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What changed in KOHLS Corp's 10-K — 2025 vs 2026

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Paragraph-level year-over-year comparison of KOHLS Corp's 2025 and 2026 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2026 report.

+219 added−195 removedSource: 10-K (2025-03-20) vs 10-K (2024-03-21)

Top changes in KOHLS Corp's 2026 10-K

219 paragraphs added · 195 removed · 152 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changePart-time associates are offered a primary care health and pharmacy plan, dental, vision, supplementary life insurance, and a merchandise discount. Kohl's also offers adoption and surrogacy reimbursement options. Kohl's has Wellness Centers available to associates at corporate and credit locations, distribution centers, and e-commerce fulfillment centers, as well as for near-site store and remote associates within the vicinity.
Biggest changeKohl's has Wellness Centers available to associates at corporate and credit locations, distribution centers, and e-commerce fulfillment centers, as well as for near-site store and remote associates within the vicinity.
Digital sales may be picked up in our stores or are shipped to the customer from a Kohl’s e-fulfillment center, retail distribution center or store, or directly by a third-party vendor. See Item 2, “Properties,” for additional information about our distribution and e-fulfillment centers. Human Capital At Kohl’s, we strive to create a welcoming and inclusive culture of care.
Digital sales may be picked up in our stores or are shipped to the customer from a Kohl’s e-fulfillment center, store, or directly by a third-party vendor. See Item 2, “Properties,” for additional information about our distribution and e-fulfillment centers. Human Capital At Kohl’s, we strive to create a welcoming and inclusive culture of care.
We also provide training to teams that provide skills and mindsets to help them perform at their highest level. Additionally, our development teams throughout the company provide job-specific training to ensure associates have the tools they need to excel in their jobs and serve our customers.
We also offer training to teams that provide skills and mindsets to help them perform at their highest level. Additionally, our development teams throughout the company provide job-specific training to ensure associates have the tools they need to excel in their jobs and serve our customers.
We support our associates by fostering a safe and healthy work environment, offering competitive total compensation and benefits, including many health and wellness offerings, providing ongoing training and development opportunities, and cultivating an inclusive culture where all associates feel a sense of belonging and appreciation.
We support our associates by fostering a safe and healthy work environment, offering competitive total compensation and benefits, including many health and wellness offerings, providing ongoing training and development opportunities, and cultivating a culture where all associates feel a sense of belonging and appreciation.
A third-party purchasing agent sources approximately 15% of the merchandise we sell. No vendor individually accounted for more than 10% of our net purchases in 2023. We have no significant long-term purchase commitments with any of our suppliers and believe that we are not dependent on any one supplier or one geographical location.
A third-party purchasing agent sources approximately 10% of the merchandise we sell. No vendor individually accounted for more than 10% of our net purchases in 2024. We have no significant long-term purchase commitments with any of our suppliers and believe that we are not dependent on any one supplier or one geographical location.
Kohl's fosters associates' total well-being, which includes a number of benefits that focus on mental well-being and health, including the Employee Assistance Program, counseling coverage, mental well-being activities, webinars, business resource groups, support groups, and leader resources. We empower our associates’ work-life balance by giving them access to a full range of professional resources.
Kohl's fosters associates' total well-being, which includes a number of benefits that focus on mental well-being and health, including the Employee Assistance Program, counseling sessions, proactive coaching, mental well-being activities, webinars, business resource groups, support groups, and leader resources. We empower our associates’ work-life balance by giving them access to a full range of professional resources.
Our private portfolio includes well-known established brands such as Croft & Barrow, Jumping Beans, SO, Sonoma Goods for Life, and Tek Gear, and exclusive brands that are developed and marketed through agreements with nationally-recognized brands such as Food Network, LC Lauren Conrad, Nine West, and Simply Vera Vera Wang.
Our private portfolio includes well-known established brands such as Apt. 9, Croft & Barrow, Jumping Beans, SO, Sonoma Goods for Life, and Tek Gear, and exclusive brands that are developed and marketed through agreements with nationally-recognized brands such as LC Lauren Conrad, Nine West, and Simply Vera Vera Wang.
Item 1. B usiness Kohl’s Corporation (the “Company," “Kohl’s,” "we," "our," or "us") was organized in 1988 and is a Wisconsin corporation. As of February 3, 2024, we operated 1,174 Kohl's stores and a website (www.Kohls.com). Our Kohl's stores and website sell moderately-priced private and national brand apparel, footwear, accessories, beauty, and home products.
Item 1. B usiness Kohl’s Corporation (the “Company," “Kohl’s,” "we," "our," or "us") was organized in 1988 and is a Wisconsin corporation. As of February 1, 2025, we operated 1,175 Kohl's stores and a website (www.Kohls.com). Our Kohl's stores and website sell moderately-priced private and national brand apparel, footwear, accessories, beauty, and home products.
Employee Count During 2023, we employed an average of approximately 96,000 associates, which included approximately 36,000 full-time and 60,000 part-time associates. The number of associates varies during the year, peaking during the back-to-school and holiday seasons. None of our associates are represented by a collective bargaining unit. We believe we maintain positive relationships with our associates.
Employee Count During 2024, we employed an average of approximately 87,000 associates, which included approximately 33,000 full-time and 54,000 part-time associates. The number of associates varies during the year, peaking during the back-to-school and holiday seasons. None of our associates are represented by a collective bargaining unit. We believe we maintain positive relationships with our associates.
The following fiscal periods are presented in this report: Fiscal Year Ended Number of Weeks 2023 February 3, 2024 53 2022 January 28, 2023 52 2021 January 29, 2022 52 For discussion of our financial results, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." 3 Table of Contents Distribution We receive substantially all of our merchandise at our nine retail distribution centers and six e-fulfillment centers.
The following fiscal periods are presented in this report: Fiscal Year Ended Number of Weeks 2024 February 1, 2025 52 2023 February 3, 2024 53 2022 January 28, 2023 52 For discussion of our financial results, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." 3 Table of Contents Distribution We receive substantially all of our merchandise at our nine retail distribution centers, five operational e-fulfillment centers, and the San Bernardino e-fulfillment center that ceased operations during January 2025.
An education benefit was introduced in 2022, which provides fully-funded tuition, books, and fees for associates pursuing high school completion, select certificates, and undergraduate degrees. Training and Development Behind our success are great teams of talented individuals who embody our values. We are committed to attracting, growing, and engaging talent, while giving associates equitable opportunities for career growth.
Kohl’s offers an education benefit which provides options for associates pursuing high school completion, select certificates, and undergraduate degrees. Training and Development Behind our success are great teams of talented individuals who embody our values. We are committed to attracting, growing, and engaging talent, while giving associates equitable opportunities for career growth.
We continue to pursue innovative ways to educate our teams on safety. Associates at our stores, distribution, and e-fulfillment centers receive specialized training to enhance our safety culture and reduce associate accidents. Diversity, Equity, and Inclusion At Kohl’s, we are committed to our Diversity, Equity, and Inclusion ("DEI") strategy focused on Our People, Our Customers, and Our Community.
We continue to pursue innovative ways to educate our teams on safety. Associates at our stores, distribution, and e-fulfillment centers receive specialized training to enhance our safety culture and reduce associate accidents.
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This strategy accelerates how we are embedding DEI throughout our business by being intentional about our programs and practices and holding ourselves accountable to the work. We are committed to creating an environment where diversity is valued at all levels, everyone feels a sense of equity, and where inclusion is evident across our business.
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Inclusion and Belonging At Kohl's, our priority as a company is to reflect our values of being a welcoming, respectful, and inclusive company for all of our associates and all of the customers we serve, which ultimately helps drive our business forward.
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Our DEI strategy is embedded into our acquisition and retention practices for all associates. We strive to celebrate our differences and help more customers see themselves reflected in our brands.
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We are committed to fostering inclusion and belonging through a strategy that centers on Our People, Our Customers, and Our Community. We are focused on cultivating a workforce comprised of different backgrounds, perspectives, and lived experiences which leads to greater innovation and collaboration and helps us achieve our business objectives.
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We are focused on growing leaders by engaging talent in internal and external professional development offerings and we are working to develop inclusive leaders through programs aimed at building awareness and encouraging advocacy.
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We also remain purposeful in attracting, growing, and engaging a workforce that values and respects our customer base's range of diverse backgrounds and experiences. Our eight Business Resource Groups (BRGs) encompass more than 10,000 unique members and are a key component in recognizing and fostering our culture of inclusion and belonging.
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In the space of continuous development and engagement, we have eight Business Resource Groups with members focused on championing and enhancing diversity and inclusion efforts across our business. 4 Table of Contents At Kohl's, we believe our leaders are responsible for strengthening, modeling, and supporting our DEI efforts by ensuring that they are building a culture and environment where our associates feel seen, and their unique needs, experiences, abilities, and perspectives are valued and heard.
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Our BRGs are inherently inclusive because they are open to all associates by welcoming all allies, not just the community they represent. 4 Table of Contents We believe our leaders are responsible for strengthening, modeling, and supporting our company Values and Behaviors by promoting a culture where all associates feel seen, heard, and valued.
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Each leader is responsible for creating a caring culture and experience for our team, one that embraces and strives to understand our differences, and provides an inclusive environment for all. We work to provide learning opportunities for our leaders and associates to build a more diverse and inclusive workforce and engage associates on how that creates a competitive advantage.
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We provide tools and resources for our leaders to help drive a welcoming, respectful and inclusive culture while also engaging associates on how this creates a competitive advantage for Kohl's.
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Part-time associates are offered a primary care health and pharmacy plan, dental, vision, supplementary life insurance, and a merchandise discount. Kohl's also offers paid parental and adoption leave, and doula and surrogacy reimbursement options.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe also accept payment from customers in a variety of ways, such as cash, checks, debit cards, gift cards, mobile payments, as well as other forms, which subject us to rules, regulations, contractual obligations, and other compliance requirements such as those related to payment network rules and operating guidelines, as well as potential fraud, which may have an adverse impact on our operating results.
Biggest changeWe accept payments using a variety of methods, including our private label and co-branded Kohl’s credit card, credit and debit cards, gift cards, mobile payments, cash, and checks. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines and rules governing electronic funds transfers.
In addition, certain laws and regulations impose import restrictions for goods, which may induce greater supply chain compliance costs and may result in delays to us or adversely impact our inventory. Where we are the importer of record, we may be subject to additional regulatory and other requirements.
In addition, certain laws and regulations impose import restrictions for goods, which may induce greater supply chain compliance costs and may result in delays to us or adversely impact our inventory. Where we are the importer of record, we may be subject to additional regulatory and other requirements, resulting in additional costs to us.
We regularly have internal information technology projects in process. Although the technology is intended to increase productivity and operating efficiencies, these projects may not yield their intended results or may deliver an adverse user or customer experience.
Our information technology projects may not yield their intended results. We regularly have internal information technology projects in process. Although the technology is intended to increase productivity and operating efficiencies, these projects may not yield their intended results or may deliver an adverse user or customer experience.
Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs, pandemic outbreaks, work stoppages, port strikes, port congestion and delays, information technology challenges, and other factors relating to foreign trade are beyond our control and have impacted or could continue to adversely 8 Table of Contents impact our performance and cause us to pay more to obtain inventory or result in having the wrong inventory at the wrong time.
Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs, 13 Table of Contents pandemic outbreaks, work stoppages, port strikes, port congestion and delays, information technology challenges, and other factors relating to foreign trade are beyond our control and have impacted or could continue to adversely impact our performance and cause us to pay more to obtain inventory or result in having the wrong inventory at the wrong time.
Consumer confidence is also affected by the domestic and international political situation. The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the United States, could lead to a decrease in spending by consumers. Future pandemics could have a material adverse impact on our business, financial condition, and results of operations.
Consumer confidence is also affected by the domestic and international political environment. The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the United States, could lead to a decrease in spending by consumers. Future pandemics could have a material adverse impact on our business, financial condition, and results of operations.
A default under our revolving credit facility could trigger a cross-default, acceleration, or other consequences under other indebtedness or financial instruments to which we are a party. If our access to capital was to become significantly constrained or our cost of capital was to increase significantly our financial condition, results of operations, and cash flows could be adversely affected.
A default under our revolving credit facility could trigger a cross-default, acceleration, or other consequences under other indebtedness or financial instruments to which we are a party. If our access to capital were to become significantly constrained or our cost of capital were to increase significantly our financial condition, results of operations, and cash flows could be adversely affected.
Such initiatives may be costly, even if realized, may not have the desired effect, and actions or statements that we may take based on expectations, assumptions, or third-party 9 Table of Contents information that we currently believe to be reasonable may subsequently be determined to be erroneous or be subject to misinterpretation.
Such initiatives may be costly, even if realized, may not have the desired effect, and actions or statements that we may take based on expectations, assumptions, 10 Table of Contents or third-party information that we currently believe to be reasonable may subsequently be determined to be erroneous or be subject to misinterpretation.
Those competitors include online retailers, off-price retailers, warehouse clubs, mass merchandisers, specialty stores, traditional department stores, and other forms of retail commerce. 7 Table of Contents We consider product and value to be the most significant competitive factors in our industry.
Those competitors include online retailers, off-price retailers, warehouse clubs, mass merchandisers, specialty stores, traditional department stores, and other forms of retail commerce. 9 Table of Contents We consider product and value to be the most significant competitive factors in our industry.
Operational Risks We may be unable to offer merchandise that resonates with existing customers and attracts new customers as well as successfully manage our inventory levels. Our business is dependent on our ability to anticipate fluctuations in consumer demand for a wide variety of merchandise.
We may be unable to offer merchandise that resonates with existing customers and attracts new customers as well as successfully manage our inventory levels. Our business is dependent on our ability to anticipate fluctuations in consumer demand for a wide variety of merchandise.
For example, we publish an annual report to share information with our partners, shareholders, customers, and associates regarding our ESG progress. These disclosures reflect our goals and other expectations and assumptions, which are necessarily uncertain and may not be realized.
For example, we publish an annual report to share information with our stakeholders, including partners, shareholders, customers, and associates, regarding our ESG progress. These disclosures reflect our goals and other expectations and assumptions, which are necessarily uncertain and may not be realized.
At the same time, investor and other stakeholder expectations, and voluntary and regulatory ESG disclosure standards and policies, continue to evolve. We may be subject to investor or regulator engagement and/or litigation on our ESG initiatives and disclosures, even if such initiatives are currently voluntary.
At the same time, investor and other stakeholder expectations, and voluntary and regulatory ESG disclosure standards and policies, continue to evolve and are not uniform. We may be subject to investor or regulator engagement and/or litigation on our ESG initiatives and disclosures, even if such initiatives are currently voluntary.
Our ability to meet our labor needs while controlling costs is subject to external factors such as government benefits, unemployment levels and labor participation rates, prevailing wage rates, minimum wage legislation, actions by our competitors in compensation levels, perceptions of our employee experience, potential labor organizing efforts, and 12 Table of Contents changing demographics.
Our ability to meet our labor needs while controlling costs is subject to external factors such as government benefits, unemployment levels and labor participation rates, prevailing wage rates, minimum wage legislation, actions by our competitors in compensation levels, perceptions of our employee experience, potential labor organizing efforts, and changing demographics.
We also note that divergent views regarding ESG principles are emerging in the U.S., and in particular, in U.S. state-level regulation and enforcement efforts and among certain activist stakeholders.
We also note that there are divergent views regarding ESG principles in the U.S., and in particular, in U.S. state-level regulation and enforcement efforts and among certain activist stakeholders.
If we are not successful in managing these risks, they could have a negative impact on our sales, revenues, gross margin, expenses, and/or operating results. Macroeconomic and Industry Risks General economic conditions, consumer spending levels, and/or other conditions could decline.
If we are not successful in managing these risks, they could have a negative impact on our sales, revenues, gross margin, expenses, and/or operating results. Macroeconomic, Regulatory, Legal, and External Risks General economic conditions, consumer spending levels, and/or other conditions could decline.
It is possible that our facilities and systems and those of our third-party vendors are vulnerable to cybersecurity threats, security breaches, system failures, acts of vandalism, fraud, misappropriation, malware, ransomware, and other malicious or harmful code, misplaced or lost data, programming and/or human errors, insider threats, or other similar events.
We face risk that our facilities and systems and those of our third-party vendors are vulnerable to cybersecurity threats, security breaches, system failures, acts of vandalism, fraud, misappropriation, malware, ransomware, and other malicious or harmful code, misplaced or lost data, programming and/or human errors, insider threats, or other similar events.
Changes in funding costs related to interest rate fluctuations are shared similar to the revenue when interest rates exceed defined amounts. Though management currently believes that increases in funding costs will be largely offset by increases in finance charge revenue, increases in funding costs could adversely impact the profitability of this program.
Changes in funding costs related to interest rate fluctuations are shared similar to the revenue when interest rates exceed defined amounts. Though management currently believes that increases in funding costs will be largely offset by increases in finance charge revenue, increases in funding costs could adversely impact the profitability of our credit card operations.
Damage to the reputations (whether or not justified) of the Kohl’s brand, our private brand names, or any affiliated individuals or companies with which we have partnered, could arise from product failures; concerns about human rights, working conditions, and other labor rights and conditions associated with our own operations or where merchandise is produced; perceptions of our diversity, equity, and inclusion efforts; perceptions of our pricing and return policies; litigation; vendor violations of our Terms of Engagement; perceptions of the national vendors and/or other third parties with which we partner; failure, or perceived failure, to realize our ESG goals on a timely basis or at all; perceptions of our management of ESG risks and opportunities; our performance on various ESG ratings; failure to meet evolving investor and other stakeholder expectations with respect to ESG matters; or various other forms of adverse publicity, especially in social media outlets.
Damage to the reputations (whether or not justified) of the Kohl’s brand, our private brand names, or any affiliated individuals or companies with which we have partnered, could arise from product failures; concerns about human rights, working conditions, and other labor rights and conditions associated with our own operations or where merchandise is produced; perceptions of our inclusion and belonging efforts; perceptions regarding our position or lack of position on ESG, public policy, geopolitical and similar matters; perceptions of our pricing and return policies; litigation; vendor violations of our Terms of Engagement; perceptions of the national vendors and/or other third parties with which we partner; failure, or perceived failure, to realize our ESG goals on a timely basis or at all; the impact of, and perception associated with, executing and/or realizing our ESG and other social efforts, whether positive or negative; perceptions of our management of ESG risks and opportunities; our performance on various ESG ratings; failure to meet evolving investor and other stakeholder expectations with respect to ESG matters; or various other forms of adverse publicity, especially in social media outlets.
Maintaining our compliance with those requirements, including recently enacted state consumer privacy laws, may increase our compliance costs, require changes to our business practices, limit our ability to use and collect data, impact our customers’ shopping experience, reduce our business efficiency, and subject us to additional regulatory scrutiny or data breach litigation. Item 1B. Unresolve d Staff Comments Not applicable.
Maintaining our compliance with those requirements, including recently enacted state consumer privacy laws, may increase our compliance costs, require changes to our business practices, limit our ability to use and collect data, impact our customers’ shopping experience, reduce our business efficiency, and subject us to additional regulatory scrutiny or data breach litigation.
We may be unable to attract, develop, and retain quality associates while controlling costs, which could adversely affect our operating results. Our performance is dependent on attracting and retaining a large number of quality associates, including our senior management team and other key associates.
We may be unable to attract, develop, and retain quality associates while controlling costs, which could adversely affect our operating results. Our performance is dependent on attracting and retaining a large number of quality associates, including our senior management team and other key associates, and successfully executing organizational changes, such as leadership transitions.
Various aspects of our operations are subject to federal, state, or local laws, rules, and regulations, including consumer regulations, any of which may change from time to time. The costs and other effects of new or changed legal requirements cannot be determined with certainty.
Regulatory and legal matters could adversely affect our business operations and change financial performance. Various aspects of our operations are subject to federal, state, or local laws, rules, and regulations, including consumer regulations, any of which may change from time to time. The costs and other effects of new or changed legal requirements cannot be determined with certainty.
In addition, 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.
Furthermore, 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. Any disruptions in these areas could adversely affect our results of operations.
Any data security incident involving the breach, misappropriation, loss, or other unauthorized disclosure of sensitive and/or confidential information, whether by us or our vendors, could disrupt our operations, damage our reputation and customers' willingness to shop in our stores or on our website, violate applicable laws, regulations, orders and agreements, and subject us to additional costs and liabilities which could be material.
Any data security incident involving the breach, misappropriation, loss, or other unauthorized disclosure of sensitive and/or confidential information, whether by us or our vendors, the failure or unavailability of technology systems, or ineffectiveness of business continuity or disaster recovery plans in the event of the foregoing events could disrupt our operations, damage our reputation and customers' willingness to shop in our stores or on our website, violate applicable laws, regulations, orders and agreements, and subject us to additional costs and liabilities which could be material.
During the first quarter of 2023, S&P downgraded our senior unsecured credit rating from BB+ to BB and Moody's downgraded our rating from Ba2 to Ba3. These downgrades have caused our cost of borrowing to increase, and further downgrades would cause our cost of borrowing to further increase.
During 2024, S&P downgraded our senior unsecured credit rating from BB to BB- and Moody's downgraded our rating from Ba3 to B1. These downgrades have caused our cost of borrowing to increase, and further downgrades would cause our cost of borrowing to further increase.
Competitive and regulatory pressures have already significantly increased our labor costs. Further changes that adversely impact our ability to attract and retain quality associates could adversely affect our performance and/or profitability.
Competitive and regulatory pressures have already significantly increased our labor costs. Further changes that adversely impact our ability to attract and retain quality associates or manage leadership transitions could adversely affect our performance, ability to effectively execute our strategy, our customer experience, and/or profitability.
The actions taken to address other specific risks may affect how well we manage the more general risk of capital efficiency.
To a large degree, capital efficiency reflects how well we manage our other key risks. The actions taken to address other specific risks may affect how well we manage the more general risk of capital efficiency.
Further, unseasonable weather conditions, including unusually warm weather in the fall or winter months or abnormally wet or cold weather in the spring or summer months, whether due to climate change or otherwise, could have a material adverse effect on our business, financial condition, and operating results, as consumer spending may be inconsistent with our typical inventory purchasing cycle.
Further, unseasonable weather conditions, including unusually warm weather in the fall or winter months or abnormally wet or cold weather in the spring or summer months, whether due to climate change or otherwise, could have a material adverse effect on our business, financial condition, and operating results, as consumer spending may be inconsistent with our typical inventory purchasing cycle. 8 Table of Contents Strategic, Competitive, and Operational Risks We may be unable to successfully execute an omnichannel strategy.
