Annual Statements Open main menu

KOHLS Corp - Quarter Report: 2022 October (Form 10-Q)

10-Q

 

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 October 29, 2022

OR

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

img72451622_0.jpg 

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

Preferred Stock Purchase Rights

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

 

Non-Accelerated Filer

 

 

Smaller Reporting Company

 

 

 

 

 

Emerging 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: November 25, 2022 Common Stock, Par Value $0.01 per Share, 110,484,128 shares outstanding.

 

 


 

KOHL’S CORPORATION

INDEX

 

PART I

FINANCIAL INFORMATION

3

Item 1.

Financial Statements:

3

 

Consolidated Balance Sheets

3

 

Consolidated Statements of 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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

22

 

 

 

PART II

OTHER INFORMATION

23

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 5.

Other Information

23

Item 6.

Exhibits

24

 

Signatures

25

 

 

 


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KOHL’S CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(Dollars in Millions)

October 29, 2022

January 29, 2022

October 30, 2021

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$194

$1,587

$1,873

Merchandise inventories

4,874

3,067

3,642

Other

366

369

373

Total current assets

5,434

5,023

5,888

Property and equipment, net

8,117

7,304

7,329

Operating leases

2,318

2,248

2,293

Other assets

365

479

441

Total assets

$16,234

$15,054

$15,951

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$2,014

$1,683

$2,135

Accrued liabilities

1,436

1,340

1,545

Borrowings under revolving credit facility

668

  —

  —

Current portion of:

 

 

 

Long-term debt

164

  —

  —

Finance leases and financing obligations

95

118

117

Operating leases

109

145

142

Total current liabilities

4,486

3,286

3,939

Long-term debt

1,747

1,910

1,909

Finance leases and financing obligations

2,791

2,133

2,072

Operating leases

2,595

2,479

2,537

Deferred income taxes

165

206

196

Other long-term liabilities

354

379

367

Shareholders’ equity:

 

 

 

Common stock

4

4

4

Paid-in capital

3,319

3,375

3,362

Treasury stock, at cost

           (13,551)

           (12,975)

           (12,426)

Retained earnings

14,324

14,257

13,991

Total shareholders’ equity

$4,096

$4,661

$4,931

Total liabilities and shareholders’ equity

$16,234

$15,054

$15,951

 

See accompanying Notes to Consolidated Financial Statements

 

3


Table of Contents

 

KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions, Except per Share Data)

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Net sales

$4,052

$4,366

$11,386

$12,251

Other revenue

225

234

693

683

Total revenue

4,277

4,600

12,079

12,934

Cost of merchandise sold

2,541

2,623

7,013

7,282

Operating expenses:

 

 

 

 

Selling, general, and administrative

1,334

1,380

3,910

3,791

Depreciation and amortization

202

210

608

631

Operating income

200

387

548

1,230

Interest expense, net

81

66

226

195

Loss on extinguishment of debt

  —

  —

  —

201

Income before income taxes

119

321

322

834

Provision for income taxes

22

78

68

195

Net income

$97

$243

$254

$639

Net income per share:

 

 

 

 

Basic

$0.82

$1.67

$2.05

$4.24

Diluted

$0.82

$1.65

$2.02

$4.19

 

See accompanying Notes to Consolidated Financial Statements

 

4


Table of Contents

 

KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions, Except per Share Data)

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Common stock

 

 

 

 

Balance, beginning of period

$4

$4

$4

$4

Stock-based awards

  —

  —

  —

  —

Balance, end of period

$4

$4

$4

$4

 

 

 

 

 

Paid-in capital

 

 

 

 

Balance, beginning of period

$3,406

$3,349

$3,375

$3,319

Stock-based awards

13

13

44

43

Accelerated share repurchase pending final settlement

        (100)

  —

        (100)

  —

Balance, end of period

$3,319

$3,362

$3,319

$3,362

 

 

 

 

 

Treasury stock

 

 

 

 

Balance, beginning of period

$(13,151)

$(11,920)

$(12,975)

$(11,595)

Treasury stock purchases

        (400)

  (506)

        (558)

  (807)

Stock-based awards

            (1)

            (1)

          (21)

          (26)

Dividends paid

1

1

3

2

Balance, end of period

$(13,551)

$(12,426)

$(13,551)

$(12,426)

 

 

 

 

 

Retained earnings

 

 

 

 

Balance, beginning of period

$14,285

$13,786

$14,257

$13,468

Net income

97

243

254

639

Dividends paid

          (58)

  (38)

        (187)

  (116)

Balance, end of period

$14,324

$13,991

$14,324

$13,991

 

 

 

 

 

Total shareholders' equity, end of period

$4,096

$4,931

$4,096

$4,931

 

 

 

 

 

Common stock

 

 

 

 

Shares, beginning of period

377

377

377

377

Stock-based awards

  —

  —

  —

  —

Shares, end of period

377

377

377

377

Treasury stock

 

 

 

 

