FORM 10-Q |
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Wisconsin | 39-1630919 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin | 53051 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨¬ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
OTHER INFORMATION | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
October 29, 2016 | January 30, 2016 | October 31, 2015 | |||||||
Assets | (Unaudited) | (Audited) | (Unaudited) | ||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 597 | $ | 707 | $ | 501 | |||
Merchandise inventories | 4,721 | 4,038 | 5,254 | ||||||
Other | 336 | 331 | 312 | ||||||
Total current assets | 5,654 | 5,076 | 6,067 | ||||||
Property and equipment, net | 8,203 | 8,308 | 8,499 | ||||||
Other assets | 219 | 222 | 228 | ||||||
Total assets | $ | 14,076 | $ | 13,606 | $ | 14,794 | |||
Liabilities and Shareholders’ Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 2,097 | $ | 1,251 | $ | 2,141 | |||
Accrued liabilities | 1,235 | 1,206 | 1,244 | ||||||
Income taxes payable | 66 | 130 | 28 | ||||||
Current portion of capital lease and financing obligations | 128 | 127 | 126 | ||||||
Short-term debt | — | — | 400 | ||||||
Total current liabilities | 3,526 | 2,714 | 3,939 | ||||||
Long-term debt | 2,794 | 2,792 | 2,792 | ||||||
Capital lease and financing obligations | 1,702 | 1,789 | 1,817 | ||||||
Deferred income taxes | 298 | 257 | 216 | ||||||
Other long-term liabilities | 649 | 563 | 556 | ||||||
Shareholders’ equity: | |||||||||
Common stock | 4 | 4 | 4 | ||||||
Paid-in capital | 2,981 | 2,944 | 2,926 | ||||||
Treasury stock, at cost | (10,221 | ) | (9,769 | ) | (9,556 | ) | |||
Accumulated other comprehensive loss | (15 | ) | (17 | ) | (18 | ) | |||
Retained earnings | 12,358 | 12,329 | 12,118 | ||||||
Total shareholders’ equity | 5,107 | 5,491 | 5,474 | ||||||
Total liabilities and shareholders’ equity | $ | 14,076 | $ | 13,606 | $ | 14,794 |
Three Months Ended | Nine Months Ended | |||||||||||
October 29, 2016 | October 31, 2015 | October 29, 2016 | October 31, 2015 | |||||||||
Net sales | $ | 4,327 | $ | 4,427 | $ | 12,481 | $ | 12,817 | ||||
Cost of merchandise sold | 2,720 | 2,784 | 7,812 | 7,990 | ||||||||
Gross margin | 1,607 | 1,643 | 4,669 | 4,827 | ||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative | 1,080 | 1,099 | 3,074 | 3,120 | ||||||||
Depreciation and amortization | 232 | 236 | 700 | 695 | ||||||||
Impairments, store closing and other costs | (6 | ) | — | 186 | — | |||||||
Operating income | 301 | 308 | 709 | 1,012 | ||||||||
Interest expense, net | 76 | 81 | 233 | 248 | ||||||||
Loss on extinguishment of debt | — | 38 | — | 169 | ||||||||
Income before income taxes | 225 | 189 | 476 | 595 | ||||||||
Provision for income taxes | 79 | 69 | 173 | 218 | ||||||||
Net income | $ | 146 | $ | 120 | $ | 303 | $ | 377 | ||||
Net income per share: | ||||||||||||
Basic | $ | 0.83 | $ | 0.63 | $ | 1.68 | $ | 1.93 | ||||
Diluted | $ | 0.83 | $ | 0.63 | $ | 1.68 | $ | 1.92 | ||||
Dividends declared and paid per share | $ | 0.50 | $ | 0.45 | $ | 1.50 | $ | 1.35 |
Common Stock | Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | ||||||||||||||||||
Shares | Amount | Shares | Amount | Total | ||||||||||||||||||
Balance at January 30, 2016 | 370 | $ | 4 | $ | 2,944 | (184 | ) | $ | (9,769 | ) | $ | (17 | ) | $ | 12,329 | $ | 5,491 | |||||
Comprehensive income | — | — | — | — | — | 2 | 303 | 305 | ||||||||||||||
Stock options and awards, net of tax | 1 | — | 37 | — | (15 | ) | — | — | 22 | |||||||||||||
Dividends paid ($1.50 per common share) | — | — | — | 4 | — | (274 | ) | (270 | ) | |||||||||||||
Treasury stock purchases | — | — | — | (11 | ) | (441 | ) | — | — | (441 | ) | |||||||||||
