Kohl's (KSS) 10-Q 2 Jun 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Apr. 29, 2017	May 27, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	KOHLS CORP
Entity Central Index Key	885,639
Current Fiscal Year End Date	--02-03
Entity Filer Category	Large Accelerated Filer
Trading Symbol	KSS
Document Type	10-Q
Document Period End Date	Apr. 29, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		170,481,383

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Apr. 29, 2017	Jan. 28, 2017	Apr. 30, 2016
Current assets:
Cash and cash equivalents	$ 625	$ 1,074	$ 423
Merchandise inventories	3,991	3,795	4,084
Other	328	378	348
Total current assets	4,944	5,247	4,855
Property and equipment, net	8,069	8,103	8,230
Long-term investments	2,800	2,700	2,800
Other assets	231	224	219
Total assets	13,244	13,574	13,304
Current liabilities:
Accounts payable	1,480	1,507	1,346
Accrued liabilities	1,088	1,224	1,126
Income taxes payable	137	112	48
Current portion of capital lease and financing obligations	134	131	127
Total current liabilities	2,839	2,974	2,647
Long-term debt	2,795	2,795	2,793
Capital lease and financing obligations	1,657	1,685	1,770
Deferred income taxes	285	272	239
Other long-term liabilities	674	671	558
Shareholders’ equity:
Common stock	4	4	4
Paid-in capital	3,013	3,003	2,961
Treasury stock, at cost	(10,503)	(10,338)	(9,906)
Accumulated other comprehensive loss	(13)	(14)	(16)
Retained earnings	12,493	12,522	12,254
Total shareholders’ equity	4,994	5,177	5,297
Total liabilities and shareholders’ equity	$ 13,244	$ 13,574	$ 13,304

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Millions	3 Months Ended
	Apr. 29, 2017	Apr. 30, 2016
Net sales	$ 3,843	$ 3,972
Cost of merchandise sold	2,445	2,560
Gross margin	1,398	1,412
Operating expenses:
Selling, general and administrative	975	1,008
Depreciation and amortization	238	234
Impairments, store closing and other costs	0	64
Operating income	185	106
Interest expense, net	76	79
Income before income taxes	109	27
Provision for income taxes	43	10
Net income	$ 66	$ 17
Net income per share:
Basic (in dollars per share)	$ 0.39	$ 0.09
Diluted (in dollars per share)	0.39	$ 0.09
Dividends declared and paid per share	$ 0.55

CONSOLIDATED STATEMENT OF CHANG

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) shares in Millions, $ in Millions	Total	Common Stock	Paid-In Capital	Treasury Stock	Accumulated Other Comprehensive Income (Loss)	Retained Earnings [Member]
Long-term Debt, Fair Value	$ 2,700
Beginning Balance (in shares) at Jan. 28, 2017		(371)		197
Beginning Balance at Jan. 28, 2017	5,177	$ 4	$ 3,003	$ (10,338)	$ (14)	$ 12,522
Comprehensive income (loss)	67				1
Net income	66					66
Stock options and awards, (in shares)		1		0
Stock options and awards	0		10
Stock Issued During Period, Value, Stock Options Exercised				$ (10)
Dividends paid ($0.55 per common share)	(94)		0	$ (1)		(95)
Treasury stock purchases, (in shares)				(4)
Treasury stock purchases	(156)			$ (156)
Ending Balance (in shares) at Apr. 29, 2017		(372)		(201)
Ending Balance at Apr. 29, 2017	4,994	$ 4	$ 3,013	$ (10,503)	$ (13)	$ 12,493
Long-term Debt, Fair Value	$ 2,800

CONSOLIDATED STATEMENT OF CHAN5

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) shares in Millions	3 Months Ended
	Apr. 29, 2017$ / sharesshares
Dividends declared and paid per share | $ / shares	$ 0.55
Treasury Stock
Stock Issued During Period Shares Stock Options Exercised And Restricted Stock Grants | shares	0