Shares, beginning of period

        (249)

        (225)

        (246)

        (219)

Treasury stock purchases

  (11)

  (10)

  (14)

  (16)

Shares, end of period

        (260)

        (235)

        (260)

        (235)

Total shares outstanding, end of period

117

142

117

142

 

 

 

 

 

Dividends paid per common share

$0.50

$0.25

$1.50

$0.75

 

See accompanying Notes to Consolidated Financial Statements

 

5


Table of Contents

 

KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Operating activities

 

 

Net income

$254

$639

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

Depreciation and amortization

608

631

Share-based compensation

37

35

Deferred income taxes

                   (41)

                 (103)

Loss on extinguishment of debt

  —

201

Non-cash lease expense

81

107

Other non-cash expense

12

10

Changes in operating assets and liabilities:

 

 

Merchandise inventories

              (1,802)

              (1,044)

Other current and long-term assets

102

574

Accounts payable

331

659

Accrued and other long-term liabilities

76

172

Operating lease liabilities

                   (83)

                 (107)

Net cash (used in) provided by operating activities

                 (425)

1,774

Investing activities

 

 

Acquisition of property and equipment

                 (733)

                 (426)

Proceeds from sale of real estate

31

35

Net cash used in investing activities

                 (702)

                 (391)

Financing activities

 

 

Proceeds from issuance of debt

  —

500

Net borrowings under revolving credit facility

668

  —

Deferred financing costs

  —

  (8)

Treasury stock purchases

                 (658)

                 (807)

Shares withheld for taxes on vested restricted shares

                   (21)

                  (26)

Dividends paid

                 (184)

                 (114)

Reduction of long-term borrowings

  —

  (1,044)

Premium paid on redemption of debt

  —

  (192)

Finance lease and financing obligation payments

  (81)

                  (96)

Proceeds from financing obligations

9

8

Proceeds from stock option exercises

1

1

Other

  —

  (3)

Net cash used in financing activities

                 (266)

              (1,781)

Net decrease in cash and cash equivalents

              (1,393)

                 (398)

Cash and cash equivalents at beginning of period

1,587

2,271

Cash and cash equivalents at end of period

$194

$1,873

Supplemental information

 

 

Interest paid, net of capitalized interest

$190

$167

Income taxes paid

53

221

 

See accompanying Notes to Consolidated Financial Statements

 

6


Table of Contents

 

KOHL’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying 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. 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 29, 2022 (Commission File No. 1-11084) as filed with the Securities and Exchange Commission.

Due to the seasonality of the business of Kohl’s Corporation (the “Company,” “Kohl’s,” “we,” “our,” or “us”), 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.

Recent Accounting Pronouncements

We do not expect that any recently issued accounting pronouncements will have a material impact on our Consolidated Financial Statements.

2. Revenue Recognition

The following table summarizes net sales by line of business:

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Women's

$1,106

$1,165

$3,422

$3,626

Men's

867

933

2,442

2,562

Home

566

680

1,593

1,923

Children's

599

678

1,424

1,609

Accessories

498

434

1,346

1,205

Footwear

416

476

1,159

1,326

Net Sales

$4,052

$4,366

$11,386

$12,251

 

Unredeemed gift cards and merchandise return card liabilities totaled $285 million as of October 29, 2022, $353 million as of January 29, 2022, and $273 million as of October 30, 2021. In the third quarter of 2022 and 2021, net sales recognized from gift cards redeemed in the current period and issued in prior years totaled $22 million in both periods. Year to date 2022 and 2021, net sales of $135 million and $132 million, respectively, were recognized from gift cards redeemed during the current year and issued in prior years.

3. Debt

Borrowings under the revolving credit facility, recorded as short-term debt, has $668 million outstanding as of October 29, 2022. No amounts were outstanding at January 29, 2022 or October 30, 2021.

 

 

 

7


Table of Contents

 

Long-term debt, which excludes borrowings on the revolving credit facility, consists of the following unsecured debt:

 

 

 

 

Outstanding

Maturity (Dollars in Millions)

Effective Rate at Issuance

Coupon Rate

October 29,
2022

January 29,
2022

October 30,
2021

2023

3.25%

3.25%

$164

$164

$164

2023

4.78%

4.75%

111

111

111

2025

9.50%

9.75%

113

113

113

2025

4.25%

4.25%

353

353

353

2029

7.36%

7.25%

42

42

42

2031

3.40%

3.63%

500

500

500

2033

6.05%

6.00%

112

112

112

2037

6.89%

6.88%

101

101

101

2045

5.57%

5.55%

427

427

427

Outstanding unsecured senior debt

 

 

1,923

1,923

1,923

Unamortized debt discounts and deferred financing costs

 

 

           (12)

           (13)

           (14)

Current portion of unsecured senior debt

 

 

         (164)

  —

  —

Long-term unsecured senior debt

 

 

$1,747

$1,910

$1,909

Effective interest rate at issuance

 

 

4.89%

4.89%

4.89%

 

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 unsecured senior debt was $1.5 billion at October 29, 2022, $2.0 billion at January 29, 2022, and $2.1 billion at October 30, 2021.