Balance at October 29, 2016 | 371 | $ | 4 | $ | 2,981 | (195 | ) | $ | (10,221 | ) | $ | (15 | ) | $ | 12,358 | $ | 5,107 |
Nine Months Ended | ||||||
October 29, 2016 | October 31, 2015 | |||||
Operating activities | ||||||
Net income | $ | 303 | $ | 377 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 700 | 695 | ||||
Share-based compensation | 31 | 36 | ||||
Excess tax benefits from share-based compensation | (4 | ) | (10 | ) | ||
Deferred income taxes | 40 | (84 | ) | |||
Loss on extinguishment of debt | — | 169 | ||||
Impairments, store closing and other costs | 57 | — | ||||
Other non-cash revenues and expenses | 20 | 23 | ||||
Changes in operating assets and liabilities: | ||||||
Merchandise inventories | (679 | ) | (1,433 | ) | ||
Other current and long-term assets | 20 | 74 | ||||
Accounts payable | 846 | 630 | ||||
Accrued and other long-term liabilities | 23 | (6 | ) | |||
Income taxes | (77 | ) | (64 | ) | ||
Net cash provided by operating activities | 1,280 | 407 | ||||
Investing activities | ||||||
Acquisition of property and equipment | (591 | ) | (551 | ) | ||
Other | 7 | 3 | ||||
Net cash used in investing activities | (584 | ) | (548 | ) | ||
Financing activities | ||||||
Treasury stock purchases | (441 | ) | (789 | ) | ||
Shares withheld for taxes on vested restricted shares | (15 | ) | (26 | ) | ||
Dividends paid | (270 | ) | (264 | ) | ||
Proceeds from issuance of debt, net | — | 1,088 | ||||
Net borrowings under credit facilities | — | 400 | ||||
Reduction of long-term borrowings | — | (1,085 | ) | |||
Premium paid on redemption of debt | — | (163 | ) | |||
Capital lease and financing obligation payments | (95 | ) | (83 | ) | ||
Proceeds from stock option exercises | 6 | 146 | ||||
Excess tax benefits from share-based compensation | 4 | 10 | ||||
Proceeds from financing obligations | 5 | 1 | ||||
Net cash used in financing activities | (806 | ) | (765 | ) | ||
Net decrease in cash and cash equivalents | (110 | ) | (906 | ) | ||
Cash and cash equivalents at beginning of period | 707 | 1,407 | ||||
Cash and cash equivalents at end of period | $ | 597 | $ | 501 | ||
Supplemental information | ||||||
Interest paid, net of capitalized interest | $ | 198 | $ | 220 | ||
Income taxes paid | 217 | 370 | ||||
Non-cash investing and financing activities | ||||||
Property and equipment acquired through additional liabilities | $ | 39 | $ | 59 |
(Dollars in Millions) | Prior Classification | Current Classification | |||
Deferred taxes | Current deferred tax asset | Long-term deferred tax liability | $ | 136 | |
Deferred taxes | Long-term deferred tax liability | Other long-term assets | 32 | ||
Deferred taxes | Other long-term liabilities | Long-term deferred tax liability | 15 |
Outstanding | |||||||||||||
Maturity | Effective Rate | Coupon Rate | October 29, 2016 | January 30, 2016 | October 31, 2015 | ||||||||
(Dollars in Millions) | |||||||||||||
2021 | 4.81 | % | 4.00 | % | $ | 650 | $ | 650 | $ | 650 | |||
2023 | 3.25 | % | 3.25 | % | 350 | 350 | 350 | ||||||
2023 | 4.78 | % | 4.75 | % | 300 | 300 | 300 | ||||||
2025 | 4.25 | % | 4.25 | % | 650 | 650 | 650 | ||||||
2029 | 7.36 | % | 7.25 | % | 99 | 99 | 99 | ||||||
2033 | 6.05 | % | 6.00 | % | 166 | 166 | 166 | ||||||
2037 | 6.89 | % | 6.88 | % | 150 | 150 | 150 | ||||||
2045 | 5.57 | 5.55 | 450 | 450 | 450 | ||||||||
4.88 | % | 2,815 | 2,815 | 2,815 | |||||||||
Unamortized debt discount | (5 | ) | (5 | ) | (5 | ) | |||||||
Deferred financing costs | (16 | ) | (18 | ) | (18 | ) | |||||||
Long-term debt | $ | 2,794 | $ | 2,792 | $ | 2,792 |
Stock Options | Nonvested Stock Awards | Performance Share Units | |||||||||||||
(Shares and Units in Thousands) | Shares | Weighted Average Exercise Price | Shares | Weighted Average Grant Date Fair Value | Units | Weighted Average Grant Date Fair Value | |||||||||
