million in the first half of 2020 and $439 million in the first half of ~~2019 and $306 million~~2019.The decrease was due to reductions in capital expenditures as a part of our response to COVID-19 as well as the proceeds from the sale of real estate.

Financing Activities

Financing activities generated cash of $1.4 billion in the first half of ~~2018. The increase was primarily due~~2020 compared to ~~investments in our E-commerce fulfillment centers.~~

~~Financing Activities~~

~~Financing activities used cash of~~ $546 million cash used for financing activities in the first half of ~~2019~~2019.

In March 2020, we fully drew down our $1.0 billion senior unsecured revolver. In April 2020, we replaced and ~~$983~~upsized the unsecured credit facility with a $1.5 billion senior secured, asset based revolving credit facility maturing in July 2024. At August 1, 2020, $1.0 billion was outstanding on the credit facility bearing an effective interest rate of 3.41%.

In April 2020, we issued $600 million of 9.50% notes with semi-annual interest payments beginning in November 2020. The notes mature in May 2025. We used part of the net proceeds from this offering to repay $500 million of the borrowings under our senior secured, asset based revolving credit facility with the remainder for general corporate purposes.

As a result of the suspension of our share repurchase program in response to COVID-19, treasury stock purchases in the first half of ~~2018.~~

~~We paid cash for treasury stock purchases of~~2020 were $8 million compared to $254 million in the first half of ~~2019 and $165 million in the first half of 2018.~~2019. Share repurchases are discretionary in nature. The timing and amount of repurchases are based upon available cash balances, our stock price, and other factors.

~~We paid cash dividends~~Cash dividend payments were $108 million ($0.704 per share) in the first half of 2020 and $214 million ($1.34 per share) in the first half of ~~2019~~2019. In response to COVID-19, the dividend program was suspended in April 2020, effective the beginning of the second quarter of 2020. The Company remains committed to paying a dividend once the uncertain and ~~$202 million ($1.22 per share) in the first half of 2018. On August 13, 2019, our Board of Directors declared a quarterly cash dividend on~~

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~~our common stock of $0.67 per share. The dividend is payable September 25, 2019 to shareholders of record at the close of business on September 11, 2019.~~

We used cash to repurchase $6 million of debt on the open market in the first half of 2019 and to repurchase $528 million of debt pursuant to a tender offer and on the open market in the first half of 2018. We may again seek to retire or purchase our outstanding debt through open market cash purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing marketvolatile conditions ~~our liquidity requirements, contractual restrictions and other factors.~~

On July 25, 2019, we amended and extended our existing credit facility with various lenders which provides for a $1.0 billion senior unsecured five-year revolving credit facility that will mature in July 2024. Among other things, the agreement includes a maximum leverage ratio financial covenant (which is generally consistent with the ratio under our prior agreement) and restrictions on liens and subsidiary indebtedness. No amounts were outstanding on the credit facility at August 3, 2019, February 2, 2019, or August 4, 2018.

caused by COVID-19 have stabilized.

As of August ~~3, 2019,~~1, 2020, our credit ratings were as follows:

Moody’s

Standard &

Poor’s

Fitch

Long-term debt

Baa2

~~BBB~~BBB-

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Key Financial Ratios

Key financial ratios that provide certain measures of our liquidity are as follows:

(Dollars in Millions)	August 3, 2019		August 4, 2018		August 1, 2020		August 3, 2019
Working capital	$	1,838	$	2,272	$	3,122	$	1,838
Current ratio		1.65		1.82		2.22		1.65

The ~~decreases~~increase in our working capital and current ratio are primarily due to ~~lower~~higher cash balances as a result of debt ~~reductions, share repurchases and dividends, as well as the addition of operating leases to current liabilities due to adoption of the new lease accounting standard.~~ issuances.