 

In September 2022, Standard & Poor's downgraded our credit rating from BBB- to BB+. As a result of the downgrade, the interest rate on our 3.375% notes and 9.50% notes increased 25 bps due to the coupon adjustment provisions within these notes. Additionally, in September 2022 Moody's placed our credit rating on review for downgrade. As of October 29, 2022, our rating at Moody’s remained under review.

Our various debt agreements contain covenants including limitations on additional indebtedness and certain financial tests. As of October 29, 2022, we were in compliance with all covenants of the various debt agreements.

4. 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 payments that 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.

Leases with a term of 12 months or less are excluded from the balance; we recognize lease expense for these leases on a straight-line basis over the lease term. We combine lease and non-lease components for new and modified leases.

 

 

 

8


Table of Contents

 

Year to date, we opened 399 Sephora shop-in-shops within our Kohl's stores and now have 599 open as of the end of the third quarter. We plan on opening seven additional shop-in-shops in 2022 and at least 250 more shops in 2023. Due to the investments we are making in the shop-in-shops, we reassessed our lease term when construction began as these assets will have significant economic value to us when the lease term becomes exercisable. The impact of these assessments resulted in additional lease term, additional lease assets and liabilities, and, in some cases, changes to the classification.

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

 

Consolidated Balance Sheets

 

 

 

(Dollars in Millions)

Classification

October 29,
2022

January 29,
2022

October 30,
2021

Assets

 

 

 

 

Operating leases

Operating leases

$2,318

$2,248

$2,293

Finance leases

Property and equipment, net

2,066

1,442

1,389

Total operating and finance leases

4,384

3,690

3,682

Liabilities

 

 

 

 

Current

 

 

 

 

Operating leases

Current portion of operating leases

109

145

142

Finance leases

Current portion of finance leases and financing obligations

78

87

86

Noncurrent

 

 

 

 

Operating leases

Operating leases

2,595

2,479

2,537

Finance leases

Finance leases and financing obligations

2,346

1,688

1,620

Total operating and finance leases

$5,128

$4,399

$4,385

 

Consolidated Statement of Operations

Three Months Ended

Nine Months Ended

(Dollars in Millions)

Classification

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Operating leases

Selling, general, and administrative

$64

$71

$197

$227

Finance leases

 

 

 

 

 

Amortization of leased assets

Depreciation and amortization

33

27

94

70

Interest on leased assets

Interest expense, net

36

29

104

81

Total operating and finance leases

 

$133

$127

$395

$378

 

Consolidated Statement of Cash Flows

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Cash paid for amounts included in the measurement of leased liabilities

 

 

Operating cash flows from operating leases

$200

$236

Operating cash flows from finance leases

99

81

Financing cash flows from finance leases

65

71

 

The following table summarizes future lease payments by fiscal year:

 

 

October 29, 2022

(Dollars in Millions)

Operating Leases

Finance Leases

Total

2022

$62

$40

$102

2023

253

215

468

2024

243

207

450

2025

233

203

436

2026

228

202

430

After 2026

3,735

3,678

7,413

Total lease payments

$4,754

$4,545

$9,299

Amount representing interest

                (2,050)

                (2,121)

                (4,171)

Lease liabilities

$2,704

$2,424

$5,128

 

 

 

 

9


Table of Contents

 

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

 

 

October 29, 2022

January 29, 2022

Weighted-average remaining term (years)

 

 

   Operating leases

20

20

   Finance leases

21

20

Weighted-average discount rate

 

 

   Operating leases

6%

6%

   Finance leases

6%

7%

 

Other lease information is as follows:

 

 

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Property and equipment acquired through exchange of:

 

 

Finance lease liabilities

$714

$755

Operating lease liabilities

167

8

 

Financing Obligations

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

 

Consolidated Balance Sheets

 

 

 

(Dollars in Millions)

Classification

October 29,
2022

January 29,
2022

October 30,
2021

Assets

 

 

 

 

   Financing obligations

Property and equipment, net

$50

$55

$57

Liabilities

 

 

 

 

   Current

Current portion of finance leases and financing obligations

17

31

31

   Noncurrent

Finance leases and financing obligations

445

445

452

Total financing obligations

$462

$476

$483

 

Consolidated Statement of Operations

Three Months Ended

Nine Months Ended

(Dollars in Millions)

Classification

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Amortization of financing obligation assets

Depreciation and amortization

1

2

5

7

Interest on financing obligations

Interest expense, net

16

11

43

30

Total financing obligations

 

$17

$13

$48

$37

 

Consolidated Statement of Cash Flows

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Cash paid for amounts included in the measurement of financing obligations

 

 

Operating cash flows from financing obligations

$42

$30

Financing cash flows from financing obligations

16

25

Proceeds from financing obligations

9

8

 

 

 

 