Balance at beginning of period | 3,076 | $ | 52.65 | 2,211 | $ | 57.37 | 347 | $ | 67.53 | ||||||
Granted | — | — | 1,342 | 46.26 | 12 | 67.48 | |||||||||
Exercised/vested | (150 | ) | 41.80 | (835 | ) | 56.19 | — | — | |||||||
Forfeited/expired | (298 | ) | 55.07 | (235 | ) | 55.34 | (32 | ) | 67.98 | ||||||
Balance at end of period | 2,628 | $ | 53.00 | 2,483 | $ | 51.95 | 327 | $ | 67.49 |
Three Months Ended | Nine Months Ended | |||||||||||
(Dollar and Shares in Millions) | October 29, 2016 | October 31, 2015 | October 29, 2016 | October 31, 2015 | ||||||||
Numerator—Net income | $ | 146 | $ | 120 | $ | 303 | $ | 377 | ||||
Denominator—Weighted average shares: | ||||||||||||
Basic | 177 | 191 | 180 | 196 | ||||||||
Impact of dilutive stock-based awards | — | 1 | — | 1 | ||||||||
Diluted | 177 | 192 | 180 | 197 | ||||||||
Antidilutive shares | 3 | 3 | 4 | 1 |
Three Months Ended | Nine Months Ended | |||||
(Dollars in Millions) | October 29, 2016 | October 29, 2016 | ||||
Store leases: | ||||||
Record future obligations | $ | (5 | ) | $ | 114 | |
Write-off net obligations | — | (21 | ) | |||
Impairments: | ||||||
Software licenses | — | 23 | ||||
Buildings and other store assets | — | 53 | ||||
Severance and other | (1 | ) | 17 | |||
Total | $ | (6 | ) | $ | 186 |
(Dollars in Millions) | Store Lease Operations | Severance | Total | ||||||
Balance - July 30, 2016 | $ | 118 | $ | 6 | $ | 124 | |||
Payments | (3 | ) | (1 | ) | (4 | ) | |||
Reversals | (5 | ) | (1 | ) | (6 | ) | |||
Balance - October 29, 2016 | $ | 110 | $ | 4 | $ | 114 |
• | Inventory per store decreased 9%. |
• | Gross margin as a percentage of sales increased 2 basis points to 37.1% driven by fewer promotional markdowns which were offset by higher shipping costs. |
• | Selling, general and administrative expenses (“SG&A”) decreased $19 million, or 2%, on strong expense management against the lower sales volume; however, we still experienced expense deleveraging. |
Change in Comparable Sales | Quarter | Year to Date | ||
Selling price per unit | 1.9 | % | 0.3 | % |
Units per transaction | 2.1 | 2.4 | ||
Average transaction value | 4.0 | 2.7 | ||
Number of transactions | (5.7 | ) | (5.1 | ) |
Comparable sales | (1.7 | )% | (2.4 | )% |
Quarter | Year to Date | |||||||||||||||||
2016 | 2015 | Increase/(Decrease) | 2016 | 2015 | (Decrease) | |||||||||||||
(Dollars in Millions) | $ | % | $ | % | ||||||||||||||
Gross margin | $1,607 | $1,643 | $ | (36 | ) | (2 | )% | $4,669 | $4,827 | $ | (158 | ) | (3 | )% | ||||
As a percent of net sales | 37.1 | % | 37.1 | % | 0.02 | % | 37.4 | % | 37.7 | % | (0.26 | )% |
Quarter | Year to Date | |||||||||||||||||
2016 | 2015 | Increase/(Decrease) | 2016 | 2015 | Increase/(Decrease) | |||||||||||||
(Dollars in Millions) | $ | % | $ | % | ||||||||||||||
Selling, general and administrative expenses | $1,080 | $1,099 | $ | (19 | ) | (2 | )% | $3,074 | $3,120 | $ | (46 | ) | (1 | )% | ||||
As a percent of net sales | 25.0 | % | 24.8 | % | 0.12 | % | 24.6 | % | 24.3 | % | 0.29 | % |
(Dollars In Millions) | Quarter | Year to Date | ||||
Increase in net revenues from credit card operations | $ | (10 | ) | $ | (23 | ) |
Corporate expenses | (9 | ) | (20 | ) | ||
Marketing costs, excluding credit card operations | (4 | ) | 9 | |||
Distribution costs | 1 | (2 | ) | |||
Store expenses | 3 | (10 | ) | |||
Total decrease | $ | (19 | ) | $ | (46 | ) |
Quarter | Year to Date | |||||||||||||||||||||
2016 | 2015 | Increase/(Decrease) | 2016 | 2015 | Increase/(Decrease) | |||||||||||||||||
(Dollars in Millions) | $ | % | $ | % | ||||||||||||||||||
Depreciation and amortization | $ | 232 | $ | 236 | $ | (4 | ) | (2 | )% | $ | 700 | $ | 695 | $ | 5 | 1 | % | |||||