Debt Covenant Compliance

Our senior secured, asset based revolving credit facility contains customary events of default and financial, affirmative and negative covenants, including but not limited to, a springing financial covenant relating to our fixed charge coverage ratio and restrictions on indebtedness, liens, investments, asset dispositions, and restricted payments, including a restriction on dividends in 2020 if our outstanding borrowings under the credit facility exceed $1.0 billion. These covenants vary from those presented in our Annual Report on Form 10-K. As of August ~~3, 2019,~~1, 2020, we were in compliance with all ~~debt~~ covenants and expect to remain in compliance during the remainder of fiscal ~~2019.~~ 2020.

Contractual Obligations

~~Other than operating leases~~During the first half of 2020, we issued $600 million in aggregate principal amount of 9.50% notes due 2025. We also replaced our outstanding unsecured credit facility, of which ~~are now Recorded, rather than Unrecorded contractual obligations, there~~$1 billion was outstanding at the end of the quarter. See "Liquidity and Capital Resources" for additional details about these financing activities. See Note 3 of the Consolidated Financial Statements for additional details about outstanding debt. There have been no other significant changes in the contractual obligations disclosed in our ~~2018~~2019 Form 10-K.

Off-Balance Sheet Arrangements

We have not provided any financial guarantees as of August ~~3, 2019.~~1, 2020.

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We have not created and are not a party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt, or operating our business. We do not have any arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our financial condition, liquidity, results of operations, or capital resources.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States~~U.S. GAAP requires us to make estimates and assumptions that affect reported amounts. Management has discussed the development, selection, and disclosure of its estimates and assumptions with the Audit Committee of our Board of Directors. ~~There~~Other than the items discussed in Footnote 1, there have been no significant changes in the critical accounting policies and estimates discussed in our ~~2018~~2019 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our operating results are subject to interest rate risk as our secured revolving credit facility carries variable interest rates, and the $600 million of notes issued in April 2020 include coupon rate step ups if our long-term debt is downgraded to below a BBB- credit rating by S&P Global Ratings or Baa3 by Moody’s Investors Service, Inc. There have been no other significant changes in the ~~market risks~~Quantitative and Qualitative Disclosures About Market Risk described in our ~~2018~~2019 Form 10-K.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (the “Evaluation”) at a reasonable assurance level as of the last day of the period covered by this report.

Based upon the Evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level. Disclosure controls and procedures are defined by Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act") as controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls, and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~second~~ quarter ~~of 2019~~ended August 1, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On August 4, 2019, we implemented a new enterprise resource planning (“ERP”) system which affects many of our financial processes. This project is expected to improve the efficiency and effectiveness of certain financial and business transaction processes, as well as the underlying systems environment. The new ERP system will be a significant component of our internal control over financial reporting.

2120

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PART II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no significant changes in the ~~risk factors~~Risk Factors described in our ~~2018~~2019 Form ~~10-K.~~10-K, other than as set out in our Quarterly Report on Form 10-Q for the quarter ended May 2, 2020, in Item 1A of Part II.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table contains information for shares of common stock repurchased and shares acquired from employees in lieu of amounts required to satisfy minimum tax withholding requirements upon the vesting of the employees’ stock-based compensation during the three fiscal months ended August ~~3, 2019:~~1, 2020:

(Dollars in Millions)
Total Number
of Shares
Purchased
Average
Price
Paid Per
Share
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
Approximate
Dollar Value
of Shares
that May Yet
Be Purchased
Under the Plans
or Programs
May 5 - June 1, 2019

652,849

$
58.82

625,302

$
1,046

June 2 - July 6, 2019

1,144,386

47.84

1,132,119

992

July 7 - August 3, 2019

844,211

49.89

841,986

950

Total

2,641,446

$
51.08

2,599,407

$
950

(Dollars in Millions, Except per Share Data)	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
May 3 - 30, 2020		20,670	$	16.73		—	$	726
May 31 - July 4, 2020		16,098		22.26		—		726
July 5 - August 1, 2020		2,202		20.39		—		726
Total		38,970	$	19.22		—	$	726

