This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Kohl’s Corp. (KSS: chart) on February 28, 2008.

President: Kevin Mansell
Chairman and Chief Executive Officer: Larry Montgomery
Chief Financial Officer: Wes McDonald

Key Investors Issues

- The earnings per share dropped from $1.48 in last year to $1.31.
- Quarterly sales rose to $5.5 billion as against $5.4 billion in prior year.
- The firm repurchased 3.2 million shares for $134 million during the quarter.
- For fiscal 2007, net income was $1.08 billion, on sales of $16.47 billion.

Fourth Quarter Fiscal 2007 Financial Highlights

Net income for the quarter was approximately $412 million compared to $485 million last year.

EPS for the quarter was $1.31 compared to $1.48 last year.

Sales for the fourth quarter were approximately $5.5 billion this year versus $5.4 billion last year, up 0.7%.

Comp sales for the quarter decreased 4%, reflecting decreases in average transaction value of 1.3% and transactions per store of 2.7%. The northeast region generated the strongest comp sales. From a line of business perspective, accessories led the company for the quarter. Both footwear and men’s had positive comp sales increases for the year. The firm’s credit share was 43.3% for the quarter, reflecting an increase of approximately 240 basis points over the prior year quarter and 185 basis points over the prior year.

The gross margin rate for the quarter was 34.3%, down approximately 110 basis points from last year.

The decrease in the quarterly margin rate reflects deeper discounts as a result of a challenging retail environment.

SG&A increased approximately 3% for the quarter.

As expected, this was faster than sales but lower than the firm’s expectations of approximately 5% over last year. Credit and corporate expenses leveraged for the quarter. Stores, advertising and distribution center expense did not leverage for the quarter due to lower than planned sales, the firm’s desire to maintain a positive customer in-store experience and efforts to drive additional traffic in the holiday period.

Depreciation expense for the quarter was $126 million versus $104 million last year, an increase of approximately 21%.

Operating income for the quarter declined from $788 million last year to $684 million this year.

- Net interest expense increased to $23 million for the quarter versus $10 million last year.
- The income tax rate for the quarter was 37.7%.
- The company currently operates 929 stores compared to 817 at this time last year. The gross square footage is 82,538 while the selling square footage is 69,889.

The firm repurchased 3.2 million shares of its stock for $134 million at an average price of approximately $42 during the quarter.

At the end of the quarter, the basic shares were 312.9 million and diluted shares for the quarter were 313.8 million.

The firm saw very broad acceptance of all three of its new brand introductions - Simply Vera, Vera Wang; Elle; and Food Network – in 2007.

The new brands increased the firm’s share of wallet with its existing customer and based on results in its credit card portfolio brought in a new customer as well. The management anticipates that each of these brands will have significant growth in 2008.