In particular, we rely on our information systems to effectively manage sales, distribution, and merchandise planning and allocation functions. We also generate sales through the operations of our Kohls.com website. We frequently make investments that will help maintain and update our existing information systems. We also depend on third parties as it relates to our information systems.
We also generate sales through the operations of our Kohls.com website. We frequently make investments that will help maintain and update our existing information systems. We also depend on third parties as it relates to our information systems.
The impact of, and actions taken in response to COVID-19, had a significant impact on the retail industry generally and our business. Future pandemics could have a material adverse effect on our business, financial condition, and results of operations. Our competitors could make changes to their pricing and other practices. The retail industry is highly competitive.
The impact of, and actions taken in response to COVID-19, had a significant impact on the retail industry generally and our business. Future pandemics could have a material adverse effect on our business, financial condition, and results of operations.
Our business is seasonal in nature, which could negatively affect our sales, revenues, operating results, and cash requirements. Our business is subject to seasonal influences, with a major portion of sales and income historically realized during the second half of the fiscal year, which includes the back-to-school and holiday seasons.
Our business is subject to seasonal influences, with a major portion of sales and income historically realized during the second half of the fiscal year, which includes the back-to-school and holiday seasons.
Our capital allocation could be inefficient or ineffective. Our goal is to invest capital to maximize our overall long-term returns. This includes spending on inventory, capital projects and expenses, managing debt levels, and periodically returning value to our shareholders through share repurchases and dividends. To a large degree, capital efficiency reflects how well we manage our other key risks.
Our capital allocation could be inefficient or ineffective. Our goal is to invest capital to maximize our overall long-term returns. This includes spending on inventory, capital projects and expenses, managing debt levels, and periodically returning value to our shareholders through dividends and, longer term, share repurchases.
This type of reputational damage may result in deterioration in our relationships with stakeholders and/or a reduction in sales, operating results, and shareholder value. There may be concerns about the safety of products that we sell.
This type of reputational damage may result in deterioration in our relationships with stakeholders and/or a reduction in sales, operating results, and shareholder value.
Major developments in tax policy or trade relations, such as the imposition of tariffs on imported products, could have a material adverse effect on our business, results of operations, and liquidity.
The majority of goods we source are manufactured outside of the United States, primarily in Asia. Major developments in tax policy or trade relations, such as the imposition of 7 Table of Contents tariffs on imported products, could have a material adverse effect on our business, results of operations, and liquidity.
We also associate the Kohl’s brand with third-party national brands that we sell in our store and through our partnerships with companies in pursuit of strategic initiatives.
In some cases, the private brands or the marketing of such brands are tied to or affiliated with well-known individuals. We also associate the Kohl’s brand with third-party national brands that we sell in our store and through our partnerships with companies in pursuit of strategic initiatives.
We may be unable to source merchandise in a timely and cost-effective manner. A third-party purchasing agent sources approximately 15% of the merchandise we sell. The remaining merchandise is sourced from a wide variety of domestic and international vendors.
A third-party purchasing agent sources approximately 10% of the merchandise we sell. The remaining merchandise is sourced from a wide variety of domestic and international vendors.
Underestimating customer demand, or failing to timely receive merchandise to meet demand, can lead to inventory shortages and missed sales opportunities, as well as negative customer experiences. 11 Table of Contents We have and may continue to experience an increase in costs associated with shipping digital orders due to promotional shipping offers, split shipments, freight surcharges due to peak capacity constraints, and additional long-zone shipments necessary to ensure timely delivery for the holiday season.
We have and may continue to experience an increase in costs associated with shipping digital orders due to promotional shipping offers, split shipments, freight surcharges due to peak capacity constraints, and additional long-zone shipments necessary to ensure timely delivery for the holiday season.
The potential problems and interruptions associated with implementing technology initiatives, the failure of our information systems to perform as designed, or the failure to successfully partner with our third party service providers, such as our cloud platform providers, could disrupt our business and harm our sales and profitability. Our information technology projects may not yield their intended results.
The potential problems and interruptions associated with implementing technology initiatives, the failure of our information systems to perform as designed, or the failure to successfully partner with our third-party service providers, such as our cloud 12 Table of Contents platform providers, could disrupt our operations, harm our sales and profitability, impair data security, and be time-consuming, costly and/or resource intensive to remedy.
We compete for customers, associates, locations, merchandise, services, and other important aspects of our business with many other local, regional, and national retailers.
Our competitors could make changes to their pricing and other practices. The retail industry is highly competitive. We compete for customers, associates, locations, merchandise, services, and other important aspects of our business with many other local, regional, and national retailers.
Significant or continuing noncompliance with such standards and laws by one or more suppliers could have a negative impact on our reputation and our results of operations. Our marketing may be ineffective. We believe that differentiating Kohl's in the marketplace is critical to our success.
Significant or continuing noncompliance with such standards and laws by one or more suppliers may delay or preclude delivery of merchandise to us and could have a negative impact on our reputation and our results of operations. There may be concerns about the safety of products that we sell.
Additionally, we are regularly involved in various litigation matters that arise out of the conduct of our business. Litigation or regulatory developments could adversely affect our business operations and financial performance.
Additionally, we are involved in various legal matters and regulatory proceedings that arise out of the conduct of our business.
We also expect there will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters. Increased regulation and increased stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the ESG-related risks we are subject to.
While increased levels of regulation, disclosure-related and otherwise, with respect to ESG matters remain in flux under the new presidential administration, increased regulation, generally or in specific jurisdictions such as California, and increased and differing governmental and stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the ESG-related risks to which we are subject.
Reputational damage caused by real or perceived product safety concerns could have a negative impact on our sales and operating results. We may be unable to adequately maintain and/or update our information systems. The efficient operation of our business is dependent on our information systems.
Reputational damage caused by real or perceived product safety concerns could have a negative impact on our sales and operating results. Capital Risks We may be unable to raise additional capital or maintain bank credit on favorable terms, which could adversely affect our business and financial condition.
If our marketing and loyalty programs are not successful or efficient, our sales and operating results could be adversely affected. The reputation and brand image of Kohl’s and the brands and products we sell could be damaged. We believe the Kohl's brand name and many of our private brand names are powerful sales and marketing tools.
The reputation and brand image of Kohl’s and the brands and products we sell could be damaged. We believe the Kohl's brand name and many of our private brand names are powerful sales and marketing tools. We devote significant resources to develop, promote, and protect private brands that generate national recognition.
On March 5, 2024, the Consumer Financial Protection Bureau ("CFPB") finalized a rule lowering the safe harbor dollar amount credit card companies can charge for late fees for a missed payment.
Additionally, on March 5, 2024, the Consumer Financial Protection Bureau ("CFPB") released a final rule reducing the safe harbor dollar amount for credit card late fees and eliminating the automatic annual inflation adjustment to such safe harbor dollar amount.
If we do not properly allocate our capital to maximize returns, we may fail to produce optimal financial results, and we may experience a reduction in shareholder value. 13 Table of Contents Legal and Regulatory Risks Regulatory and legal matters could adversely affect our business operations and change financial performance.
If we do not properly allocate our capital to maximize returns, we may fail to produce optimal financial results, and we may experience a reduction in shareholder value. Item 1B. Unresolve d Staff Comments Not applicable.
Unanticipated changes in the pricing and other practices of our competitors may adversely affect our performance and lead to loss of market share in one or more categories. Tax, trade and climate, and other ESG-related policies and regulations could change or be implemented and adversely affect our business and results of operations.
Unanticipated changes in the pricing and other practices of our competitors may adversely affect our performance and lead to loss of market share in one or more categories. Our marketing may be ineffective. We believe that differentiating Kohl's in the marketplace is critical to our success.
If our competitors are more successful in adapting to such changes or otherwise incorporating such changes into their business or operations, this could have a material adverse impact on our business and results of operations. 10 Table of Contents Weather conditions and natural disasters could adversely affect consumer shopping patterns and disrupt our operations.
If our competitors are more successful in adapting to such changes or otherwise incorporating such changes into their business or operations, this could have a material adverse impact on our business and results of operations. Supply Chain, Third Party, and Product-Related Risks We may be unable to source merchandise in a timely and cost-effective manner.
Uncertainty with respect to tax and trade policies, tariffs, and government regulations affecting trade between the United States and other countries has recently increased. The majority of goods sourced are manufactured outside of the United States, primarily in Asia.
Tax, trade, and climate and other ESG-related policies and regulations could change or be implemented and adversely affect our business and results of operations. Uncertainty with respect to tax and trade policies, tariffs, and government regulations affecting trade between the United States and other countries has recently increased.
In January 2023, we upsized and replaced our unsecured credit facility with a $1.5 billion senior secured, asset based revolving credit facility. Changes in the credit and capital markets, including market disruptions, limited liquidity, and interest rate fluctuations may increase the cost of financing or restrict our access to these potential sources of future liquidity.
Changes in the credit and capital markets, including market disruptions, limited liquidity, and interest rate fluctuations may increase the cost of financing or restrict our access to these potential sources of future liquidity. Our continued access to these 14 Table of Contents liquidity sources on favorable terms depends on multiple factors, including our operating performance and debt ratings.
In addition, the regulatory environment related to data privacy and cybersecurity is constantly changing, with new and increasingly demanding requirements applicable to our business.
While we maintain insurance coverage designed to address certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise. In addition, the regulatory environment related to data privacy and cybersecurity is constantly changing, with new and increasingly demanding requirements applicable to our business.
We may be unable to successfully execute an omnichannel strategy. Customer expectations about the methods by which they purchase and receive products or services are 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.
Customer expectations regarding how they purchase and receive products are continuously evolving. Customers are increasingly using technology and mobile devices to rapidly compare products, check prices, and make purchases. Once products are purchased, customers are seeking alternate options for delivery of those products. To stay competitive, we must continually anticipate and adapt to these changes in consumer behavior.
We must continually anticipate and adapt to these changes in the purchasing process. Our ability to compete with other retailers and to meet our customers' expectations may suffer if we are unable to provide relevant customer-facing technology and omnichannel experiences.
Our physical stores play a crucial role in attracting customers, driving traffic to digital channels, and supporting fulfillment, returns, and other omnichannel functions. Our ability to compete with other retailers and to meet our customers' expectations may suffer if we are unable to provide relevant customer-facing technology, a compelling in-store experience, and positive omnichannel experiences.
Capital Risks We may be unable to raise additional capital or maintain bank credit on favorable terms, which could adversely affect our business and financial condition. We have historically relied on the public debt markets to raise capital to partially fund our operations and growth. We have also historically maintained lines of credit with financial institutions.
We have historically relied on the public debt markets to raise capital to partially fund our operations and growth. We have also historically maintained lines of credit with financial institutions. In January 2023, we upsized and replaced our unsecured credit facility with a $1.5 billion senior secured, asset based revolving credit facility.
Similarly, as we refine our value strategy to be less promotional, our efforts may negatively impact the loyalty of certain customers and our efforts to mitigate this impact may not be successful.
As we continue to refine our omnichannel value strategy, our efforts may negatively impact the loyalty of certain customers and our efforts to mitigate this impact may not be successful. Additionally, declining store traffic or shifting sales from physical stores to digital platforms could lead to store closures, restructuring and other costs, and adverse effects on our financial performance.