Interest expense, net | 76 | 81 | (5 | ) | (6 | )% | 233 | 248 | (15 | ) | (6 | )% | ||||||||||
Impairments, store closing and other costs | (6 | ) | — | 6 | 100 | % | 186 | — | 186 | 100 | % | |||||||||||
Loss on extinguishment of debt | — | 38 | (38 | ) | (100 | )% | — | 169 | (169 | ) | (100 | )% | ||||||||||
Provision for income taxes | 79 | 69 | 10 | 14 | % | 173 | 218 | (45 | ) | (21 | )% | |||||||||||
Effective tax rate | 35.0 | % | 36.5 | % | 36.3 | % | 36.6 | % |
Three Months Ended | Nine Months Ended | |||||
(Dollars in Millions) | October 29, 2016 | October 29, 2016 | ||||
Store leases: | ||||||
Record future obligations | $ | (5 | ) | $ | 114 | |
Write-off net obligations | — | (21 | ) | |||
Impairments: | ||||||
Software licenses | — | 23 | ||||
Buildings and other store assets | — | 53 | ||||
Severance and other | (1 | ) | 17 | |||
Total | $ | (6 | ) | $ | 186 |
Quarter | ||||||||||||||||||
2016 | 2015 | |||||||||||||||||
Income before Taxes | Net Income | Earnings Per Share | Income before Taxes | Net Income | Earnings Per Share | |||||||||||||
(Dollars in Millions, Except per Share Data) | ||||||||||||||||||
GAAP | $ | 225 | $ | 146 | $ | 0.83 | $ | 189 | $ | 120 | $ | 0.63 | ||||||
Adjustments | ||||||||||||||||||
Impairments, store closing and other costs | (6 | ) | (4 | ) | (0.03 | ) | — | — | — | |||||||||
Loss on extinguishment of debt | — | — | — | 38 | 24 | 0.12 | ||||||||||||
Adjusted (Non-GAAP) | $ | 219 | $ | 142 | $ | 0.80 | $ | 227 | $ | 144 | $ | 0.75 |
Year to Date | ||||||||||||||||||
2016 | 2015 | |||||||||||||||||
Income before Taxes | Net Income | Earnings Per Share | Income before Taxes | Net Income | Earnings Per Share | |||||||||||||
(Dollars in Millions, Except per Share Data) | ||||||||||||||||||
GAAP | $ | 476 | $ | 303 | $ | 1.68 | $ | 595 | $ | 377 | $ | 1.92 | ||||||
Adjustments | ||||||||||||||||||
Impairments, store closing and other costs | 186 | 117 | 0.65 | — | — | — | ||||||||||||
Loss on extinguishment of debt | — | — | — | 169 | 107 | 0.54 | ||||||||||||
Adjusted (Non-GAAP) | $ | 662 | $ | 420 | $ | 2.33 | $ | 764 | $ | 484 | $ | 2.46 |
Cash Requirements | Sources of Funds |
• Operational needs, including salaries, rent, taxes and other costs of running our business • Capital expenditures • Inventory (seasonal and new store) • Share repurchases • Dividend payments | • Cash flow from operations • Short-term trade credit, in the form of extended payment terms • Line of credit under our revolving credit facility |
Increase/(Decrease) in Cash | |||||||||||
(Dollars in Millions) | 2016 | 2015 | $ | % | |||||||
Net cash provided by (used in): | |||||||||||
Operating activities | $ | 1,280 | $ | 407 | $ | 873 | 214 | % | |||
Investing activities | (584 | ) | (548 | ) | (36 | ) | (7 | )% | |||
Financing activities | (806 | ) | (765 | ) | (41 | ) | (5 | )% |
Moody’s | Standard & Poor’s | Fitch | |
Long-term debt | Baa2 | BBB | BBB |
(Dollars in Millions) | 2016 | 2015 | Increase/(Decrease) in Free Cash Flow | ||||||
Net cash provided by operating activities | $ | 1,280 | $ | 407 | $ | 873 | |||
Acquisition of property and equipment | (591 | ) | (551 | ) | (40 | ) | |||
Capital lease and financing obligation payments | (95 | ) | (83 | ) | (12 | ) | |||
Proceeds from financing obligations | 5 | 1 | 4 | ||||||
Free cash flow | $ | 599 | $ | (226 | ) | $ | 825 |
(Dollars in Millions) | October 29, 2016 | October 31, 2015 | ||||
Working capital | $ | 2,128 | $ | 2,128 | ||
Current ratio | 1.60 | 1.54 | ||||
Debt/capitalization | 47.5 | % | 48.4 | % |
(Dollars in Millions) | |||
Included Indebtedness | |||
Total debt | $ | 4,645 | |
Permitted exclusions | (5 | ) | |
Subtotal | 4,640 | ||
Rent x 8 | 2,208 | ||
Included Indebtedness | $ | 6,848 | |
