Kohl's 2015 Annual Report Download - page 7

Table of Contents
•Damage to the reputation of the Kohl's brand or our private and exclusive brands.
We believe the Kohl's brand name and many of our private and exclusive brand names are powerful sales and marketing tools. We devote significant
resources to promoting and protecting them. We develop and promote private and exclusive brands that have generated national recognition. In some
cases, the brands or the marketing of such brands are tied to or affiliated with well-known individuals. Damage to the reputations (whether or not
justified) of the Kohl’s brand, our private and exclusive brand names or any affiliated individuals, could arise from product failures; concerns about
human rights, working conditions and other labor rights and conditions where merchandise is produced; perceptions of our pricing and return policies;
litigation; vendor violations of our Terms of Engagement; or various other forms of adverse publicity, especially in social media outlets. Damage to our
reputation may generate negative customer sentiment, potentially resulting in a reduction in sales, earnings, and shareholder value.
•Product safety concerns.
If our merchandise offerings do not meet applicable safety standards or our customers' expectations regarding safety, we could experience lost sales,
experience increased costs and/or be exposed to legal and reputational risk. Events that give rise to actual, potential or perceived product safety concerns
could expose us to government enforcement action and/or private litigation. Reputational damage caused by real or perceived product safety concerns,
could have a negative impact on our sales and operating results.
•Disruptions in our information systems or an inability to adequately maintain and update those systems.
The efficient operation of our business is dependent on our information systems. In particular, we rely on our information systems to effectively
manage sales, distribution, and merchandise planning and allocation functions. We also generate sales though the operations of our Kohls.com website.
We frequently make investments that will help maintain and update our existing information systems. The potential problems and interruptions
associated with implementing technology initiatives or the failure of our information systems to perform as designed could disrupt our business and
harm sales and profitability.
•Weather conditions could adversely affect consumer shopping patterns.
A significant portion of our business is apparel and is subject to weather conditions. As a result, our operating results may be adversely affected by
severe or unexpected weather conditions. Frequent or unusually heavy snow, ice or rain storms; natural disasters such as earthquakes, tornadoes, floods
and hurricanes; or extended periods of unseasonable temperatures could adversely affect our performance by affecting consumer shopping patterns,
diminishing demand for seasonal merchandise and/or causing physical damage to our properties.
•Inability to successfully execute a profitable omni-channel strategy.
Our business has evolved from an in-store only shopping experience to an omni-channel experience which includes in-store, on-line, mobile, social
media and/or other interactions. We strive to offer a desirable omni-channel shopping experience for our customers and use social media as a way to
interact with our customers and enhance their shopping experiences.
Customer expectations about the methods by which they purchase and receive products or services are also evolving. Customers are increasingly
using technology and mobile devices to rapidly compare products and prices and to purchase products. Once products are purchased, customers are
seeking alternate options for delivery of those products. We must continually anticipate and adapt to these changes in the purchasing process. Our
ability to compete with other retailers and to meet our customer expectations may suffer if we are unable to provide relevant customer-facing technology.
Our ability to compete may also suffer if Kohl’s, our suppliers, or our third-party shipping and delivery vendors are unable to effectively and efficiently
fulfill and deliver orders, especially during the holiday season when sales volumes are especially high. Consequently, our results of operations could be
adversely affected.
Our omni-channel business currently generates a lower operating margin than we have historically reported when we were primarily a store-only
retailer. This profitability variance is due to a variety of factors including, but not limited to, an increase in the volume of lower margin merchandise,
especially home products; costs to ship merchandise to our customers; and investments to provide the infrastructure necessary to expand our omni-
channel strategy. There has been rapid growth in penetration of these less profitable omni-channel sales. There can be no assurances that future
profitability will return to historical levels.
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