Changes in credit card operations and payment-related risks could adversely affect our sales, revenues, and/or profitability. Our credit card operations facilitate merchandise sales and generate additional revenue from fees related to extending credit.
We are subject to payment-related risks, including in our credit card operations, that could adversely affect our sales, revenues, and/or profitability, increase our operating costs, expose us to fraud or theft, and subject us to potential liability.
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We devote significant resources to develop, promote, and protect private brands that generate national recognition. In some cases, the private brands or the marketing of such brands are tied to or affiliated with well-known individuals.
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Litigation or regulatory developments could adversely affect our business operations and financial performance, given the expense, resources, and impact on our reputation that could result from involvement in these proceedings and compliance with regulatory developments and/or settlements or consent decrees resulting from these proceedings. Weather conditions and natural disasters could adversely affect consumer shopping patterns and disrupt our operations.
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We have taken steps to simplify our value strategy by eliminating online-only promotions in favor of omnichannel pricing across the enterprise. This pressured our digital performance in 2023. While we believe this approach aligns with our long-term strategy, our efforts may not produce the intended results.
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The success of our omnichannel strategy depends on delivering a seamless shopping experience - both in-store and online. This requires maintaining uninterrupted availability of our website and supporting applications, adequate and accurate inventory levels, timely fulfillment of customer orders, accurate shipping of undamaged products, and integrating these efforts across our physical locations.
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The rule reduces the typical amount of late fees that can be charged, which could have a negative impact on Kohl’s credit card revenues, particularly if Kohl’s steps to mitigate the impact of such rule are not successful.
Added
If our marketing and loyalty programs are not successful or efficient, our sales and operating results could be adversely affected. Our business is seasonal in nature, which could negatively affect our sales, revenues, operating results, and cash requirements.
Removed
Our continued access to these liquidity sources on favorable terms depends on multiple factors, including our operating performance and debt ratings. During 2022, our credit ratings were reduced below investment grade, which resulted in an increase in the interest rate on a portion of our long-term debt.
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Underestimating customer demand, or failing to timely receive merchandise to meet demand, can lead to inventory shortages and missed sales opportunities, as well as negative customer experiences.
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The use of online media by us, our influencer network, and our consumers and other stakeholders has increased the risk that our reputation and brand could be damaged, as the dissemination of information via online media is immediate and damage could arise quickly without affording us an opportunity for redress or correction.
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These requirements may change over time or be reinterpreted, making compliance more difficult, costly, or uncertain. Our credit card operations facilitate merchandise sales and generate additional revenue from fees related to extending credit.
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The rule is subject to legal challenge, and the United States District Court for the Northern District of Texas granted a preliminary injunction, staying implementation of the rule, on May 10, 2024. As of February 1, 2025, this injunction remains in effect.
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The ultimate outcome of this legal challenge, along with the rule’s effectiveness and implementation under the new presidential administration, remains uncertain.
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If implemented, this rule could adversely impact Kohl’s credit card revenues, particularly if Kohl's steps to mitigate the impact of such rule are not successful. 11 Table of Contents The payment and payment process methods that we accept subject us to potential fraud and theft by threat actors, including increased credit fraud risks associated with self check out, self pick up, and digital payment methods which could negatively impact our revenue and profitability.
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If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by third parties or our ability to accept or facilitate certain types of payments may be impaired.
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In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs, adversely affecting our business and operating results.
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Information Systems, Cybersecurity, Data Management, and Privacy Risks We may be unable to adequately maintain and/or update our information 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.
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Although we and our third-party vendors seek to maintain our respective systems and address the risk of compromise of integrity, security, and consistent operation of these systems, such efforts are not always successful, and we or our third-party vendors could experience interruptions, delays, or cessation of service.
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Our ability to monitor our vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, acquisition, disclosure, loss, alteration, or destruction of our and our customers’ and associates’ data, including confidential, sensitive, and other information about individuals.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use these frameworks as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. 14 Table of Contents Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use these frameworks as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Our management team’s experience includes over 25 years of technology and finance leadership experience across multiple industries for our CTO, over 30 years of experience in the Legal, Risk and Compliance disciplines for our CRCO, and over 20 years of cybersecurity leadership experience for our CISO.
Our management team’s experience includes over 30 years of technology and finance leadership experience across multiple industries for our CTO, over 30 years of experience in the Legal, Risk and Compliance disciplines for our CRCO, and over 20 years of cybersecurity leadership experience for our CISO.
Our management team is informed about and monitors the prevention, detection, mitigation, and remediation of key cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in the information technology environment. 15 Table of Contents
Our management team is informed about and monitors the prevention, detection, mitigation, and remediation of key cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in the information technology environment. 16 Table of Contents
Our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems and information; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training of our employees, including our incident response personnel; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for service providers, suppliers, and vendors who access our critical systems and data.
Our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems and information; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; 15 Table of Contents • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training of our employees, including our incident response personnel; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for service providers, suppliers, and vendors who access our critical systems and data.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, t hat have materially affected us , including our operations, business strategy, results of operations, or financial condition.
We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See "Risk Factors- Legal and Regulatory Risks".
We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See "Risk Factors- Information Systems, Cybersecurity, Data Management, and Privacy Risks".
Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to its Audit Committee oversight of cybersecurity and other information technology risks. Our Audit Committee oversees management’s implementation of our cybersecurity risk management program.
Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to its Audit Committee oversight of cybersecurity and other information technology risks. Our Audit Committee oversees management’s implementation of our cybersecurity risk management program. Our Audit Committee receives regular reports from management on our cybersecurity risks, and our full Board receives periodic updates.
Our Audit Committee receives regular reports from management on our cybersecurity risks, and our full Board receives a periodic update. In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as significant incidents. Our Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity.
In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as significant incidents. Our Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity.
Added
Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pr operties Stores As of February 3, 2024, we operated 1,174 Kohl's stores with 82 million selling square feet in 49 states. Our typical store lease has an initial term of 20-25 years and four to eight five-year renewal options.
Biggest changeAs of February 1, 2025 three of those stores have been closed and the remaining 24 are expected to close in the first quarter of 2025. Our typical store lease has an initial term of 20-25 years and four to eight five-year renewal options.
The following tables summarize key information about our Kohl's stores as of February 3, 2024: Number of Stores by State Mid-Atlantic Region: Northeast Region: South Central Region: Delaware 5 Connecticut 20 Arkansas 8 Maryland 23 Maine 5 Kansas 12 Pennsylvania 51 Massachusetts 26 Louisiana 7 Virginia 31 New Hampshire 11 Missouri 27 West Virginia 8 New Jersey 38 Oklahoma 11 New York 50 Texas 89 Rhode Island 4 Vermont 2 Total Mid-Atlantic 118 Total Northeast 156 Total South Central 154 Midwest Region: Southeast Region: West Region: Illinois 66 Alabama 14 Alaska 1 Indiana 42 Florida 50 Arizona 26 Iowa 18 Georgia 33 California 117 Michigan 46 Kentucky 18 Colorado 24 Minnesota 28 Mississippi 5 Idaho 6 Nebraska 8 North Carolina 31 Montana 4 North Dakota 4 South Carolina 17 Nevada 13 Ohio 59 Tennessee 20 New Mexico 4 South Dakota 4 Oregon 11 Wisconsin 42 Utah 12 Washington 21 Wyoming 2 Total Midwest 317 Total Southeast 188 Total West 241 Location Ownership Strip centers 951 Owned 406 Freestanding 161 Leased 521 Community & regional malls 62 Ground leased 247 16 Table of Contents Distribution Centers The following table summarizes key information about each of our distribution and e-fulfillment centers: Year Opened Square Footage Store distribution centers: Findlay, Ohio 1994 780,000 Winchester, Virginia 1997 450,000 Blue Springs, Missouri 1999 540,000 Corsicana, Texas 2001 540,000 Mamakating, New York 2002 605,000 San Bernardino, California 2002 575,000 Macon, Georgia 2005 560,000 Patterson, California 2006 365,000 Ottawa, Illinois 2008 330,000 E-commerce fulfillment centers: Monroe, Ohio 2001 1,225,000 San Bernardino, California 2010 970,000 Edgewood, Maryland 2011 1,450,000 DeSoto, Texas 2012 1,515,000 Plainfield, Indiana 2017 975,000 Etna, Ohio 2021 1,300,000 We own all of the distribution and e-fulfillment centers except the San Bernardino, California locations and Corsicana, Texas, which are leased.
The following tables summarize key information about our Kohl's stores as of February 1, 2025: Number of Stores by State Mid-Atlantic Region: Northeast Region: South Central Region: Delaware 5 Connecticut 20 Arkansas 8 Maryland 23 Maine 5 Kansas 12 Pennsylvania 51 Massachusetts 24 Louisiana 7 Virginia 30 New Hampshire 11 Missouri 27 West Virginia 8 New Jersey 38 Oklahoma 11 New York 50 Texas 89 Rhode Island 4 Vermont 2 Total Mid-Atlantic 117 Total Northeast 154 Total South Central 154 Midwest Region: Southeast Region: West Region: Illinois 66 Alabama 14 Alaska 1 Indiana 42 Florida 52 Arizona 26 Iowa 18 Georgia 33 California 116 Michigan 46 Kentucky 18 Colorado 24 Minnesota 29 Mississippi 5 Idaho 6 Nebraska 9 North Carolina 31 Montana 4 North Dakota 4 South Carolina 17 Nevada 13 Ohio 60 Tennessee 20 New Mexico 4 South Dakota 4 Oregon 11 Wisconsin 42 Utah 12 Washington 21 Wyoming 2 Total Midwest 320 Total Southeast 190 Total West 240 Location Ownership Strip centers 951 Owned 405 Freestanding 162 Leased 522 Community & regional malls 62 Ground leased 248 17 Table of Contents Distribution Centers The following table summarizes key information about each of our distribution and e-fulfillment centers: Year Opened Square Footage Store distribution centers: Findlay, Ohio 1994 780,000 Winchester, Virginia 1997 450,000 Blue Springs, Missouri 1999 540,000 Corsicana, Texas 2001 540,000 Mamakating, New York 2002 605,000 San Bernardino, California 2002 575,000 Macon, Georgia 2005 560,000 Patterson, California 2006 365,000 Ottawa, Illinois 2008 330,000 E-commerce fulfillment centers: Monroe, Ohio 2001 1,225,000 San Bernardino, California 2010 970,000 Edgewood, Maryland 2011 1,450,000 DeSoto, Texas 2012 1,515,000 Plainfield, Indiana 2017 975,000 Etna, Ohio 2021 1,300,000 We own all of the distribution and e-fulfillment centers except the San Bernardino, California locations and Corsicana, Texas, which are leased.
Corporate Facilities We own our corporate headquarters in Menomonee Falls, Wisconsin. We also own or lease additional buildings and office space, which are used by various corporate departments, including our credit operations.
We are leasing the San Bernardino e-fulfillment center through May 2025 when our lease expires; however, all business operations ceased in January 2025. Corporate Facilities We own our corporate headquarters in Menomonee Falls, Wisconsin. We also own or lease additional buildings and office space, which are used by various corporate departments, including our credit operations.