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Apr. 29, 2017	Apr. 30, 2016
Operating activities
Net income	$ 66	$ 17
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	238	234
Share-based compensation	10	12
Deferred income taxes	13	(18)
Impairments, store closing and other costs cash flow	0	64
Other non-cash revenues and expenses	(12)	7
Changes in operating assets and liabilities:
Merchandise inventories	(193)	(44)
Other current and long-term assets	42	(15)
Accounts payable	(27)	95
Accrued and other long-term liabilities	(117)	(125)
Income taxes	26	(87)
Net cash provided by operating activities	46	140
Investing activities
Acquisition of property and equipment	(216)	(177)
Proceeds from sales of property and equipment	13	3
Net cash used in investing activities	(203)	(174)
Financing activities
Treasury stock purchases	(156)	(126)
Shares withheld for taxes on vested restricted shares	(10)	(12)
Dividends paid	(94)	(91)
Capital lease and financing obligation payments	(32)	(31)
Proceeds from stock option exercises		6
Proceeds from financing obligations	0	4
Net cash used in financing activities	(292)	(250)
Net decrease in cash and cash equivalents	(449)	(284)
Cash and cash equivalents at beginning of period	1,074	707
Cash and cash equivalents at end of period	625	423
Supplemental information
Interest paid, net of capitalized interest	46	50
Income taxes paid	5	126
Non-cash investing and financing activities
Property and equipment acquired through additional liabilities	$ 13	$ 9

Basis of Presentation

Basis of Presentation	3 Months Ended
	Apr. 29, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Business and Summary of Accounting Policies	Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for fiscal year end 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 and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (Commission File No. 1-11084) as filed with the Securities and Exchange Commission. Due to 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. We operate as a single business unit. During the quarter ended April 29, 2017, we adopted the new accounting standard on share-based payments as required. The guidance simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of excess tax benefits in the Statements of Cash Flows. The adoption of the new standard resulted in the following: • Net tax detriments related to share-based compensation awards of $5 million for the quarter ended April 29, 2017 were recognized as increases to income tax expense in our Statements of Income. Prior to adoption of the new standard, this amount would have been recorded as a decrease in additional paid-in capital in our Balance Sheet. This change was accounted for prospectively and will likely create volatility in our future effective tax rate. • Accounting rules require us to use the treasury stock method when calculating potential common shares used to determine diluted earnings per share. The new standard requires that assumed proceeds under the treasury stock method be modified to exclude the amount of excess tax benefits that would have been recognized in additional paid-in capital. These changes were applied on a prospective basis and had an immaterial impact on our weighted average common shares outstanding for the quarter ended April 29, 2017. • The new standard requires that excess tax benefits from share-based employee awards be reported as operating activities in the Statements of Cash Flows. Previously, these cash flows were included in financing activities. We elected to retrospectively apply the presentation requirements. The retrospective application had no impact on our net cash provided by operations and net cash used in financing activities for the three months ended April 30, 2016, but will increase our net cash provided by operations and net cash used in financing activities by $5 million for the year ended January 28, 2017 . We elected not to change our policy on accounting for forfeitures and continue to estimate the total number of awards for which the requisite service period will not be rendered. At this time, we have not changed our policy on statutory withholding requirements and will continue to allow employees to withhold up to the minimum statutory withholding requirements. The following table provides a brief description of issued, but not yet effective, accounting standards: Standard Description Effect on our Financial Statements Revenue from Contracts with Customers (ASC Topic 606) Issued May 2014 Effective Q1 2018 The standard eliminates the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace​s​ it with a principle​s-based approach for revenue recognition​ and disclosures​. The standard will change the way we account for sales returns, our loyalty program and certain promotional programs. Based on current estimates, we do not expect these provisions of the standard will have a material impact on our financial statements. We are currently evaluating the impact other provisions of the standard may have on our financial statements, including principal vs agent considerations and presentation of net earnings of our credit card operations. Under current accounting, substantially all merchandise sales are reported gross as we are considered the principal in the transaction and net credit card earnings are reported in Selling, General and Administrative Expenses. We will elect an adoption methodology after we have evaluated the impact that all provisions of the standard will have on our financial statements. Leases (ASC Topic 842) Issued February 2016 Effective Q1 2019 Among other things, the new standard requires us to recognize a right of use asset and a lease liability on our balance sheet for leases. It also changes the presentation and timing of lease-related expenses. Approximately 5% of our store leases and all of our land leases are not currently recorded on our balance sheet. Recording right of use assets and liabilities for these and other non-store leases is expected to have a material impact on our balance sheet. We are also evaluating the impact that recording right of use assets and liabilities will have on our income statement and the financial statement impact that the standard will have on leases which are currently recorded on our balance sheet.