10


Table of Contents

 

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

 

 

October 29, 2022

(Dollars in Millions)

Financing Obligations

2022

$17

2023

78

2024

77

2025

76

2026

74

After 2026

975

Total lease payments

$1,297

Non-cash gain on future sale of property

166

Amount representing interest

                    (1,001)

Financing obligation liability

$462

 

The following table summarizes the weighted-average remaining term and discount rate for financing obligations:

 

 

October 29, 2022

January 29, 2022

Weighted-average remaining term (years)

14

10

Weighted-average discount rate

14%

9%

 

5. Stock-Based Awards

The following table summarizes our stock-based awards activity for the nine months ended October 29, 2022:

 

 

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 29, 2022

12

$48.66

2,769

$36.17

856

$42.74

Granted

  —

  —

884

51.60

252

65.42

Exercised/vested

             (12)

48.66

        (1,038)

38.51

              —

              —

Forfeited/expired

  —

  —

           (151)

42.98

           (218)

36.89

Balance - October 29, 2022

  —

$—

2,464

$40.30

890

$50.58

 

In 2019, we issued 1,747,441 stock warrants. The total vested and unvested warrants as of October 29, 2022 were 1,048,465 and 698,976, respectively.

6. Contingencies

On September 2, 2022, Sean Shanaphy, an alleged shareholder of the Company, filed a putative class action lawsuit in the U.S. District Court for the Eastern District of Wisconsin against the Company, its directors, and its Chief Financial Officer alleging violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934. Shanaphy v. Kohl’s Corporation, No. 2:22-cv- 01016-LA (E.D. Wis.). The plaintiff asserts claims on behalf of persons and entities that purchased or otherwise acquired the Company’s securities between October 20, 2020 and May 19, 2022, and seeks compensatory damages, interest, fees, and costs. The complaint alleges that members of the putative class suffered losses as a result of (1) false or misleading statements and withholding of information regarding the conception, execution, and outcomes of the Company’s strategic plan announced on October 20, 2020 and the Company’s financial results for the first quarter of fiscal 2022 and (2) the Company’s internal controls over financial reporting, disclosure controls, and corporate governance mechanisms. The case is in its early stages. Lead plaintiff applications were submitted on November 1, 2022, and a lead plaintiff has not yet been selected. The Company intends to file a motion to dismiss the complaint and to vigorously defend against these claims. Due to the early stages

 

 

 

11


Table of Contents

 

of this matter, the Company is unable to estimate a reasonably possible range of loss, if any, that may result from this matter.

In addition to what is noted above, we are subject to certain legal proceedings and claims arising out of the ordinary conduct of our business. In the opinion of management, the outcome of these proceedings and claims will not have a material adverse effect on our Consolidated Financial Statements.

7. Income Taxes

The effective income tax rate for the third quarter of 2022 was 18.3% compared to 24.3% for the third quarter of 2021. Year to date, the rate was 21.1% for 2022 and 23.4% for 2021. The third quarter and year to date rates reflect the recognition of favorable tax items in both 2022 and 2021.

8. Net Income 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 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.

The information required to compute basic and diluted net income per share is as follows:

 

 

Three Months Ended

Nine Months Ended

(Dollar and Shares in Millions, Except per Share Data)

October 29,
2022

October 30,
2021

October 29,
2022

October 30,
2021

Numerator—Net income

$97

$243

$254

$639

Denominator—Weighted-average shares:

 

 

 

 

Basic

118

145

124

151

Dilutive impact

1

2

2

2

Diluted

119

147

126

153

Net income per share:

 

 

 

 

Basic

$0.82

$1.67

$2.05

$4.24

Diluted

$0.82

$1.65

$2.02

$4.19

 

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

 

 

Three Months Ended

Nine Months Ended

(Shares in Millions)

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Anti-dilutive shares

3

3

3

3

 

9. Treasury Stock Repurchases

On August 18, 2022, we entered into an accelerated share repurchase agreement ("ASR") with Goldman Sachs & Co. LLC ("Goldman Sachs") to repurchase $500 million of the Company's common stock. This accelerated share repurchase was part of the $3.0 billion share repurchase program authorized by our Board of Directors in February 2022.

On August 22, 2022, we received an initial delivery of 11.8 million shares of common stock, representing 80% of the total shares that were expected to be repurchased under the ASR.

 

 

 

12


Table of Contents

 

10. Subsequent Events

On November 2, 2022, we completed the $500 million ASR that we entered into on August 18, 2022. Final settlement occurred on November 7, 2022, with an additional 6.1 million shares of common stock being delivered. In total, we received 17.9 million shares, which resulted in an average purchase price of approximately $28 per share.

On November 6, 2022, Michelle Gass resigned her positions as Chief Executive Officer of the Company and a member of its Board of Directors effective December 2, 2022. On November 7, 2022, the Board of Directors appointed Thomas A. Kingsbury as Interim Chief Executive Officer of the Company effective as of December 2, 2022.