2221

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Item 6. Exhibits


Exhibit		Description
~~4.1~~ 31.1	Third Amended and Restated Credit Agreement dated as of July 25, 2019 by and among the Company, the various lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent, a Swing Line Lender and an Issuing Bank, Bank of America, N.A., JPMorgan Chase Bank, N.A., MUFG Bank, Ltd. and U.S. Bank National Association, as Syndication Agents, Swing Line Lenders, and Issuing Banks, and Capital One, N.A., Goldman Sachs Bank USA and Morgan Stanley Senior Funding, Inc., as Documentation Agents, and Wells Fargo Securities, LLC, BofA Securities, Inc., JP Morgan Chase Bank, N.A., MUFG Bank, Ltd., and U.S. Bank National Association, as Joint Lead Arrangers and Bookrunners, ~~incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K dated July 25, 2019.~~
~~31.1~~	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101)

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Kohl’s Corporation (Registrant)

Date: September ~~6, 2019~~3, 2020	/s/ ~~Bruce Besanko~~Jill Timm
	~~Bruce Besanko~~Jill Timm On behalf of the Registrant and as Chief Financial Officer (Principal Financial Officer)

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Consolidated Balance Sheet		August 3, 2019
(Dollars in Millions)	Classification	August 3, 2019
Assets
Operating leases	Operating leases	$	2,428
Finance leases	Property and equipment, net		544
Total operating and finance leases			2,972
Liabilities
Current
Operating leases	Current portion of operating leases		158
Finance leases	Current portion of finance leases and financing obligations		72
Noncurrent
Operating leases	Operating leases		2,647
Finance leases	Finance leases and financing obligations		764
Total operating and finance leases		$	3,641

Consolidated Statement of Income		Three Months Ended		Six Months Ended
(Dollars in Millions)	Classification	August 3, 2019		August 3, 2019
Operating leases	Selling, general, and administrative	$	79	$	157
Finance leases
Amortization of leased assets	Depreciation and amortization		18		35
Interest on lease liabilities	Interest expense, net		24		48
Total operating and finance leases		$	121	$	240

Consolidated Statement of Cash Flows		Six Months Ended
(Dollars in Millions)	Classification	August 3, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases		$	169
Operating cash flows from finance leases			48
Financing cash flows from finance leases			37

Consolidated Statement of Income		Three Month Ended		Six Months Ended
(Dollars in Millions)	Classification	August 3, 2019		August 3, 2019
Amortization of financing obligation assets	Depreciation and amortization	$	3	$	6
Interest on financing obligations	Interest expense, net		9		19
Total financing obligations		$	12	$	25

Consolidated Statement of Cash Flows		Six Months Ended August 3, 2019
(Dollars in Millions)	Classification
Cash paid for amounts included in the measurement of financing obligations
Operating cash flows from financing obligations		$	19
Financing cash flows from financing obligations			23
Proceeds from financing obligations			13

(Dollars in Millions)	August 3, 2019
2019	$	29
2020		72
2021		72
2022		68
2023		66
After 2023		249
Total financing obligations payments		556
Non-cash gain on future sale of property		238
Amount representing interest		(241	)
Financing obligation liability	$	553

	2019						2018
(Dollars in Millions, Except per Share Data)	Income before Income Taxes		Net Income		Earnings Per Diluted Share		Income before Income Taxes		Net Income		Earnings Per Diluted Share
Three Months Ended:
GAAP	$	323	$	241	$	1.51	$	387	$	292	$	1.76
Impairments, store closings and other costs		7		6		0.04		—		—		—
Loss on extinguishment of debt		—		—		—		—		—		—
Adjusted (Non-GAAP)	$	330	$	247	$	1.55	$	387	$	292	$	1.76
Six Months Ended:
GAAP	$	389	$	303	$	1.89	$	485	$	368	$	2.21
Impairments, store closings and other costs		56		42		0.26		—		—		—
Loss on extinguishment of debt		—		—		—		42		31		0.19
Adjusted (Non-GAAP)	$	445	$	345	$	2.15	$	527	$	399	$	2.40