Debt

Debt	3 Months Ended
	Apr. 29, 2017
Debt [Abstract]
Debt	Long-term debt consists of the following unsecured senior debt as of April 29, 2017, January 28, 2017, and April 30, 2016: Maturity (Dollars in Millions) Effective Rate Coupon Rate Outstanding 2021 4.81 % 4.00 % $ 650 2023 3.25 % 3.25 % 350 2023 4.78 % 4.75 % 300 2025 4.25 % 4.25 % 650 2029 7.36 % 7.25 % 99 2033 6.05 % 6.00 % 166 2037 6.89 % 6.88 % 150 2045 5.57 % 5.55 % 450 4.88 % $ 2,815 Long-term debt is net of unamortized debt discounts and deferred financing costs of $20 million at April 29, 2017 and January 28, 2017, and $22 million at April 30, 2016. Our 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 debt was $2.8 billion at April 29, 2017, $2.7 billion at January 28, 2017 and $2.8 billion at April 30, 2016.

Stock-Based Compensation

Stock-Based Compensation	3 Months Ended
	Apr. 29, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]	The following table summarizes our stock-based compensation activity for the three months ended April 29, 2017 : Stock Options Nonvested Stock Awards Performance Share Units (Shares and Units in Thousands) Shares Weighted Average Exercise Price Shares Weighted Average Grant Date Fair Value Units Weighted Average Grant Date Fair Value Balance - January 28, 2017 2,350 $ 53.29 2,163 $ 52.75 512 $ 57.82 Granted — — 1,085 38.08 309 40.42 Exercised/vested — — (515 ) 53.72 (105 ) 57.58 Forfeited/expired (435 ) 60.58 (68 ) 53.09 — — Balance - April 29, 2017 1,915 $ 51.64 2,665 $ 46.58 716 $ 50.35

Contingencies

Contingencies	3 Months Ended
	Apr. 29, 2017
Commitments and Contingencies Disclosure [Abstract]
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.

Net Income Per Section

Net Income Per Section	3 Months Ended
	Apr. 29, 2017
Net Income Per Section [Abstract]
Earnings Per Share	Basic net income per share is net income divided by the average number of common shares outstanding during the period. Diluted net income per share includes incremental shares assumed for share-based awards. The information required to compute basic and diluted net income per share is as follows: Three Months Ended (Dollar and Shares in Millions, Except per Share Data) April 29, April 30, Numerator—Net income $ 66 $ 17 Denominator—Weighted average shares: Basic 170 183 Impact of dilutive stock-based awards 1 1 Diluted 171 184 Antidilutive shares 3 4 Net income per share: Basic $ 0.39 $ 0.09 Diluted $ 0.39 $ 0.09

Store Closures (Notes)

Store Closures (Notes)	3 Months Ended
	Apr. 29, 2017
Restructuring, Impairment, and Other Activities Disclosure [Text Block]	During 2016, we closed 18 underperforming stores. The following table summarizes changes in the store closure and restructure reserve during the quarter: (Dollars in Millions) Store Lease Operations Severance Total Balance - January 28, 2017 $ 103 $ 3 $ 106 Payments (3 ) (1 ) (4 ) Balance - April 29, 2017 $ 100 $ 2 $ 102

Debt (Tables)