Added
Item 2. Pr operties Stores As of February 1, 2025, we operated 1,175 Kohl's stores with 82 million selling square feet in 49 states. During the fourth quarter of 2024, we announced the closure of 27 underperforming stores.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings For a description of our legal proceedings, see Note 7, Contingencies, of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, which is incorporated by reference in response to this item. Item 4. Mine Saf ety Disclosures Not applicable.
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Item 3. Legal Proceedings We are not currently party to any material legal proceedings; however, 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.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Item 4. Mine Safety Disclosures 17 Item 4A. Information about Our Executive Officers 17 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 19 Item 6. Reserved 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 7A.
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Item 4. Mine Saf ety Disclosures Not applicable.
Removed
Quantitative and Qualitative Disclosures about Market Risk 34 Item 8. Financial Statements and Supplementary Data 35
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Informat ion about Our Executive Officers Our executive officers as of February 1, 2025 were as follows: Name Age Position Ashley Buchanan 50 Chief Executive Officer Jill Timm 51 Chief Financial Officer Fred Hand 61 Senior Executive Vice President, Director of Stores Nick Jones 52 Chief Merchandising Officer Jennifer Kent 53 Chief Legal Officer and Corporate Secretary Siobhán Mc Feeney 53 Chief Technology and Digital Officer Christie Raymond 55 Chief Marketing Officer 18 Table of Contents Ashley Buchanan Mr.
Added
Buchanan has served as Chief Executive Officer since January 2025. Prior to joining Kohl's, Mr. Buchanan served as Chief Executive Officer of The Michaels Companies from 2020 to 2025. Mr. Buchanan has also held various roles of increased leadership across the retail sector, including Chief Merchant at Sam’s Club and Chief Merchandising and Chief Operating Officer for Walmart U.S. eCommerce.
Added
Jill Timm Ms. Timm has served as Chief Financial Officer since November 2019. Ms. Timm joined the Company in 1999 and has held a number of progressive leadership roles across several areas of finance, most recently having served as Executive Vice President of Finance. Prior to joining the Company, she served as senior auditor at Arthur Andersen LLP.
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Fred Hand Mr. Hand has served as Senior Executive Vice President, Director of Stores since September 2023. Prior to joining the Company, Mr. Hand served as Chief Executive Officer of Tuesday Morning from May 2021 to November 2022. Mr.
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Hand also held progressive leadership roles in stores at Burlington, including Chief Operating Officer, as well as held various senior leadership positions in stores and visual merchandising at May Department Stores (then Macy's), and Filene's. Nick Jones Mr. Jones has served as Chief Merchandising Officer since March 2023. Prior to joining the Company, Mr.
Added
Jones served as Chief Executive Officer at Joules Group — a premium British lifestyle clothing brand from September 2019 to August 2022. Mr. Jones has also held a variety of business and merchandise leadership positions with ASDA/Walmart UK and Marks & Spencer. Jennifer Kent Ms. Kent has served as Chief Legal Officer and Corporate Secretary since February 2023.
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Prior to joining the Company, Ms. Kent served in various legal leadership roles at Quad/Graphics, Inc., a publicly traded Milwaukee-based company, from 2010 to February 2023, most recently having served as its Executive Vice President and Chief People and Legal Officer and Corporate Secretary. Ms.
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Kent also held a variety of other legal roles throughout her career, including as an Associate General Counsel at Harley-Davidson Motor Company, an Assistant United States Attorney at the U.S. Attorney’s Office, and as an associate at Foley & Lardner LLP. Siobhán Mc Feeney Ms. Mc Feeney has served as Chief Technology and Digital Officer since July 2022.
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She joined the Company in January 2020 as Senior Vice President, Technology. Prior to joining the Company, Ms. Mc Feeney served in a number of technology leadership roles, including leading innovation and strategy at Pivotal Software, Inc. from 2014 to January 2020. Ms.
Added
Mc Feeney has also held various leadership roles at AAA Northern California, including Chief Financial Officer, Chief Information Officer, and Interim Chief Executive Officer. Christie Raymond Ms. Raymond has served as Chief Marketing Officer since August 2022.
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She joined the Company in October 2017 as Senior Vice President, Media and Personalization and was promoted to Executive Vice President, Customer Engagement, Analytics & Insights in June 2020.
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Prior to joining the Company, she served in marketing, new business, and strategic planning leadership roles at The Walt Disney Company and Aspen Club Technologies. 19 Table of Contents PA RT II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table contains information for shares repurchased and shares acquired from employees in lieu of amounts required to satisfy minimum tax withholding requirements upon the vesting of the employees’ restricted stock during the three fiscal months ended February 3, 2024: (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 October 29 - November 25, 2023 2,444 $22.54 — $2,476 November 26 – December 30, 2023 47,766 25.53 — 2,476 December 31, 2023 - February 3, 2024 69,227 26.32 — 2,476 Total 119,437 $25.93 —
Biggest changeThe following table contains information for shares repurchased and shares acquired from employees in lieu of amounts required to satisfy minimum tax withholding requirements upon the vesting of the employees’ restricted stock during the three fiscal months ended February 1, 2025: (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 November 3 - November 30, 2024 3,647 $18.58 — $2,476 December 1, 2024 – January 4, 2025 10,231 14.20 — 2,476 January 5 - February 1, 2025 1,313 13.51 — 2,476 Total 15,191 $15.19 —
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters, and Issuer Purchases of Equity Securities Market information Our Common Stock has been traded on the New York Stock Exchange ("NYSE") since May 19, 1992, under the symbol “KSS.” Holders As of March 20, 2024, there were approximately 3,200 record holders of our Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters, and Issuer Purchases of Equity Securities Market information Our Common Stock has been traded on the New York Stock Exchange ("NYSE") since May 19, 1992, under the symbol “KSS.” Holders As of March 12, 2025, there were approximately 3,100 record holders of our Common Stock.
Performance Graph The graph below compares our cumulative five-year shareholder return to that of the Standard & Poor’s (“S&P”) 500 Index and the S&P 500 Consumer Discretionary Distribution & Retail Index, formerly known as the S&P 500 Retailing Index.
Performance Graph The graph below compares our cumulative five-year shareholder return to that of the Standard & Poor’s (“S&P”) 500 Index and the S&P 500 Consumer Discretionary Distribution & Retail Index.
The graph assumes an investment of $100 on February 2, 2019 and reinvestment of dividends.
The graph assumes an investment of $100 on February 1, 2020 and reinvestment of dividends.
The calculations exclude trading commissions and taxes. 19 Table of Contents Company / Index Feb 2, 2019 Feb 1, 2020 Jan 30, 2021 Jan 29, 2022 Jan 28, 2023 Feb 3, 2024 Kohl’s Corporation $100.00 $67.42 $72.06 $100.18 $55.41 $50.62 S&P 500 Index 100.00 121.56 142.53 172.46 161.03 199.42 S&P 500 Consumer Discretionary Distribution & Retail Index 100.00 120.61 170.52 180.58 149.54 210.02 Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities We did not sell any equity securities in fiscal year 2023 that were not registered under the Securities Act.
The calculations exclude trading commissions and taxes. 20 Table of Contents Company / Index Feb 1, 2020 Jan 30, 2021 Jan 29, 2022 Jan 28, 2023 Feb 3, 2024 Feb 1, 2025 Kohl’s Corporation $100.00 $106.88 $148.59 $82.19 $75.08 $41.57 S&P 500 Index 100.00 117.25 141.87 132.47 164.06 202.59 S&P 500 Consumer Discretionary Distribution & Retail Index 100.00 141.39 149.72 123.99 174.14 227.91 Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities We did not sell any equity securities in fiscal year 2024 that were not registered under the Securities Act.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeInflation We expect that our operations will continue to be influenced by general economic conditions, including food, fuel, and energy prices, higher unemployment, wage inflation, and costs to source our merchandise, including tariffs. There can be no assurances that such factors will not impact our business in the future.
Biggest change(Dollars in Millions, Except per Share Data) 2024 Net income (GAAP) $109 Impairments, store closing, and other costs 76 Income tax impact of items noted above (18) Adjusted Net income (non-GAAP) $167 Diluted earnings per share (GAAP) $0.98 Impairments, store closing, and other costs 0.69 Income tax impact of items noted above (0.17) Adjusted Diluted earnings per share (non-GAAP) $1.50 27 Table of Contents Inflation We expect that our operations will continue to be influenced by general economic conditions, including food, fuel, and energy prices, higher unemployment, wage inflation, and costs to source our merchandise, including tariffs.
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; third we will complete debt reduction transactions, when appropriate; and fourth we return excess cash to shareholders through our share repurchase program.
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; third we will complete debt reduction transactions, when appropriate; and fourth, when appropriate, we return excess cash to shareholders through our share repurchase program.
The expected lease term is used in determining whether the lease is accounted for as an operating lease or a finance lease. • Incremental borrowing rate —The incremental borrowing rate is the rate of interest that the lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
The expected lease term is used in determining whether the lease is accounted for as an operating lease or a finance lease. • Incremental borrowing rate —The incremental borrowing rate is the rate of interest that the lessee would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment.
Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our 2022 Form 10-K . 53 rd Week The retail calendar for fiscal January 2023 included a fifth week, resulting in a 14-week fiscal fourth quarter and a 53-week year.
Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our 2023 Form 10-K . 53 rd Week The retail calendar for fiscal January 2023 included a fifth week, resulting in a 14-week fiscal fourth quarter and a 53-week year.
The following are significant estimates used by management in accounting for real estate and other leases: • Accounting lease term —Our accounting lease term includes all noncancelable periods and renewal periods that are reasonably assured of being exercised.
The following are estimates used by management in accounting for real estate and other leases: • Accounting lease term —Our accounting lease term includes all noncancelable periods and renewal periods that are reasonably assured of being exercised.
See Notes 2 and 3 to the Consolidated Financial Statements for amounts outstanding on February 3, 2024 related to debt and leases. Other purchase obligations primarily include royalties, legally binding minimum lease and interest payments for stores opening in 2024 or later, as well as payments associated with technology, marketing, and donation agreements.
See Notes 2 and 3 to the Consolidated Financial Statements for amounts outstanding on February 1, 2025 related to debt and leases. Other purchase obligations primarily include royalties, legally binding minimum lease and interest payments for stores opening in 2025 or later, as well as payments associated with technology, marketing, and donation agreements.
The parties share equally in the operating profit of the arrangement which incorporates all expenses to run the arrangement including depreciation expense related to the assets. Amounts due to Sephora for their share of the operating profits are recorded in cost of merchandise sold.
The parties share equally in the operating profit of the arrangement which incorporates all expenses to run the arrangement including depreciation expense related to the assets. Amounts due to Sephora for their share of the operating profits are recorded in cost of merchandise sold. 34 Table of Contents
Our comparable sales in 2023 exclude the impact of the 53rd week and compare the 52 weeks ended January 27, 2024 to the 52 weeks ended January 28, 2023. Net Sales Net sales includes revenue from the sale of merchandise, net of expected returns and deferrals due to future performance obligations, and shipping revenue.
Our comparable sales in 2024 exclude the impact of the 53rd week in 2023 and compare the 52 weeks ended February 1, 2025 and January 27, 2024. Net Sales Net sales includes revenue from the sale of merchandise, net of expected returns and deferrals due to future performance obligations, and shipping revenue.