Debt Compliance Adjusted EBITDAR - Rolling 12-month | |||
Net income | $ | 599 | |
Rent expense | 276 | ||
Depreciation and amortization | 939 | ||
Net interest | 312 | ||
Provision for income taxes | 339 | ||
EBITDAR | 2,465 | ||
Impairments, store closing and other costs | 186 | ||
Adjusted EBITDAR | 2,651 | ||
Stock based compensation | 46 | ||
Other non-cash revenues and expenses | 8 | ||
Debt Compliance Adjusted EBITDAR - Rolling 12-month | $ | 2,705 | |
Debt Ratio (a) | 2.53 | ||
Maximum permitted Debt Ratio | 3.75 | ||
(a) Included Indebtedness divided by Debt Compliance Adjusted EBITDAR |
(Dollars in Millions) | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||
July 31 – August 27, 2016 | 1,237,104 | $ | 42.43 | 1,229,074 | $ | 325 | ||||
August 28 – October 1, 2016 | 1,569,081 | 43.39 | 1,563,062 | 257 | ||||||
October 2 – October 29, 2016 | 1,227,076 | 44.26 | 1,221,421 | 203 | ||||||
Total | 4,033,261 | $ | 43.36 | 4,013,557 | $ | 203 |
Exhibit Number | Description | |
31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
Kohl’s Corporation (Registrant) | ||
Date: | December 2, 2016 | /s/ Wesley S. McDonald |
Wesley S. McDonald On behalf of the Registrant and as Chief Financial Officer (Principal Financial Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Kohl's Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: | December 2, 2016 | /s/ Kevin Mansell |
Kevin Mansell | ||
Chairman, Chief Executive Officer and President | ||
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Kohl's Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: | December 2, 2016 | /s/ Wesley S. McDonald |
Wesley S. McDonald | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
1. | This Quarterly Report on Form 10-Q of the Company for the quarterly period ended October 29, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | That the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | December 2, 2016 | /s/ Kevin Mansell |
Kevin Mansell | ||
Chairman, Chief Executive Officer and President | ||
(Principal Executive Officer) |
1. | This Quarterly Report on Form 10-Q of the Company for the quarterly period ended October 29, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | That the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | December 2, 2016 | /s/ Wesley S. McDonald |
Wesley S. McDonald | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
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Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Oct. 29, 2016 |
Nov. 26, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | KOHLS CORP | |
Entity Central Index Key | 0000885639 | |
Current Fiscal Year End Date | --01-28 | |
Entity Filer Category | Large Accelerated Filer | |
Trading Symbol | KSS | |
Document Type | 10-Q | |
Document Period End Date | Oct. 29, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 176,472,956 |
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 29, 2016 |
Oct. 31, 2015 |
Oct. 29, 2016 |
Oct. 31, 2015 |
|
Document Period End Date | Oct. 29, 2016 | |||
Net sales | $ 4,327 | $ 4,427 | $ 12,481 | $ 12,817 |
Cost of merchandise sold | 2,720 | 2,784 | 7,812 | 7,990 |
Gross margin | 1,607 | 1,643 | 4,669 | 4,827 |
Operating expenses: | ||||
Selling, general and administrative | 1,080 | 1,099 | 3,074 | 3,120 |
Depreciation and amortization | 232 | 236 | 700 | 695 |
Impairments, store closing and other costs | (6) | 0 | 186 | 0 |
Operating income | 301 | 308 | 709 | 1,012 |
Interest expense, net | 76 | 81 | 233 | 248 |
Gains (Losses) on Extinguishment of Debt | 0 | 38 | 0 | 169 |
Income before income taxes | 225 | 189 | 476 | 595 |
Provision for income taxes | $ 79 | $ 69 | 173 | 218 |
Net income | $ 303 | $ 377 | ||
Net income per share: | ||||