On November 9, 2022, the Board of Directors of Kohl's Corporation declared a quarterly cash dividend of $0.50 per share. The dividend will be paid on December 21, 2022, to all shareholders of record at the close of business on December 7, 2022.

 

 

 

13


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 third quarter” are for the three fiscal months (13 weeks) ended October 29, 2022 or October 30, 2021. References to "year to date" are for the nine fiscal months (39 weeks) ended October 29, 2022 or October 30, 2021. References to “the first quarter” are for the three fiscal months (13 weeks) ended April 30, 2022 or May 1, 2021. References to “the second quarter” are for the three fiscal months (13 weeks) ended July 30, 2022 or July 31, 2021.

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," and similar expressions are intended to identify forward-looking statements. Forward-looking statements include the information under “2022 Outlook,” as well as statements 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. Forward-looking statements are based on management’s 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 2021 Form 10-K and in Part II Item 1A of our Form 10-Q for the quarter ended April 30, 2022, 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

Kohl's is a leading omnichannel retailer operating 1,166 stores and a website (www.Kohls.com) as of October 29, 2022. Our Kohl's stores and website sell moderately-priced private 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, store size, and presence of Sephora shop-in-shops. Our website includes merchandise which is available in our stores, as well as merchandise that is available only online.

Key financial results for the quarter included:

Net sales decreased 7.2% and comparable sales decreased 6.9%
Earnings of $0.82 per diluted share
Gross margin was 37.3% of net sales, a 263 basis point decrease from last year
SG&A decreased 3.3% and deleveraged as a percent of total revenue by 120 basis points to last year
Operating margin of 4.7%
Entered into $500 million ASR receiving an initial 11.8 million shares in the third quarter, and subsequent to the quarter, completed the ASR and received an additional 6.1 million shares for a total of 17.9 million shares.

Our Vision and Strategy

The Company’s vision is to be “the most trusted retailer of choice for the active and casual lifestyle” and its strategy is focused on delivering long-term shareholder value. Key long-term strategic focus areas for the Company include: driving top line growth, delivering a 7% to 8% operating margin, maintaining disciplined capital management, and sustaining an agile, accountable, and inclusive culture.

 

 

 

14


Table of Contents

 

2022 Outlook

Given the recent volatility in business trends, the significant macroeconomic headwinds, along with the unexpected CEO transition, the Company is no longer providing guidance for the fourth quarter, and therefore is withdrawing its prior full year 2022 guidance.

Results of Operations

Total Revenue

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Change

October 29, 2022

October 30, 2021

Change

Net sales

$4,052

$4,366

$(314)

$11,386

$12,251

$(865)

Other revenue

         225

         234

  (9)

         693

         683

           10

Total revenue

$4,277

$4,600

$(323)

$12,079

$12,934

$(855)

 

Net sales decreased 7.2% in the third quarter of 2022 and 7.1% year to date 2022.

Comparable sales decreased 6.9% in the third quarter of 2022 and 6.6% year to date 2022 driven by lower traffic and smaller basket sizes.
Digital sales decreased 8% for the third quarter of 2022 and decreased 4% year to date 2022. Digital penetration was 29% of net sales in both the third quarter and year to date 2022.
From a line of business perspective, Accessories, Women's, and Men's outperformed the Company average for the third quarter and year to date 2022, while Home, Footwear, and Children's underperformed the Company.
Active underperformed the overall business in the third quarter of 2022 and year to date 2022 driven by continued softness in active footwear. Total active represented 25% of sales for the third quarter of 2022 and 24% year to date 2022.

Net sales includes revenue from the sale of merchandise, net of expected returns, and shipping revenue.

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 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.

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.

Other revenue decreased $9 million for the third quarter and increased $10 million year to date 2022. The decrease for the third quarter was driven by lower credit revenue due to higher write-off activity partially offset by higher late fees. The increase year to date was driven by higher credit revenue due to higher late fees partially offset by higher write-off activity.

 

 

 

15


Table of Contents

 

On March 14, 2022, we amended and restated our private label credit card program agreement with Capital One through March 31, 2030. The agreement will operate in substantially the same manner as it currently operates.

Cost of Merchandise Sold and Gross Margin

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Change

October 29, 2022

October 30, 2021

Change

Net sales

$4,052

$4,366

$(314)

 

$11,386

$12,251

$(865)

 

Cost of merchandise sold

      2,541

      2,623

      (82)

 

      7,013

      7,282

     (269)

 

Gross margin

$1,511

$1,743

$(232)

 

$4,373

$4,969

$(596)

 

Gross margin as a percent of net sales

37.3%

39.9%

     (263)

bps

38.4%

40.6%

     (215)

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; terms cash discount; and depreciation of product development facilities and equipment. 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.