Item 7. Management’s Discussion and An alysis of Financial Condition and Results of Operations Executive Summary Kohl's is a leading omnichannel retailer operating 1,174 stores and a website (www.Kohls.com) as of February 3, 2024. Our Kohl's stores and website sell moderately-priced private and national brand apparel, footwear, accessories, beauty, and home products.
Item 7. Management’s Discussion and An alysis of Financial Condition and Results of Operations Executive Summary Kohl's is a leading omnichannel retailer operating 1,175 stores and a website (www.Kohls.com) as of February 1, 2025. Our Kohl's stores and website sell moderately-priced private and national brand apparel, footwear, accessories, beauty, and home products.
The obligations were $540 million as of February 3, 2024. Off-Balance Sheet Arrangements We have not provided any financial guarantees as of year-end fiscal 2023. We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt, or operating our business.
The obligations were $599 million as of February 1, 2025. Off-Balance Sheet Arrangements We have not provided any financial guarantees as of year-end fiscal 2024. We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt, or operating our business.
Impairment of Long-Lived Assets We review our long-lived assets for impairment when events or changes in circumstances, such as decisions to close a store or significant cash flow losses, indicate the carrying value of the asset may not be recoverable.
Impairment of Long-Lived Assets We review our long-lived assets for impairment when events or changes in circumstances, such as decisions to close a store or significant cash flow losses, indicate the carrying value of the asset may not be recoverable. All long-lived assets are reviewed for impairment at least annually.
Our cash and cash equivalents balance includes short-term investments of $15 million and $10 million as of February 3, 2024, and January 28, 2023, 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.
Our cash and cash equivalents balance includes short-term investments of $9 million and $15 million as of February 1, 2025, and February 3, 2024, 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.
In February 2023, $164 million in aggregate principal amount of our 3.25% notes matured and were repaid, and in December 2023, $111 million in aggregate principal amount of our 4.75% notes matured and were repaid. There was no cash used for treasury stock purchases in 2023 compared to $658 million used in 2022. Share repurchases are discretionary in nature.
In February 2023, $164 million in aggregate principal amount of our 3.25% notes matured and was repaid, and in December 2023, $111 million in aggregate principal amount of our 4.75% notes matured and was repaid. There was no cash used for treasury stock purchases in 2024 or 2023. Share repurchases are discretionary in nature.
Key financial results for 2023 as compared to 2022 include: • Net sales decreased 3.4%, to $16.6 billion. 2023 net sales included approximately $164 million from the 53rd week. • Comparable sales, which compares the 52-week period ending January 27, 2024 versus the 52-week period ended January 28, 2023, decreased 4.7%. • Gross margin as a percent of net sales was 36.7%, an increase of 347 basis points. • Selling, general & administration ("SG&A") expenses decreased 1.3%, to $5.5 billion.
Key financial results for 2024 as compared to 2023 include: • Net sales decreased 7.2%, to $15.4 billion. 2023 net sales included approximately $164 million from the 53rd week. • Comparable sales, which compares the 52-week period ending February 1, 2025 versus the 52-week period ended January 27, 2024, decreased 6.5%. • Gross margin as a percent of net sales was 37.2%, an increase of 50 basis points. • Selling, general & administration ("SG&A") expenses decreased 3.7%, to $5.3 billion.
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 • Debt reduction • Share repurchases • Cash flow from operations • Line of credit under our revolving credit facility • Issuance of debt The following table includes cash balances and changes: (Dollars in Millions) 2023 2022 2021 Cash and cash equivalents $183 $153 $1,587 Net cash provided by (used in): Operating activities $1,168 $282 $2,271 Investing activities (562) (783) (570) Financing activities (576) (933) (2,385) Adjusted free cash flow (a) $519 $(639) $1,556 (a) Non-GAAP financial measure.
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 • Debt reduction • Share repurchases • Cash flow from operations • Line of credit under our revolving credit facility • Issuance of debt 28 Table of Contents The following table includes cash balances and changes: (Dollars in Millions) 2024 2023 2022 Cash and cash equivalents $134 $183 $153 Net cash provided by (used in): Operating activities $648 $1,168 $282 Investing activities (467) (562) (783) Financing activities (230) (576) (933) Adjusted free cash flow (a) $104 $519 $(639) (a) Non-GAAP financial measure.
As of February 3, 2024, we were in compliance with all covenants. Contractual Obligations Material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, principal and interest payments for leases, and other purchase obligations.
As of February 1, 2025, we were in compliance with all covenants. 31 Table of Contents Contractual Obligations Material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, principal and interest payments for leases, and other purchase obligations.
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. Net cash used in investing activities decreased $221 million to $562 million in 2023.
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 real estate. Net cash used in investing activities decreased $95 million to $467 million in 2024.
Please see the “GAAP to Non-GAAP Reconciliation” for a reconciliation of adjusted free cash flow to net cash provided by operating activities.
Please see the “Adjusted Free Cash Flow (Non-GAAP measure)” for a reconciliation of net cash provided by operating activities to adjusted free cash flow.
Kohl’s is the principal on sales transactions with our customers and we recognize sales, cost of merchandise sold, and operating expenses in the respective lines on our consolidated statements of operations. Kohl’s owns and manages the inventory and funds capital expenditures for the arrangement.
The arrangement involves various activities including the merchandising, marketing, and operations of the shops and Kohls.com. Kohl’s is the principal on sales transactions with our customers and we recognize sales, cost of merchandise sold, and operating expenses in the respective lines on our consolidated statements of operations. Kohl’s owns and manages the inventory and funds capital expenditures for the arrangement.
If the expense as a percent of revenue increased over the prior year, the expense "deleveraged". 24 Table of Contents The following graph summarizes the changes in SG&A by expense type between 2022 and 2023: SG&A decreased $75 million, or 1.3%, to $5.5 billion in 2023. As a percentage of revenue, SG&A deleveraged by (67) basis points.
If the expense as a percent of revenue increased over the prior year, the expense "deleveraged". 25 Table of Contents The following graph summarizes the changes in SG&A by expense type between 2023 and 2024: SG&A decreased $204 million, or 3.7%, to $5.3 billion in 2024. As a percentage of revenue, SG&A deleveraged by 118 basis points.
Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same. 28 Table of Contents The majority of our financing activities generally include proceeds and/or repayments of long-term debt, dividend payments, and in 2022 and 2021 repurchases of common stock.
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 generally include proceeds and/or repayments of borrowings under our revolving credit facility and long-term debt, dividend payments, and repurchases of common stock.
We believe that adjusted free cash flow represents our ability to generate additional cash flow from our business operations. 29 Table of Contents The following table reconciles net cash provided by operating activities (a GAAP measure) to adjusted free cash flow (a non-GAAP measure): (Dollars in Millions) 2023 2022 2021 Net cash provided by operating activities $1,168 $282 $2,271 Acquisition of property and equipment (577) (826) (605) Free cash flow $591 $(544) $1,666 Finance lease and financing obligation payments $(93) $(106) $(125) Proceeds from financing obligations 21 11 15 Adjusted free cash flow $519 $(639) $1,556 Key Financial Ratios Key financial ratios that provide certain measures of our liquidity are as follows: (Dollars in Millions) 2023 2022 Working capital $798 $621 Current ratio 1.31 1.20 Our working capital and inventory levels typically build throughout the fall, peaking during the November and December holiday selling season.
The following table reconciles net cash provided by operating activities (a GAAP measure) to adjusted free cash flow (a non-GAAP measure): (Dollars in Millions) 2024 2023 2022 Net cash provided by operating activities $648 $1,168 $282 Acquisition of property and equipment (466) (577) (826) Free cash flow $182 $591 $(544) Finance lease and financing obligation payments $(79) $(93) $(106) Proceeds from financing obligations 1 21 11 Adjusted free cash flow $104 $519 $(639) Key Financial Ratios Key financial ratios that provide certain measures of our liquidity are as follows: (Dollars in Millions) 2024 2023 Working capital $257 $798 Current ratio 1.08 1.31 Our working capital and inventory levels typically build throughout the fall, peaking during the November and December holiday selling season.
As of February 3, 2024, our credit ratings and outlook were as follows: Moody’s S&P Fitch Long-term debt Ba3 BB BBB- Outlook Negative Negative Negative As a result of the downgrades, the interest rate on our 3.375% notes due May 2031 and 9.50% notes due May 2025 increased 50 basis points in May 2023 due to the coupon adjustment provisions within these notes.
As of February 1, 2025, our credit ratings and outlook were as follows: Moody’s S&P Fitch Long-term debt B1 BB- BB Outlook Negative Negative Stable As a result of the downgrades, the interest rate on our 3.375% notes due May 2031 will increase an additional 50 basis points in May 2025 due to the coupon adjustment provision within the note.
Markdown support related to merchandise that has not yet been sold is recorded in inventory. We also receive support from vendors for marketing and other costs that we have incurred to sell the vendors’ merchandise.
This markdown support generally relates to sold inventory or permanent markdowns and, accordingly, is reflected as a reduction to cost of merchandise sold. Markdown support related to merchandise that has not yet been sold is recorded in inventory. We also receive support from vendors for marketing and other costs that we have incurred to sell the vendors’ merchandise.
Adjusted free cash flow should be evaluated in addition to, and not considered a substitute for, other financial measures such as net income and net cash provided by operating activities.
Adjusted free cash flow is provided and should be evaluated in addition to, and not as an alternative to our other financial GAAP measures such as net cash provided by operating activities or net income.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect reported amounts.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect reported amounts. Management has discussed the development, selection, and disclosure of these estimates and assumptions with the Audit Committee of our Board of Directors.
The shrinkage rate from the most recent physical inventory, in combination with current events and historical experience, is used as the standard for the shrinkage accrual rate for the next inventory cycle. Historically, our actual physical inventory count results have shown our estimates to be reliable.
The shrinkage rate from the most recent physical inventory, in combination with current events and historical experience, is used as the standard for the shrinkage accrual rate for the next inventory cycle.
Inventory shrinkage is estimated as a percent of sales for the period between the last physical inventory count and the balance sheet date. Shrink is the difference between the recorded amount of inventory and the physical inventory. We perform an annual physical inventory count at the majority of our stores, E-Commerce fulfillment centers, and distribution centers.
Shrink is the difference between the recorded amount of inventory and the physical inventory. We perform an annual physical inventory count at the majority of our stores, E-Commerce fulfillment centers, and distribution centers.
Comparable sales includes all store and digital sales, except sales from stores open less than 12 months, stores that have been closed, and stores that have been relocated where square footage has changed by more than 10%.
Comparable sales includes all store and digital sales, except sales from stores open less than 12 months, stores that have been closed, and stores that have been relocated where square footage has changed by more than 10%. The following graph summarizes net sales dollars and the change in comparable sales over the prior year. Digital sales decreased 9% in 2024.
Fair market value is used in determining whether the lease is accounted for as an operating lease or a finance lease.
Fair market value is used in determining whether the lease is accounted for as an operating lease or a finance lease. Leases are further described in Note 3 of the Consolidated Financial Statements.
The following graph summarizes cost of merchandise sold and gross margin as a percent of net sales: Gross margin is calculated as net sales less cost of merchandise sold. Gross margin as a percent of net sales increased 347 basis points in 2023 compared to 2022.
The following graph summarizes cost of merchandise sold and gross margin as a percent of net sales: Gross margin is calculated as net sales less cost of merchandise sold. Gross margin in 2024 was 37.2% of net sales, an increase of 50 basis points to last year.