Basic (in dollars per share) | $ 0.83 | $ 0.63 | $ 1.68 | $ 1.93 |
Diluted (in dollars per share) | 0.83 | 0.63 | 1.68 | 1.92 |
Dividends declared and paid per share | $ 0.50 | $ 0.45 | $ 1.50 | $ 1.35 |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) shares in Millions, $ in Millions |
Total |
Common Stock |
Paid-In Capital |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Retained Earnings [Member] |
---|---|---|---|---|---|---|
Long-term Debt, Fair Value | $ 2,800 | |||||
Beginning Balance (in shares) at Jan. 30, 2016 | (370) | (184) | ||||
Beginning Balance at Jan. 30, 2016 | 5,491 | $ 4 | $ 2,944 | $ (9,769) | $ (17) | $ 12,329 |
Comprehensive income (loss) | 305 | 2 | ||||
Net income | 303 | 303 | ||||
Stock options and awards, (in shares) | 1 | 0 | ||||
Stock options and awards | 22 | 37 | ||||
Stock Issued During Period, Value, Stock Options Exercised | $ (15) | |||||
Dividends paid ($1.50 per common share) | (270) | $ (4) | (274) | |||
Treasury stock purchases, (in shares) | (11) | |||||
Treasury stock purchases | (441) | $ (441) | ||||
Ending Balance (in shares) at Oct. 29, 2016 | (371) | (195) | ||||
Ending Balance at Oct. 29, 2016 | 5,107 | $ 4 | $ 2,981 | $ (10,221) | $ (15) | $ 12,358 |
Long-term Debt, Fair Value | $ 3,000 |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 29, 2016 |
Oct. 31, 2015 |
Oct. 29, 2016 |
Oct. 31, 2015 |
|
Dividends declared and paid per share | $ 0.50 | $ 0.45 | $ 1.50 | $ 1.35 |
Treasury Stock | ||||
Stock Issued During Period Shares Stock Options Exercised And Restricted Stock Grants | 0 |
Basis of Presentation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
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Oct. 29, 2016 | |||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||
Business and Summary of Accounting Policies | Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for fiscal year end consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016 (Commission File No. 1-11084) as filed with the Securities and Exchange Commission on March 18, 2016. Due to the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. We operate as a single business unit. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") No. 605, "Revenue Recognition". In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date", which defers the effective date of ASU 2014-09 for all entities by one year. The original ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective in the first quarter of 2018. It will change the way we account for sales returns, our loyalty program and certain promotional programs. Based on current estimates, we do not expect these provisions of the ASU to have a material impact on our financial statements. We are currently evaluating the impact other provisions of the standard may have on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)". The core principle of the standard is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. We will be required to adopt the new standard in the first quarter of 2019. We are currently evaluating the impact this new standard will have on our financial statements. In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718)". This ASU modifies several aspects of accounting and reporting for share-based payment transactions. Under the new rules, excess income tax benefits and tax deficiencies related to share-based payments will be recognized within income tax expense in the statement of income, rather than within additional paid-in capital on the balance sheet. We are currently evaluating the potential impact that this provision, which is to be applied prospectively, will have on our financial statements. ASU 2016-09 also permits changes to an employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures. We will be required to adopt this new standard in the first quarter of 2017. We do not expect these provisions will have a material impact on our financial statements. In 2015, we adopted ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes (Topic 740)" which requires us to present deferred tax liabilities and assets as non-current in our balance sheet and corrected the presentation of certain other tax assets and liabilities. The following table summarizes changes to our October 31, 2015 balance sheet:
