Key questions and answers from the fourth quarter earnings call as presented by Kohl's Corporation on February 26, 2009

Jeffrey P. Klinefelter (Piper Jaffray): On the credit, can you give us any more insights on your expectations for receivable next year?

Wesley S. McDonald: We have seen approval rates deteriorate quite a bit in the fall, particularly in the fourth quarter and we have built that expectation in our guidance.

Jeffrey P. Klinefelter (Piper Jaffray): Are they going to be with tighter underwriting standards are you anticipating those receivables dropping, any pressure from that on comps?

Wesley S. McDonald: We have tightened our standards especially in high risk states, the states that most folks are continuing to mention, California, Florida, Arizona, Nevada.

We are also seeing some deterioration in some other states in the Midwest related to the auto industry. It is going to be of benefit to us in terms of leveraging next year. I do not expect it to be as big a benefit as it was this year, however that is built in our guidance and SG&A.

Jeffrey P. Klinefelter (Piper Jaffray): And how does this flow through your income statement and when might it start deteriorating, the contribution that you have been receiving?


Wesley S. McDonald: We treat it as a contra SG&A account and we settle up with Chase on a monthly basis and it is really a net revenue number which takes into account finance charges plus late fees plus any other revenue less bad debt expense.

We also do all the customer service and marketing on that, that is all on the nickel and all built into the SG&A assumptions we gave you earlier.

Jeffrey P. Klinefelter (Piper Jaffray): Is there an efficiency that you are starting to gain by leveraging the online medium a little bit more so than print and can that drop your dollars?

Kevin Mansell: Marketing is planned essentially in line with sales on a rate basis. So think about it from that perspective.

As it relates to the mix, we are definitely increasing our investment in direct mail but the largest increase in investment on a mixed basis is in digital advertising.

So while we are going to continue to have substantial support in our more traditional advertising like our tabs or our broadcasts, both TV and radio, digital advertising has got the largest single increase in the marketing budget.

Jeffrey P. Klinefelter (Piper Jaffray): So while the total dollars might not drop any faster than sales, you are getting more in prints for the same dollars by using digital?

Kevin Mansell: Yes.

Lorraine Maikis (Hutchison - Banc of America): Can you provide some color on what you are basing your negative 5% to 8% comp on, is that reflective of the current trends?

Wesley S. McDonald: It is reflective of the year trend which was down 6.9% and reflective of the quarter trend which was down 9.1%. It does not have anything to do with the February trend.

Charles Grom (JP Morgan): What is your comp hurdle rate looking like for 2009 and is the sensitivity to the margin line for every one point comp move up or down?

Wesley S. McDonald: It is basically flat for 2009. We hope to do better as we get through the year and as it goes down it is probably around 15 basis points on the down side and probably on the up side it is around eight to ten.

Charles Grom (JP Morgan): Could you wash out the step up in rent that you are going to see that is going to increase the pre-opening?