Cash dividend payments were $220 million ($2.00 per share) in 2023 and $239 million ($2.00 per share) in 2022. Adjusted Free Cash Flow We generated $519 million of adjusted free cash flow for 2023 compared to a negative adjusted free cash flow of $639 million in 2022.
Cash dividend payments were $222 million ($2.00 per share) in 2024 and $220 million ($2.00 per share) in 2023. 30 Table of Contents Adjusted Free Cash Flow (Non-GAAP measure) We generated $104 million of adjusted free cash flow for 2024 compared to $519 million in 2023.
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 maintaining strong credit ratings.
Financing Activities Our financing strategy is to ensure adequate 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.
We are closely monitoring developments on this ruling, specifically as it relates to the timing of implementation. 23 Table of Contents Cost of Merchandise Sold and Gross Margin 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; and terms cash discount.
If implemented, this rule could adversely impact Kohl’s credit card revenues; however, we are actively pursuing various mitigation strategies should the rule become effective. 24 Table of Contents Cost of Merchandise Sold and Gross Margin 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; and terms cash discount.
The accuracy of these estimates will be impacted by a number of factors including general economic conditions, changes in competitive landscape, and our ability to effectively manage the operations of the store.
Projected cash flows must be estimated for future periods throughout the remaining life of the property, which may be as many as 40 years in the future. The accuracy of these estimates will be impacted by a number of factors including general economic conditions, changes in competitive landscape, and our ability to effectively manage the operations of the store.
All long-lived assets are reviewed for impairment at least annually. 32 Table of Contents If our evaluations, which are performed on an undiscounted cash flow basis, indicate that the carrying amount of the asset may not be recoverable, the potential impairment is measured as the excess of carrying value over the fair value of the impaired asset.
If our evaluations, which are performed on an undiscounted cash flow basis, indicate that the carrying amount of the asset may not be recoverable, the potential impairment is measured as the excess of carrying value over the fair value of the impaired asset. Identifying impaired assets and quantifying the related impairment loss, if any, requires significant estimates by management.
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.
Digital penetration represented 28% of net sales in 2024 and 29% of net sales in 2023. 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.
Application of these accounting rules and assumptions made by management will determine if the lease is accounted for as a finance lease, an operating lease, or a financing obligation.
Income taxes are further described in Note 5 of the Consolidated Financial Statements. Leases Accounting for leased properties requires compliance with technical accounting rules and judgment by management. Application of these accounting rules and assumptions made by management will determine if the lease is accounted for as a finance lease, an operating lease, or a financing obligation.
As a percentage of total revenue, SG&A expense was 31.5%, an increase of 67 basis points. • Operating income was $717 million compared to $246 million in the prior year. As a percentage of total revenue, operating income was 4.1%, an increase of 274 basis points. • Net income of $317 million, or $2.85 per diluted share.
As a percentage of total revenue, SG&A expenses were 32.7%, an increase of 118 basis points year-over-year. • Operating income was $433 million compared to $717 million in the prior year. As a percentage of total revenue, operating income was 2.7%, a decrease of 143 basis points year-over-year. • Net income was $109 million, or $0.98 per diluted share.
Vendor Allowances We frequently receive allowances from our vendors for markdowns that we have taken in order to sell the vendors' merchandise and/or to support gross margins earned on those sales. This markdown support generally relates to sold inventory or permanent markdowns and, accordingly, is reflected as a reduction to cost of merchandise sold.
Historically, our actual physical inventory count results have shown our estimates to be reliable. 32 Table of Contents Vendor Allowances We frequently receive allowances from our vendors for markdowns that we have taken in order to sell the vendors' merchandise and/or to support gross margins earned on those sales.
The use of RIM will result in inventory being valued at the lower of cost or market since permanent markdowns are taken as a reduction of the retail value of inventories. A reserve is recorded if the future estimated selling price is less than cost.
RIM is an averaging method that has been widely used in the retail industry due to its practicality. The use of RIM will result in inventory being valued at the lower of cost or market since permanent markdowns are taken as a reduction of the retail value of inventories.
If we believe it is more likely than not that our position will be sustained, we recognize a benefit at the largest amount which we believe is cumulatively greater than 50% likely to be realized.
If we believe it is more likely than not that our position will be sustained, we recognize a benefit at the largest amount which we believe is cumulatively greater than 50% likely to be realized. 33 Table of Contents Unrecognized tax benefits require significant management judgment regarding applicable statutes and their related interpretation, the status of various income tax audits, and our particular facts and circumstances.
RIM inherently requires management judgment and estimates, such as the amount and timing of permanent markdowns to clear unproductive or slow-moving inventory, which may impact the ending inventory valuation as well as gross margin. Factors considered in the determination of permanent markdowns include current and anticipated demand, customer preferences, age of the merchandise, fashion trends, and weather conditions.
A reserve is recorded if the future estimated selling price is less than cost. RIM inherently requires management judgment and estimates, such as the amount and timing of permanent markdowns to clear unproductive or slow-moving inventory, which may impact the ending inventory valuation as well as gross margin.
When determining the stream of projected future cash flows associated with an individual store, management estimates future store performance including sales, gross margin, and controllable expenses, such as store payroll and occupancy expense. Projected cash flows must be estimated for future periods throughout the remaining life of the property, which may be as many as 40 years in the future.
The most significant of these estimates is the cash flow expected to result from the use and eventual disposition of the asset. When determining the stream of projected future cash flows associated with an individual store, management estimates future store performance including sales, gross margin, and controllable expenses, such as store payroll and occupancy expense.
Under RIM, the valuation of inventory at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail value of inventory. RIM is an averaging method that has been widely used in the retail industry due to its practicality.
Retail Inventory Method and Inventory Valuation The majority of our merchandise inventories are valued at the lower of cost or market using the retail inventory method (“RIM”). Under RIM, the valuation of inventory at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail value of inventory.
Leases are further described in Note 3 of the Consolidated Financial Statements. 33 Table of Contents Sephora Arrangement In 2020, we entered into an arrangement with Sephora to be the exclusive beauty offering at Kohl's and bring a transformational, elevated beauty experience to Kohl’s.
Sephora Arrangement In 2020, we entered into an arrangement with Sephora to be the exclusive beauty offering at Kohl's and bring a transformational, elevated beauty experience to Kohl’s. We sell prestige beauty products through Sephora-branded retail shops in certain Kohl’s stores and through a Sephora-branded offering on Kohls.com.
We now have a Sephora presence in over 900 of our stores, including 860 full size 2,500 square foot Sephora shops and 50 small format Sephora shops.
The following chart summarizes capital expenditures by major category: At the end of 2024, we had a Sephora presence in over 1,000 of our stores, including 861 full size 2,500 square foot shops and 190 small format Sephora shops.
Other Expenses (Dollars in Millions) 2023 2022 2021 Depreciation and amortization $749 $808 $838 Interest expense, net 344 304 260 Loss on extinguishment of debt — — 201 Depreciation and amortization decreased in 2023, primarily driven by reduced capital spending in technology.
Other Expenses (Dollars in Millions) 2024 2023 2022 Depreciation and amortization $743 $749 $808 Impairments, store closing, and other costs 76 — — Interest expense, net 319 344 304 Depreciation and amortization decreased in 2024, primarily driven by reduced capital spending in technology. This was partially offset by increased store investments, including Sephora shops and queuing lines.
Liquidity and Capital Resources Capital Allocation Our capital allocation strategy is to invest to maximize our overall long-term return and maintain a strong balance sheet, with a long-term objective of achieving an investment grade rating.
There can be no assurances that such factors will not 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 and maintain a strong balance sheet.
Operating activities generated cash of $1.2 billion in 2023 compared to $282 million in 2022. Operating cash flow increased primarily due to higher net income and strong inventory management in 2023. Inventory management resulted in managing receipts, down 9% versus last year.
Operating activities generated cash of $648 million in 2024 compared to $1.2 billion in 2023. Operating cash flow decreased due to a lower net income and inventory increasing 2% to last year as we invested into private brand inventory. Receipts decreased 5% in 2024 compared to a decrease of 9% in 2023 due to the private brand investment.
In 2022, our credit rating was also downgraded which resulted in the interest rates increasing 75 basis points, of which 25 basis points was effective in 2022 and the remaining 50 basis points became effective in May 2023. In total, the interest rate of both these notes have increased 125 basis points since their issuance.
Our credit rating was also downgraded in 2023 and 2022. This resulted in the interest rates on our 3.375% notes due May 2031 and 9.50% notes due May 2025 increasing 100 basis points in 2023 and 25 basis points in 2022.
Both parties to the arrangement are active participants and are exposed to significant risks and rewards dependent on the success of the activities of the arrangement. The arrangement involves various activities including the merchandising, marketing, and operations of the shops and Kohls.com.
We have opened 861 full size 2,500 square foot Sephora shops and 190 small format Sephora shops to date. Both parties to the arrangement are active participants and are exposed to significant risks and rewards dependent on the success of the activities of the arrangement.
The decrease was primarily driven by decreased marketing investments across all channels and decreased distribution costs due to lower receipts and increased productivity. Distribution costs, which exclude payroll related to online originated orders that were shipped from our stores, were $406 million for 2023 compared to $457 million for 2022. Partially offsetting the decreases were increased store costs.
The decrease in SG&A expenses was driven by strong cost discipline across the organization. In addition, as sales declined, expenses were further reduced across stores and distribution centers. Distribution costs, which exclude payroll related to online originated orders that were shipped from our stores, were $378 million for 2024 compared to $406 million for 2023.
Financing cash outflows also include payments to our landlords for leases classified as financing leases and financing obligations. Financing activities used $576 million in 2023 compared to $933 million in 2022. The decrease is driven by no treasury stock purchases occurring in 2023 partially offset by repayment of long-term borrowings.
Financing cash outflows also include payments to our landlords for leases classified as financing leases and financing obligations. Financing activities used $230 million in 2024 compared to $576 million in 2023. In 2024, we had net borrowings of $198 million on our $1.5 billion credit facility compared to net borrowings of $7 million in 2023.
Unrecognized tax benefits require significant management judgment regarding applicable statutes and their related interpretation, the status of various income tax audits, and our particular facts and circumstances. Also, as audits are completed or statutes of limitations lapse, it may be necessary to record adjustments to our taxes payable, deferred tax assets, tax reserves, or income tax expense.
Also, as audits are completed or statutes of limitations lapse, it may be necessary to record adjustments to our taxes payable, deferred tax assets, tax reserves, or income tax expense. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different.
As our stores were closed for a period during 2020, we have not included a measure of 2021 comparable sales as we do not believe it is a meaningful metric over this period of time. 2023 compared to 2022 Net sales decreased $575 million, or (3.4%), to $16.6 billion for 2023. • The decrease was driven by transaction volume down approximately 4% partially offset by an approximately 1% increase in average transaction value. 22 Table of Contents • The sales decrease was seen across all lines of business except for Accessories, as they underperformed the Company average.
As a result, our comparable sales calculation and digital penetration may not be consistent with the similarly titled measures reported by other companies. 23 Table of Contents 2024 compared to 2023 Net sales decreased $1.2 billion, or (7.2%), to $15.4 billion for 2024. • The decrease was driven by an approximately 3% decrease in average transaction value as well as a decrease of approximately 4% in transaction volume. • Sales decreased across all lines of business, except for Accessories.