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Debt |
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Debt [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Long-term debt consists of the following unsecured senior debt:
ASC No. 820, "Fair Value Measurements and Disclosures", requires fair value measurements be classified in various pricing categories. Our long-term debt is classified as Level 1, financial instruments with unadjusted, quoted prices listed on active market exchanges. The estimated fair value of our long-term debt was $3.0 billion at October 29, 2016, $2.8 billion at January 30, 2016, and $2.9 billion at October 31, 2015. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | Stock-Based Compensation The following table summarizes our stock-based compensation activity for the nine months ended October 29, 2016:
|
Contingencies |
9 Months Ended |
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Oct. 29, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies We are subject to certain legal proceedings and claims arising out of the conduct of our business. In the opinion of management, the outcome of these proceedings and litigation will not have a material adverse impact on our consolidated financial statements. |
Net Income Per Section |
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Net Income Per Section [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Net Income Per Share The following table summarizes our basic and diluted net income per share calculations:
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Store Closures (Notes) |
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Restructuring, Impairment, and Other Activities Disclosure [Text Block] | On February 25, 2016, we announced plans to close 18 underperforming stores in fiscal 2016. The specific locations were announced in March 2016. Seventeen of the stores closed in June 2016. We closed the final store in November. Store employees impacted by the closures were offered the opportunity to work at nearby Kohl’s locations or a severance package. We recorded the following costs related to the store closures and the organizational realignment at our corporate office:
The store lease future obligation charge represents the discounted value of rents and other lease liabilities under non-cancellable lease terms and will be paid over the next 13 years. All of the severance will be paid out within two years. The remaining charge is primarily non-cash write-offs of assets and liabilities that were previously recorded on our books. During the quarter ended October 29, 2016, we reversed $6 million of costs that were recorded earlier in the year. The reversal includes severance for corporate associates that have found re-employment elsewhere and lease liabilities for a store that will be used for corporate purposes. The following table summarizes changes in the store closure and restructure reserve during the quarter:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of long-term debt | Long-term debt consists of the following unsecured senior debt:
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Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block] | The following table summarizes our stock-based compensation activity for the nine months ended October 29, 2016:
|
Net Income Per Section Net Income Per Section (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 29, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Section [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and diluted net income per share calculation | The following table summarizes our basic and diluted net income per share calculations:
|
Store Closures (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 29, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring Reserve by Type of Cost [Table Text Block] | The following table summarizes changes in the store closure and restructure reserve during the quarter:
|
Basis of Presentation (Narrative) (Details) - USD ($) $ in Millions |
Oct. 29, 2016 |
Jan. 30, 2016 |
Oct. 31, 2015 |
---|---|---|---|
Basis of Presentation (Narrative) [Abstract] | |||
Deferred Finance Costs, Net | $ 16 | $ 18 | $ 18 |
Deferred Tax Reclass | 136 | ||
Deferred Tax Asset Reclass | 32 | ||
FIN 48 Reclass | $ 15 |
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions |
Oct. 29, 2016 |
Jan. 30, 2016 |
Oct. 31, 2015 |
Jan. 31, 2015 |
---|---|---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Cash and Cash Equivalents, at Carrying Value | $ 597 | $ 707 | $ 501 | $ 1,407 |
Long-term Debt, Excluding Current Maturities | 2,794 | 2,792 | 2,792 | |
Long Term Investments Fair Value | $ 3,000 | $ 2,800 | $ 2,900 |
Stock-Based Compensation Performance Share Unit Activity (Details) - $ / shares shares in Thousands |
9 Months Ended | |
---|---|---|
Oct. 29, 2016 |
Jan. 30, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Performance Restricted Shares, Fair Value Beginning | $ 67.53 | |
Granted performance restricted share units | 12 | |
Performance Restricted Shares Fair Value, Granted | $ 67.48 | |
Forfeited performance restricted share units | (32) | |
Performance Restricted Shares Fair Value, Forfeited | $ 67.98 | |
Performance restricted shares units, ending | 327 | |
Performance Restricted Shares, Fair Value Ending | $ 67.49 |
Net Income Per Section Net Income Per Section (Details) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 29, 2016 |
Oct. 31, 2015 |
Oct. 29, 2016 |
Oct. 31, 2015 |
Nov. 01, 2014 |
|
Net income | $ 303 | $ 377 | |||
Basic | 177 | 191 | 180 | 196 | |
Impact of dilutive stock-based awards | 0 | 1 | 0 | 1 | |
Diluted | 177 | 192 | 180 | 197 | |
Antidilutive shares | 3 | 3 | 4 | 1 | |
Retained Earnings [Member] | |||||
Net income | $ 146 | $ 120 | $ 303 |
Store Closures (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 29, 2016 |
Oct. 31, 2015 |
Oct. 29, 2016 |
Oct. 31, 2015 |
Jul. 30, 2016 |
|
Restructuring Cost and Reserve [Line Items] | |||||
Restructuring Reserve | $ 114 | $ 114 | $ 124 | ||
Store closure, future lease obligation | (5) | 114 | |||
Store closure, write-off net obligation | 0 | 21 | |||
Impairment, software license | 0 | 23 | |||
Restructuring and Related Cost, Incurred Cost | 0 | 53 | |||
Severance and other store closure costs | (1) | 17 | |||
Impairments, store closing and other costs | (6) | $ 0 | 186 | $ 0 | |
Payments for Restructuring | (4) | ||||
Restructuring Reserve, Accrual Adjustment | (6) | ||||
Contract Termination [Member] | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Restructuring Reserve | 110 | 110 | 118 | ||
Payments for Restructuring | (3) | ||||
Restructuring Reserve, Accrual Adjustment | (5) | ||||
Employee Severance [Member] | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Restructuring Reserve | 4 | $ 4 | $ 6 | ||
Payments for Restructuring | (1) | ||||
Restructuring Reserve, Accrual Adjustment | $ (1) |
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