Gross margin is calculated as net sales less cost of merchandise sold. In the third quarter of 2022, gross margin was 37.3% of net sales, decreasing 263 basis points. Year to date 2022 gross margin was 38.4% of net sales, decreasing 215 basis points. The decrease in gross margin for the third quarter was primarily driven by elevated freight costs, product cost inflation, and elevated shrink levels partially offset by continued benefit from our pricing and promotional optimization strategies. Year to date, the decrease was driven by increased freight costs and shrink.

Selling, General, and Administrative Expense (“SG&A”)

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Change

October 29, 2022

October 30, 2021

Change

SG&A

$1,334

$1,380

$(46)

 

$3,910

$3,791

$119

 

As a percent of total revenue

31.2%

30.0%

      120

bps

32.4%

29.3%

      306

bps

 

SG&A includes compensation and benefit costs (including stores, corporate, 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 other than expenses to fulfill digital sales; 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 revenue. If the expense as a percent of revenue decreased from the prior year, the expense "leveraged". If the expense as a percent of revenue increased over the prior year, the expense "deleveraged".

 

 

 

16


Table of Contents

 

The following table summarizes the changes in SG&A by expense type:

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 29, 2022

Store expenses

$(22)

$104

Distribution

                         (1)

                         21

Corporate and other

                        (23)

                         (6)

Total (decrease) increase

$(46)

$119

 

SG&A expenses decreased $46 million, or 3.3%, to $1.3 billion in the third quarter of 2022. As a percentage of revenue, SG&A deleveraged by 120 basis points. Year to date 2022, SG&A expenses increased $119 million, or 3.1%, to $3.9 billion. As a percentage of revenue, SG&A deleveraged by 306 basis points. The decrease in SG&A during the third quarter was primarily driven by lower strategic investments made in our stores to support the Sephora shop-in-shops openings, store refreshes, and reflows. Additionally, corporate costs decreased due to lower general corporate costs and incentives. The year to date 2022 increase was primarily driven by the strategic investments made in our stores to support the approximately 400 Sephora shop-in-shop openings this year compared to the 200 openings last year. Also contributing to the increase were $26 million of expenses related to the proxy contest and strategic review process, heightened transportation costs, and increased wages.

Other Expenses

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Change

October 29, 2022

October 30, 2021

Change

Depreciation and amortization

$202

$210

$(8)

$608

$631

$(23)

Interest expense, net

                  81

                  66

        15

                 226

                 195

       31

Loss on extinguishment of debt

  —

  —

  —

  —

  201

  (201)

 

The decrease in depreciation and amortization in the third quarter and year to date 2022 was primarily driven by reduced capital spending in technology.

Net interest expense increased in the third quarter and year to date 2022 due to more financing leases as well as borrowings under the revolving credit facility. Partially offsetting the year to date increase was a decrease in interest expense in the first quarter of 2022 due to the benefit of debt reductions as a result of our liability management strategies employed during 2021.

In the first quarter of 2021, we completed a cash tender offer and recognized a loss of $201 million from the extinguishment of debt.

Income Taxes

 

 

Three Months Ended

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Change

October 29, 2022

October 30, 2021

Change

Provision for income taxes

$22

$78

$(56)

$68

$195

$(127)

Effective tax rate

18.3%

24.3%

 

21.1%

23.4%

 

 

The decrease in provision for income taxes was driven by lower taxable income in the third quarter and year to date 2022 as well as the recognition of more favorable tax items in 2022 than in 2021.

 

 

 

17


Table of Contents

 

GAAP to Non-GAAP Reconciliation

 

(Dollars in Millions, Except per Share Data)

Operating Income

Income before
Income Taxes

Net Income

Earnings Per Diluted
Share

Three Months Ended October 29, 2022

 

 

 

 

GAAP

$200

$119

$97

$0.82

Loss on extinguishment of debt

  —

  —

  —

  —

Income tax impact of items noted above

  —

  —

  —

  —

Adjusted (non-GAAP) (1)

$200

$119

$97

$0.82

Three Months Ended October 30, 2021

 

 

 

 

GAAP

$387

$321

$243

$1.65

Loss on extinguishment of debt

  —

  —

  —

  —

Income tax impact of items noted above

  —

  —

  —

  —

Adjusted (non-GAAP) (1)

$387

$321

$243

$1.65

Nine Months Ended October 29, 2022

 

 

 

 

GAAP

$548

$322

$254

$2.02

Loss on extinguishment of debt

  —

  —

  —

  —

Income tax impact of items noted above

  —

  —

  —

  —

Adjusted (non-GAAP) (1)

$548

$322

$254

$2.02

Nine Months Ended October 30, 2021

 

 

 

 

GAAP

$1,230

$834

$639

$4.19

Loss on extinguishment of debt

  —

  201

  201

           1.32

Income tax impact of items noted above

  —

  —

  (50)

  (0.33)

Adjusted (non-GAAP)

$1,230

$1,035

$790

$5.18

(1)
Amounts shown for the three months ended October 29, 2022 and October 30, 2021 and for the nine months ended October 29, 2022 are GAAP as there are no adjustments to Non-GAAP. These amounts are shown for comparability purposes.

