Kohl's 2002 Annual Report Download - page 5

Without question, fiscal 2002 was a challenging year. The continued
soft economy, layoffs and the impact of a potential war combined
to dampen consumer spending for retailers in all segments of the
market. In this difficult environment, Kohl’s delivered a 29.8%
increase in earnings, exceeding our goal of a 20% increase each year
and outperforming the vast majority of our competitors.
Net sales for fiscal 2002 increased 21.8% to a record $9.1 billion
and net income reached $643 million or $1.87 per diluted share.
Comparable store sales rose 5.3% in 2002, as we continued to
increase our market share.
We believe our ability to succeed while many others struggled is a
direct reflection of our business model and the hard work of our
dedicated Associates. We offer the national brand merchandise our
customers want at prices they can afford, which is especially attractive
in a difficult economy. And we continue to focus on increasing
productivity across all areas of the business, resulting in effective
expense management. Selling, general and administrative expenses
(SG&A) as a percent of sales decreased to 19.9% in 2002, an
improvement of 47 basis points over the prior year.
Coast-to-coast expansion
We opened 75 stores in 2002, ending the year with a total of 457
stores, and created 15,000 new jobs in communities across the country.
We successfully introduced the Kohl’s concept to new customers in
the Houston, Boston, Nashville and Providence markets. We also
added 36 new prototype stores in markets we already serve and
opened four stores as part of a small-store test. In addition to opening
new stores, we continued our emphasis on keeping our established
stores fresh and current. From remodeling and expanding existing
stores to updating our merchandise presentations, our goal is to drive
increases in same-store sales by continually enhancing the Kohl’s
shopping experience.
We will continue to build on this momentum with the opening of
approximately 80 stores in 2003 and 95 - 100 stores in 2004. The new
store openings will be a combination of new market entries and fill-ins
in markets we already serve.
Our 2003 expansion has already begun. With the help of 4,500
new Associates, we successfully opened 28 new stores in the
greater Los Angeles area in March. This expansion into the
Southwest is significant because it gives Kohl’s a major presence
in markets across the United States, moving us from a regional
to a national retailer.
The Southwest region provides significant growth opportunities for
Kohl’s. To support the expansion into this region, we opened a new
distribution center in San Bernardino, California, in December 2002.
Building on our new Southern California base, we will further expand
our presence in this region with the opening of new stores in the
Phoenix, Las Vegas and Tucson markets in the fall.
The fact that we were able to successfully open 28 stores in a new
West Coast market all on the same day is one more example of our
thorough and disciplined approach to expansion, as well as our ability
to consistently execute our strategies.
Framework for growth
The framework for our growth is the infrastructure we have developed
and refined over the past 10 years, as we grew from our Midwestern
base of 76 stores to become a major national retailer. Our regional
management structure and market solutions group facilitate our
expansion into new areas of the country with different style preferences
and climates. Our distribution centers are strategically located to
serve the existing stores in each region, as well as to support future
expansion. We are continually improving our systems and programs
to further increase productivity, efficiency and customer satisfaction.
And with our coast-to-coast expansion comes new opportunities for
national advertising and increased marketing to build the Kohl’s brand
among consumers across the country.
We are financially strong and our capital structure is well positioned
to support our growth. Internally generated cash flow continues to
be our most important source of capital. A new $665 million revolving
credit facility will be used primarily to support our seasonal working
capital needs. It replaces a $300 million facility that would have
matured in June 2003. We maintained our long-term debt ratings of
A3 by Moody’s and A- by Standard & Poor’s.
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Arlene Meier, Kevin Mansell and Larry Montgomery.