Debt (Tables)	3 Months Ended
	Apr. 29, 2017
Debt Disclosure [Abstract]
Components of long-term debt	Long-term debt consists of the following unsecured senior debt as of April 29, 2017, January 28, 2017, and April 30, 2016: Maturity (Dollars in Millions) Effective Rate Coupon Rate Outstanding 2021 4.81 % 4.00 % $ 650 2023 3.25 % 3.25 % 350 2023 4.78 % 4.75 % 300 2025 4.25 % 4.25 % 650 2029 7.36 % 7.25 % 99 2033 6.05 % 6.00 % 166 2037 6.89 % 6.88 % 150 2045 5.57 % 5.55 % 450 4.88 % $ 2,815

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	3 Months Ended
	Apr. 29, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]	The following table summarizes our stock-based compensation activity for the three months ended April 29, 2017 : Stock Options Nonvested Stock Awards Performance Share Units (Shares and Units in Thousands) Shares Weighted Average Exercise Price Shares Weighted Average Grant Date Fair Value Units Weighted Average Grant Date Fair Value Balance - January 28, 2017 2,350 $ 53.29 2,163 $ 52.75 512 $ 57.82 Granted — — 1,085 38.08 309 40.42 Exercised/vested — — (515 ) 53.72 (105 ) 57.58 Forfeited/expired (435 ) 60.58 (68 ) 53.09 — — Balance - April 29, 2017 1,915 $ 51.64 2,665 $ 46.58 716 $ 50.35

Net Income Per Section Net Inco

Net Income Per Section Net Income Per Section (Tables)	3 Months Ended
	Apr. 29, 2017
Net Income Per Section [Abstract]
Basic and diluted net income per share calculation	The information required to compute basic and diluted net income per share is as follows: Three Months Ended (Dollar and Shares in Millions, Except per Share Data) April 29, April 30, Numerator—Net income $ 66 $ 17 Denominator—Weighted average shares: Basic 170 183 Impact of dilutive stock-based awards 1 1 Diluted 171 184 Antidilutive shares 3 4 Net income per share: Basic $ 0.39 $ 0.09 Diluted $ 0.39 $ 0.09

Store Closures (Tables)

Store Closures (Tables)	3 Months Ended
	Apr. 29, 2017
Restructuring and Related Activities [Abstract]
Schedule of Restructuring Reserve by Type of Cost [Table Text Block]	The following table summarizes changes in the store closure and restructure reserve during the quarter: (Dollars in Millions) Store Lease Operations Severance Total Balance - January 28, 2017 $ 103 $ 3 $ 106 Payments (3 ) (1 ) (4 ) Balance - April 29, 2017 $ 100 $ 2 $ 102

Debt - Components of Long Term

Debt - Components of Long Term Debt (Details) - USD ($) $ in Millions	Apr. 29, 2017	Jan. 28, 2017	Apr. 30, 2016
Debt Instrument [Line Items]
Long-term Debt, Fair Value	$ 2,800	$ 2,700	$ 2,800
Unamortized debt discount	(20)		(22)
Long-term debt	$ 2,795	$ 2,795	$ 2,793
Senior Notes
Debt Instrument [Line Items]
Effective Rate	5.00%
Total senior debt	$ 2,815
Senior Notes | Senior Notes Due Two Thousand And Twenty One [Member]
Debt Instrument [Line Items]
Effective Rate	5.00%
Debt Instrument, Interest Rate, Stated Percentage	4.00%
Total senior debt	$ 650
Senior Notes | Senior Notes Due 2023
Debt Instrument [Line Items]
Effective Rate	3.00%
Debt Instrument, Interest Rate, Stated Percentage	3.00%
Total senior debt	$ 350
Senior Notes | Senior Notes Due Twenty Twenty Three [Member]
Debt Instrument [Line Items]
Effective Rate	5.00%
Debt Instrument, Interest Rate, Stated Percentage	5.00%
Total senior debt	$ 300
Senior Notes | Senior Notes Due Twenty Twenty Five [Member]
Debt Instrument [Line Items]
Effective Rate	4.00%
Debt Instrument, Interest Rate, Stated Percentage	4.00%
Total senior debt	$ 650
Senior Notes | Senior Notes Due 2029
Debt Instrument [Line Items]
Effective Rate	7.00%
Debt Instrument, Interest Rate, Stated Percentage	7.00%
Total senior debt	$ 99
Senior Notes | Senior Notes Due 2033
Debt Instrument [Line Items]
Effective Rate	6.00%
Debt Instrument, Interest Rate, Stated Percentage	6.00%
Total senior debt	$ 166
Senior Notes | Senior Notes Due 2037
Debt Instrument [Line Items]
Effective Rate	7.00%
Debt Instrument, Interest Rate, Stated Percentage	7.00%
Total senior debt	$ 150
Senior Notes | Senior Notes Due 2045
Debt Instrument [Line Items]
Effective Rate	6.00%
Debt Instrument, Interest Rate, Stated Percentage	6.00%
Total senior debt	$ 450