 

We believe the adjusted results in the table above are useful because they provide enhanced visibility into our results for the periods excluding 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 other retailers, is subject to seasonal influences. Sales and income are typically higher during the back-to-school and holiday seasons. 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.

In 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 unemployment, wage and transportation inflation, product cost inflation, and costs to source our merchandise, including tariffs. There can be no assurances that such factors will not continue to impact our business in the future.

Liquidity and Capital Resources

Capital Allocation

Our capital allocation strategy is to invest to maximize our overall long-term return, maintain a strong balance sheet, and maintain our investment grade rating. We follow a disciplined approach to capital allocation based on the following priorities: first we invest in our business to drive long-term profitable growth; second we pay a quarterly dividend; and third we return excess cash to shareholders through our share repurchase program. In addition, when appropriate, we will complete liability management transactions.

 

 

 

18


Table of Contents

 

Our period-end cash and cash equivalents balance decreased to $194 million from $1.9 billion in the third quarter of 2021. Our cash and cash equivalents balance includes short-term investments of $8 million and $1.6 billion as of October 29, 2022, and October 30, 2021, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments. We also place dollar limits on our investments in individual funds or instruments.

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

 

 Cash Uses

 

Cash Sources

Operational needs, including salaries, rent, taxes, and other operating costs
Inventory
Capital expenditures
Dividend payments
Share repurchases
Debt reduction

 

Cash flow from operations
Line of credit under our revolving credit facility
Issuance of debt

 

 

 

Nine Months Ended

(Dollars in Millions)

October 29, 2022

October 30, 2021

Change

Net cash (used in) provided by:

 

 

 

Operating activities

$(425)

$1,774

$(2,199)

Investing activities

               (702)

               (391)

      (311)

Financing activities

               (266)

            (1,781)

    1,515

 

Operating Activities

Our operating cash outflows generally consist of payments to our employees for wages, salaries and employee benefits, payments to our merchandise vendors for inventory (net of vendor allowances), payments to our shipping carriers, and payments to our landlords for rent. Operating cash outflows also include payments for income taxes and interest on our debt borrowings.

Operating activities used $425 million of cash year to date 2022 compared to $1.8 billion of cash generated year to date 2021. Operating cash flow decreased due to decreased net income and an increase in inventory driven by beauty inventory to support the Sephora shop-in-shop rollouts as well as rebuilding inventory to more normalized levels.

Investing Activities

Our investing cash outflows include payments for capital expenditures, including investments in new and existing stores, improvements to supply chain, and technology costs. Our investing cash inflows are generally from proceeds from sales of property and equipment.

Investing activities used $702 million year to date 2022 and $391 million year to date 2021. The increase was primarily driven by in-store investments related to Sephora shop-in-shop build-outs, store refreshes, and other customer experience and sales driving enhancements.

Year to date 2022, we opened 399 Sephora-branded retail shop-in-shops and now have a total of 599 Sephora shop-in-shops open. We are planning on opening seven additional shop-in-shops in 2022 and at least 250 shop-in-shops in 2023. We are also working with Sephora to have a Sephora presence in the remaining approximately 300 stores.

 

 

 

19


Table of Contents

 

Financing Activities

Our financing strategy is to ensure liquidity and access to capital markets. We also strive to maintain a balanced portfolio of debt maturities, while minimizing our borrowing costs. Our ability to access the public debt market has provided us with adequate sources of liquidity. Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and the strength of our credit ratings.

In September 2022, Standard & Poor's downgraded our credit rating from BBB- to BB+. Additionally, in September 2022 Moody's placed our credit rating on review for downgrade. As of October 29, 2022, our rating at Moody's remained under review.

As of October 29, 2022, our credit ratings and outlook were as follows:

 

 

Moody’s

Standard &
Poor’s

Fitch

Long-term debt

Baa2

BB+

BBB-

Outlook

Under Review

Stable

Stable

 

As a result of the downgrade, the interest rate on our 3.375% notes and 9.50% notes increased 25 bps due to the coupon adjustment provisions within these notes. If our credit ratings are lowered further, our ability to access the public debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same.

The majority of our financing activities include repurchases of common stock, proceeds from and/or repayments of long-term debt, and dividend payments.

Financing activities used $266 million year to date 2022 and $1.8 billion year to date 2021.

During the year we drew on our credit facility. As of October 29, 2022, $668 million was outstanding. No borrowings were outstanding as of October 30, 2021.

In March 2021, we issued $500 million in aggregate principal amount of 3.375% notes with semi-annual interest payments beginning in November 2021. 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 Baa3 by Moody’s Investors Service, Inc. The notes mature in May 2031.

In April 2021, we completed a cash tender offer for $1.0 billion of senior unsecured debt. We recognized a $201 million loss on extinguishment of debt in the first quarter of 2021, which includes the $192 million tender premium paid to tendering note holders in accordance with the terms of the tender offer, a $6 million non-cash write-off of deferred financing costs and original issue discounts associated with the extinguished debt, and $3 million in other fees.