The timing and amount of repurchases are based upon available cash balances, our stock price, and other factors. As previously noted, we are not planning any share repurchases until our balance sheet is strengthened on a path towards the long term target leverage ratio of 2.5 times adjusted EBITDAR (utilizing an eight times cash rent calculation for lease obligations).
The timing and amount of repurchases are based upon available cash balances, our stock price, and other factors. While we are not currently planning for share repurchases, we expect to resume share repurchases over the long-term following improvement in overall leverage.
Income Taxes (Dollars in Millions) 2023 2022 2021 Provision (benefit) for income taxes $56 $(39) $281 Effective tax rate 15.1% 68.1% 23.1% 25 Table of Contents Fiscal year 2023 resulted in an income tax provision compared to an income tax benefit in fiscal year 2022 due to the pre-tax book income in fiscal year 2023 compared to the pre-tax book loss in 2022.
Income Taxes (Dollars in Millions) 2024 2023 2022 Provision (benefit) for income taxes $5 $56 $(39) Effective tax rate 3.9% 15.1% 68.1% The effective tax rate for 2024 was lower than the effective tax rate for 2023 because of the impact of favorable results from uncertain tax positions and federal tax credits relative to consolidated book net income.
We remain committed to the dividend, and on February 28, 2024, our Board of Directors declared a quarterly cash dividend of $0.50 per share. The dividend will be paid on April 3, 2024 to all shareholders of record at the close of business on March 20, 2024.
The dividend will be paid on April 2, 2025 to all shareholders of record at the close of business on March 21, 2025. Although we remain committed to returning capital to shareholders, this reduction in the quarterly dividend allows for greater balance sheet flexibility.
Outstanding borrowings under the credit facility bear interest at a variable rate based on SOFR plus the applicable margin. Borrowings under the revolving credit facility, recorded as short-term debt, had $92 million outstanding as of February 3, 2024, and had $85 million as of January 28, 2023.
Borrowings under the revolving credit facility, recorded as short-term debt, had $290 million outstanding as of February 1, 2025, and had $92 million as of February 3, 2024. In the second quarter of 2024, we completed a voluntary redemption of the remaining $113 million of outstanding 9.50% notes due May 15, 2025.
The increase is primarily driven by more cash provided by operating activities due to a higher net income and a reduction in inventory purchases of 9%, and a decrease in capital expenditures related to less Sephora shop build-outs and store refreshes in 2023.
The decrease was primarily driven by less cash provided by operating activities due to a lower net income and inventory increasing 2% to last year as we invested into private brand inventory. Receipts decreased 5% in 2024 compared to a decrease of 9% in 2023 due to the private brand investment.
Digital penetration represented 29% of net sales in 2023. Other Revenue Other revenue includes revenue from credit card operations, third-party advertising on our website, unused gift cards and merchandise return cards (breakage), and other non-merchandise revenue.
(Dollars in Millions) 2024 2023 Change Women's $3,817 $4,281 (10.8%) Men's 3,079 3,455 (10.9%) Accessories (including Sephora) 3,060 2,813 8.8% Home 2,311 2,533 (8.8%) Children's 1,819 2,060 (11.7%) Footwear 1,299 1,444 (10.0%) Net Sales $15,385 $16,586 (7.2%) Other Revenue Other revenue includes revenue from credit card operations, third-party advertising on our website, unused gift cards and merchandise return cards (breakage), and other non-merchandise revenue.
In 2024, we anticipate capital expenditures of approximately $500 million, including the expansion of Sephora shops, the launch of Babies "R" Us, and the expansion of queuing lines to 350 stores. We will continue to invest in enhancing our omnichannel capabilities. Financing Activities Our financing strategy is to ensure adequate liquidity and access to capital markets.
In 2025, we anticipate capital expenditures of approximately $400 to $425 million, which includes the investments to complete the roll out of 29 Table of Contents Sephora, expansion of impulse queuing lines, omnichannel enhancements, and two new store openings. We will continue to invest in enhancing our omnichannel capabilities.
During the first quarter of 2023, S&P downgraded our senior unsecured credit rating from BB+ to BB and Moody's downgraded our rating from Ba2 to Ba3 while both also revised their outlook to negative. While Fitch reaffirmed our credit rating, they also revised their outlook to negative.
Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and our credit ratings. During 2024, S&P downgraded our senior unsecured credit rating from BB to BB-, Moody's downgraded our rating from Ba3 to B1, and Fitch downgraded our rating from BBB- to BB.
The decrease was primarily driven by fewer rollouts of Sephora shop build-outs and store refreshes undertaken in 2023, consistent with our capital expenditure plans for fiscal 2023. 27 Table of Contents The following chart summarizes capital expenditures by major category: In 2023, we opened 254 full size Sephora shops and 45 small format shops.
The decrease was primarily driven by fewer Sephora shop openings and other investments, consistent with our reduced capital expenditure plans for fiscal 2024.
The following graph summarizes other revenue: Other revenue decreased $47 million in 2023 driven by a decline in credit revenue due to increasing credit loss rates. In addition, as it relates to our credit business and recent regulatory developments, the CFPB has finalized a rule that will lower the late fees credit card companies can charge.
The following graph summarizes other revenue: Other revenue decreased $54 million in 2024 due to lower credit revenue, driven by a decrease in net sales, lower revolving credit balances, and an increase in loss rates.
Financial and Capital Outlook For fiscal year 2024, the Company currently expects the following: • Net sales: A decrease of (1%) to an increase of 1% • Comparable sales: In the range of 0% to 2% • Operating margin: In the range of 3.6% to 4.1% • Diluted EPS: In the range of $2.10 to $2.70, excluding any non-recurring charges. • Capital Expenditures: Approximately $500 million, including expansion of Sephora arrangement and other store-related investments The Company’s guidance includes the potential impact from credit card late fee regulatory changes in the second half of 2024. 21 Table of Contents Results of Operations For our comparison and discussion of 2022 and 2021, see Item 7.
Financial and Capital Outlook For fiscal year 2025, the Company currently expects the following: • Net sales: A decrease of (5%) to a decrease of (7%) • Comparable sales: A decrease of (4%) to a decrease of (6%) • Operating margin: In the range of 2.2% to 2.6% • Diluted EPS: In the range of $0.10 to $0.60 22 Table of Contents • Capital Expenditures: In the range of $400 to $425 million • Dividend: On March 11, 2025, Kohl’s Board of Directors declared a quarterly cash dividend on the Company’s common stock of $0.125 per share.
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This compares to net loss of $19 million, or ($0.15) per diluted share, in the prior year. • Inventory was $2.9 billion, a decrease of 10% to last year, driven by managing receipts down 9% versus last year. • Operating cash flow was $1.2 billion. Our Strategy Kohl's strategy is focused on delivering long-term shareholder value.
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This compares to net income of $317 million, or $2.85 per diluted share in the prior year. • On an adjusted non-GAAP basis, our adjusted net income was $167 million, or $1.50 per adjusted diluted share.
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To achieve this, the Company has established four overarching priorities to drive improved sales and profitability. These priorities include enhancing the customer experience, accelerating and simplifying its value strategies, managing inventory and expenses with discipline, and strengthening the balance sheet.
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(a) • Operating cash flow was $648 million. • Long-term debt was reduced by $113 million through the voluntary redemption of the remaining 9.50% notes due May 15, 2025. (a) Non-GAAP financial measures.
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Comparable sales and digital penetration measures vary across the retail industry. As a result, our comparable sales calculation and digital penetration may not be consistent with the similarly titled measures reported by other companies. The following graph summarizes net sales dollars and the change in comparable sales over the prior year.
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Please see the “GAAP to Non-GAAP Reconciliation” for a reconciliation of net income to adjusted net income and diluted earnings per share to adjusted diluted earnings per share. Our Strategy Kohl's remains committed to driving long-term shareholder value by providing our customers with great product, great value, and a great experience.
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Partially offsetting this decrease was a 23% increase in Accessories driven by over a 90% increase in Sephora compared to the prior year. Sephora sales exceeded $1.4 billion in 2023.
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To achieve this, we will offer a curated balanced assortment, reestablish Kohl’s to be a leader in value and quality, and enhance our omnichannel platform to deliver a frictionless experience to customers.
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(Dollars in Millions) 2023 2022 Change Women's $4,281 $4,654 (8.0%) Men's 3,455 3,679 (6.1%) Accessories (including Sephora) 2,813 2,279 23.4% Home 2,533 2,791 (9.2%) Children's 2,060 2,176 (5.3%) Footwear 1,444 1,582 (8.7%) Net Sales $16,586 $17,161 (3.4%) • Digital sales decreased 14% for the year as sales were impacted by the elimination of online-only promotions as we worked to simplify our value strategies.
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The dividend is payable April 2, 2025 to shareholders of record at the close of business on March 21, 2025. Results of Operations For our comparison and discussion of 2023 and 2022, see Item 7.
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The final rule will have a negative impact on our credit card revenues if unmitigated. We are actively pursuing various initiatives to mitigate the effects of this ruling including scaling our recently launched co-brand card and other various initiatives with Capital One, our credit partner.
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These amounts do not take into consideration fulfillment node or digital returns processed in stores. Comparable sales and digital penetration measures vary across the retail industry.
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The increase in gross margin was driven by lower clearance markdowns, lower freight costs, reduced digital-related cost of shipping, and the simplification of our value strategies. We expect gross margin to expand 40 to 50 basis points in 2024, driven by strong inventory management, lower freight expense, and continued benefits from the simplification of our value strategies.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAdditionally, the CFPB finalized a rule in March 2024 which will lower the safe harbor dollar amount credit card companies can charge for late fees for a late payment. The rule will have a negative impact on our credit card revenues if our steps to mitigate the impact of such rule are not successful. 34 Table of Contents
Biggest changeAdditionally, the CFPB finalized a rule in March 2024 which lowers the safe harbor dollar amount credit card companies can charge for late fees for a late payment. The rule is subject to legal challenge, and implementation of the rule has been delayed following a preliminary injunction. As of February 1, 2025, this injunction remains in effect.
We are also subject to interest rate risk from changes in the interest rates under our $1.5 billion revolving credit facility. Outstanding borrowings under the credit facility bear interest at a variable rate based on SOFR plus the applicable margin. Outstanding borrowings under the revolving credit facility, recorded as short-term debt, were $92 million as of February 3, 2024.
We are also subject to interest rate risk from changes in the interest rates under our $1.5 billion revolving credit facility. Outstanding borrowings under the credit facility bear interest at a variable rate based on SOFR plus the applicable margin. Outstanding borrowings under the revolving credit facility, recorded as short-term debt, were $290 million as of February 1, 2025.
Quantitative and Quali tative Disclosures about Market Risk Our operating results are subject to interest rate risk as the $600 million of notes issued in April 2020, $113 million of which remain outstanding, and the $500 million of notes issued in March 2021 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., both of which occurred in 2022 and 2023.
Quantitative and Quali tative Disclosures about Market Risk Our operating results are subject to interest rate risk as the $500 million of notes issued in March 2021 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., both of which occurred in 2024, 2023, and 2022.
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If implemented, this rule could adversely impact Kohl’s credit card revenues; however, we are actively pursuing various mitigation strategies should the rule become effective. 35 Table of Contents

Other KSS 10-K year-over-year comparisons