Fair Value Measurements (Narrat

Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions	Apr. 29, 2017	Jan. 28, 2017	Apr. 30, 2016	Jan. 30, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, at Carrying Value	$ 625	$ 1,074	$ 423	$ 707
Long-term Debt, Excluding Current Maturities	2,795	2,795	2,793
Long Term Investments Fair Value	$ 2,800	$ 2,700	$ 2,800

Stock-Based Compensation - Summ

Stock-Based Compensation - Summary of Stock Based Compensation Grants (Details) - $ / shares shares in Thousands	3 Months Ended
	Apr. 29, 2017	Jan. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	2,665	2,163
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Number of Outstanding Options		2,350
Restricted shares and units granted, excluding shares earned in lieu of cash dividends	1,085
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 38.08
Granted performance restricted share units	309
Performance Restricted Shares Fair Value, Granted	$ 40.42
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Exercise Price		$ 53.29
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	0
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	(435)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	1,915
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price	$ 51.64
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	$ 46.58	$ 52.75
Performance restricted shares units, beginning		512
Performance Restricted Shares, Fair Value Beginning		$ 57.82
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	(68)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested Options Forfeited, Weighted Average Grant Date Fair Value	$ 53.09
Forfeited performance restricted share units	0
Performance Restricted Shares Fair Value, Forfeited	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period, Weighted Average Exercise Price	$ 60.58
Performance restricted shares units, ending	716
Performance Restricted Shares, Fair Value Ending	$ 50.35
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	(105)
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value	$ 57.58
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	(515)
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value	$ 53.72

Stock-Based Compensation Perfor

Stock-Based Compensation Performance Share Unit Activity (Details) - $ / shares shares in Thousands	3 Months Ended
	Apr. 29, 2017	Jan. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance Restricted Shares, Fair Value Beginning		$ 57.82
Granted performance restricted share units	309
Performance Restricted Shares Fair Value, Granted	$ 40.42
Forfeited performance restricted share units	0
Performance Restricted Shares Fair Value, Forfeited	$ 0
Performance restricted shares units, ending	716
Performance Restricted Shares, Fair Value Ending	$ 50.35

Net Income Per Section Net In21

Net Income Per Section Net Income Per Section (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Apr. 29, 2017	Apr. 30, 2016
Basic (in dollars per share)	$ 0.39	$ 0.09
Diluted (in dollars per share)	$ 0.39	$ 0.09
Net income	$ 66	$ 17
Basic	170	183
Impact of dilutive stock-based awards	1	1
Diluted	171	184
Antidilutive shares	3	4
Retained Earnings [Member]
Net income	$ 66	$ 17

Store Closures (Details)

Store Closures (Details) - USD ($) $ in Millions	3 Months Ended
	Apr. 29, 2017	Apr. 30, 2016	Jan. 28, 2017
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	$ 102		$ 106
Impairments, store closing and other costs	0	$ 64
Payments for Restructuring	(4)
Contract Termination [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	100		103
Payments for Restructuring	(3)
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	2		$ 3
Payments for Restructuring	$ (1)