We paid cash for treasury stock purchases of $658 million year to date 2022 and $807 million year to date 2021. $158 million of the 2022 purchases were made pursuant to a Rule 10b5-1 plan adopted in November 2021. Share repurchases are discretionary in nature. The timing and amount of repurchases are based upon available cash balances, our stock price, and other factors. On August 18, 2022, we entered into an ASR with Goldman Sachs, pursuant to the previously announced share repurchase program, to repurchase $500 million of the Company's common stock. On August 22, 2022, we received an initial delivery of 11.8 million shares of common stock, representing 80% of the total shares that were expected to be repurchased under the ASR. Final settlement occurred

 

 

 

20


Table of Contents

 

on November 7, 2022, with an additional 6.1 million shares of common stock being delivered. In total, we received 17.9 million shares, which resulted in an average purchase price of approximately $28 per share.

Cash dividend payments were $184 million ($1.50 per share) year to date 2022 and $114 million ($0.75 per share) year to date 2021.

Key Financial Ratios

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

 

(Dollars in Millions)

October 29, 2022

October 30, 2021

Working capital

$948

$1,949

Current ratio

               1.21

               1.49

 

Our working capital and inventory levels typically build throughout the fall, peaking during the November and December holiday selling season.

The decrease in our working capital and current ratio is primarily due to lower cash balances as a result of higher capital expenditures and an increase in inventory.

Debt Covenant Compliance

As of October 29, 2022, we were in compliance with all covenants in our debt instruments.

Contractual Obligations

There have been no significant changes in the contractual obligations disclosed in our 2021 Form 10-K other than leases, which have been disclosed in Note 4 of the Consolidated Financial Statements, and borrowings in our revolving credit facility, which have been disclosed in Note 3 of the Consolidated Financial Statements and under "Liquidity and Capital Resources - Financing Activities".

Off-Balance Sheet Arrangements

We have not provided any financial guarantees arising from arrangements with unconsolidated entities or persons as of October 29, 2022.

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 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 have been no significant changes in the critical accounting policies and estimates discussed in our 2021 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in the market risks described in our 2021 Form 10-K.

 

 

 

21


Table of Contents

 

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 quarter ended October 29, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

22


Table of Contents

 

PART II. OTHER INFORMATION

For a description of our legal proceedings, see Note 6, Contingencies, of the notes to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, which is incorporated by reference in response to this item.

Item 1A. Risk Factors

There have been no significant changes in the Risk Factors described in our 2021 Form 10-K, other than as set out in our Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, in Item 1A of Part II.

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

In February 2022, our Board of Directors increased the remaining share repurchase authorization under our existing share repurchase program to $3.0 billion. Purchases under the repurchase program may be made in the open market, through block trades, and other negotiated transactions. We expect to execute the share repurchase program primarily in open market transactions, subject to market conditions. There is no fixed termination date for the repurchase program, and the program may be suspended, discontinued, or accelerated at any time.

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 October 29, 2022:

 

(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

July 31 - August 27, 2022 (1)

  11,802,903

$33.94

  11,782,033

$2,476

August 28 - October 1, 2022

        12,772

       28.68

  —

$2,476

October 2 - October 29, 2022

          3,865

       26.97

  —

$2,476

Total

  11,819,540

$33.93

  11,782,033

 

(1)
During the third quarter of 2022 we entered into a $500 million ASR and received an initial delivery of 11.8 million shares, representing 80% of the total shares that were expected to be repurchased under the ASR. Final settlement occurred during the fourth quarter of 2022 with an additional 6.1 million shares of common stock being delivered. The ASR was part of the $3.0 billion share repurchase program authorized by our Board of Directors in February 2022.

Item 5. Other Information

On November 29, 2022, Jill Timm, the Company’s Chief Financial Officer, received a cash award in recognition of her ongoing contributions to the Company and in consideration for her continued employment with the Company. The award vests and is payable in two equal installments of $450,000 each on January 1, 2024 and January 1, 2025, subject to Ms. Timm remaining employed with the Company through the payment date. In the event of Ms. Timm’s termination of employment other than for cause, without good reason, death or disability, the first installment will be payable in full and a prorated portion of the second installment will be payable based on the number of full calendar months she is employed by the Company during calendar 2024. In the event of her death or disability, Ms. Timm will remain eligible to receive the total cash award. The cash award agreement is attached to this Quarterly Report on Form 10-Q as Exhibit 10.1 and is incorporated by reference herein.

 

 

 

23


Table of Contents

 

Item 6. Exhibits

 

Exhibit

 

Description

10.1

 

Cash Award Agreement between Kohl's, Inc. and Jill Timm effective as of November 29, 2022.

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)

 

 

 

 

24


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: December 1, 2022

/s/ Jill Timm

 

Jill Timm

On behalf of the Registrant and as Chief Financial Officer

(Principal Financial Officer)

 

 

 

 

25