Kohl's Financial Analysis

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Kohl’s Corporation Financial Analysis
American retailer Kohl’s has become a prevalent fixture for the purchase of discounted clothing and home goods in the mid-west for over twenty-five years. The history of the company however has roots much more modest than present day market dominance would suggest. Dating back to a Wisconsin supermarket in 1946, founder Max Kohl grew his small business to the most successful chain of supermarkets in the Milwaukee area (12). By 1962 Kohl opened his first department store in Brookfield, Wisconsin where an eclectic selection of merchandise, from sporting goods, motor oil and candy, was sold (11). In 1972, the Kohl’s Company which by then consisted of 50 grocery stores, six department stores, three drug stores and three liquor stores, sold 80 percent of its interests to the American subsidiary of British American Tobacco (BAT), p.l.c., BATUS, Inc. The Kohl’s family ended participation in the operations of the company after soon after the sale (11). BATUS, like many other tobacco companies began looking to diversify its holdings by acquiring department stores in the 1960’s. By the mid-1980’s BATUS held 19th place for largest retail holdings in the US with assets including Gamble’s, Saks Fifth Avenue and Marshall Field & Co. (11). In 1983 BATUS, Inc. dropped its interest in the Kohl’s Food Stores to Atlantic and Pacific Tea Company (12). In 1986 a group of private investors purchased the 40 Kohl’s department stores and formed Kohl’s Corporation. It was during that period of private ownership that the Kohl’s management team began to develop the Kohl’s sales model that is still in use today (11). The primary focus for the Kohl’s management was to define themselves as an affordable family- oriented retailer that was an amalgamation of a traditional department store feel but with a lower cost price structure of a discount store. It was also during that time that the company tightened its product line and dropped less profitable items like candy and sewing notions, replacing them with higher profit margin goods like jewelry and linens (11). The innovative business model proved successful and two years after the forming Kohl’s Corporation, 26 Main Street Stores were purchased from Federated Department Stores (12). That brought Kohl’s total stores owned to 66 and allowed them to enter new markets in Michigan, Minnesota and Chicago (11). In 1992 in order to fund continued expansion of the corporation including a goal of 14-16 additional stores per year, an initial public offering of 11.1 million shares was offered on the public market (12). From there Kohl’s expansion was exponential over the years, branching out throughout the Midwest, Mid-Atlantic and North-East. By the end of 1992 it had 120 stores and by the end of 1995 had opened 73 additional stores (11). Kohl’s began its expansion into the west in 1999, primarily concentrating on Texas, Missouri and Colorado. To support the westward expansion, a 542,000-square foot distribution center was opened in 2000 to service six central US states (11). Also during this time, 33 Caldor Corporation stores were purchased in New York and Boston through an offering of 2.8 million shares of stock. (11) From Kohl’s emergence as a public company in 1992-1999, the company more than tripled its numbers of stores while quadrupling its profits (11). In the summer of 2001 the company launched its e-commerce site Kohls.com. (6) and despite a weakening economy after the terrorist attacks in September 2001, Kohl’s continued its vigorous expansion in to new markets throughout the US. In 2002 the first stores were opened in Nashville, Tennessee, New Hampshire and Rhode Island adding to the overall total of 457 Kohl’s stores. The 2003 expansion into California made Kohl’s a bona fide coast-to-coast retail entity (11). It was during that time of aggressive growth that Kohl’s acquired exclusive contracts with name brand labels and celebrity endorsements such as the...
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