Hello,

I need help with Requirements 1-6. Attached are both financial statements for Kohl's. Is there any way it could be done by tomorrow?

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended February 1, 2014 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from ____________ to ___________ Commission file number 1-11084 KOHL'S CORPORATION (Exact name of registrant as specified in its charter) 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) Registrant's telephone number, including area code (262) 703-7000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.01 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes None X . No No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes X . Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X . Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of \"large accelerated filer,\" \"accelerated filer\" and \"smaller reporting company\" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer X Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X . At August 2, 2013 , the aggregate market value of the voting stock of the Registrant held by stockholders who were not affiliates of the Registrant was approximately $11.7 billion (based upon the closing price of Registrant's Common Stock on the New York Stock Exchange on such date). At March 12, 2014 , the Registrant had outstanding an aggregate of 208,557,520 sh ares of its Common Stock. Documents Incorporated by Reference: Portions of the Proxy Statement for the Registrant's Annual Meeting of Shareholders to be held on May 15, 2014 are incorporated into Parts II and III. Table of Contents KOHL'S CORPORATION INDEX PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. PART II Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. 3 Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Consolidated Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes In and Disagreements with Accountants on Accounting and Financial Disclosures Controls and Procedures Other Information PART III Item 10. Item 11. Item 12. Item 13. Item 14. PART IV Item 15. 3 5 9 9 12 12 13 13 16 17 30 30 30 31 32 33 Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services 33 Exhibits and Financial Statement Schedules Signatures Exhibit Index Index to Consolidated Financial Statements 35 36 34 34 34 34 34 37 F-1 Table of Contents PART I Item 1. Business Kohl's Corporation (the \"Company\" or \"Kohl's\") was organized in 1988 and is a Wisconsin corporation. As of February 1, 2014 , we operated 1,158 family-focused, value-oriented department stores and a website (www.Kohls.com) that sell moderately priced exclusive and national brand apparel, footwear, accessories, beauty and home products. Our stores generally carry a consistent merchandise assortment with some differences attributable to regional preferences. Our website includes merchandise which is available in our stores, as well as merchandise which is available only on-line. Our fiscal year ends on the Saturday closest to January 31 st each year. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. The following fiscal periods are presented in this report. Number of Fiscal Year 2013 2012 2011 Ended Weeks February 1, 2014 February 2, 2013 January 28, 2012 52 53 52 For discussion of our financial results, see Item 7, \"Management's Discussion and Analysis of Financial Condition and Results of Operations.\" Merchandise Our merchandise mix by line of business and brand type over the last three years are reflected in the table below: 2013 Line of Business Women's Men's Home Children's Accessories Footwear Total Brand Private and Exclusive National Total 31% 19% 18% 13% 10% 9% 100% 2012 2011 31% 31% 19% 18% 19% 19% 13% 10% 9% 13% 10% 8% 100% 100% 52% 52% 48% 48% 50% 50% 100% 100% 100% Our private brands generally are at lower price-points than our other brands. Most of our private brands are well-known established brands such as Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Life + Style. Exclusive brands generally are at higher price-points and are developed and marketed through agreements with nationally-recognized brands. Examples of our exclusive brands include Food Network, Jennifer Lopez, Marc Anthony, Rock & Republic and Simply Vera Vera Wang. We frequently launch new brands in order to maintain freshness in our inventory assortment and drive customer traffic to our stores and website. In 2013, we launched an assortment of over 20 new national beauty and fragrance brands in over 250 stores and on-line. In Spring 2014, we plan to combine the magic of Disney, one of the most recognizable brands in the world, with our highly successful Jumping Beans brand. We also plan to launch the next designer in our limited-time DesigNation series. In Fall 2014, we expect to begin selling IZOD menswear and Juicy Couture. Omni-Channel Shopping Experience Practical, easy shopping is about convenience. It's about providing customers the options which allow them to shop when they want and from where they want. At Kohl's, in-store convenience includes a neighborhood location close to home, convenient parking, easily-accessible entry, knowledgeable and friendly associates, wide aisles, a functional store layout, shopping carts/strollers and fast, centralized 3 Table of Contents checkouts. Though our stores have fewer departments than traditional, full-line department stores, the physical layout of the store and our focus on strong instock positions in style, color and size is aimed at providing a convenient shopping experience for an increasingly time-starved customer. On-line convenience begins with an easy-to-navigate, on-line shopping experience for the growing percentage of our customers that prefer shopping online. Kohls.com was launched in 2001 and has experienced substantial growth, growing at an annual growth rate of approximately 20% in 2013 and over 40% in 2012 and 2011. On-line sales, including shipping revenues, were $1.7 billion and accounted for approximately 9% of our total sales in 2013. Our website currently carries significantly more product offerings than our stores, with a primary focus on extended sizes, product line extensions, and web-exclusive product lines. We also are expanding our ability to meet the ever-changing needs of an increasingly technologically-savvy customer. Our in-store kiosks allow customers to order items from our stores and have them shipped to their homes with no shipping charges. All of our stores are equipped with Wi-Fi. We continue to improve our digital and mobile sales platforms. During 2013, we shipped selected on-line orders from approximately 200 of our stores and expect to have this capability in approximately 500 stores by the end of 2014. We are also building the infrastructure which will allow our customers to order on-line and pick up from our stores. Stores As of year-end 2013, we operated 1,158 stores. We have stores in all 48 of the continental United States and Alaska. Our stores are located in every large and intermediate sized market in the United States. During 2013, we opened 12 new stores. In 2014, we expect to increase our store count to 1,163. Substantially all of our recent store openings have been "small" stores with less than 64,000 square feet of retail space. Low-Cost Operating Structure An important aspect of our pricing strategy and overall profitability is a culture focused on maintaining a low-cost structure. Critical elements of this low-cost structure are our unique store format, lean staffing levels, sophisticated management information systems and operating efficiencies which are the result of centralized buying, advertising and distribution. We remain focused on providing the solid infrastructure needed to ensure consistent, low-cost execution. We proactively invest in distribution capacity and regional management to facilitate growth in new and existing markets as well as on-line. Our central merchandising organization tailors merchandise assortments to reflect regional climates and preferences. Technological systems and improvements support our low-cost culture by enhancing productivity and providing the information needed to make key merchandising decisions. Distribution We receive substantially all of our store merchandise at our nine retail distribution centers. A small amount of our merchandise is delivered directly to the stores by vendors or their distributors. The retail distribution centers, which are strategically located throughout the United Sates, ship merchandise to each store by contract carrier several times a week. We also operate four fulfillment centers that service our E-Commerce business. Some of our E-Commerce sales are shipped directly to our customers by third-party vendors. See Item 2, \"Properties,\" for additional information about our distribution centers. Employees As of February 1, 2014 , we employed approximately 137,000 associates, including approximately 31,000 full-time and 106,000 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 our relations with our associates are very good. Competition The retail industry is highly competitive. Management considers style, quality and price to be the most significant competitive factors in the industry. Merchandise mix, brands, service, customer experience and convenience are also key competitive factors. Our primary competitors are traditional department stores, upscale mass merchandisers, off-price retailers, specialty stores and on-line only retailers. Our specific competitors vary from market to market. 4 Table of Contents Merchandise Vendors We purchase merchandise from numerous domestic and foreign suppliers. We have Terms of Engagement requirements which set forth the basic minimum requirements all business partners must meet in order to do business with us. Our Terms of Engagement include provisions regarding laws and regulations, employment practices, ethical standards, environmental and legal requirements, communication, monitoring/compliance, record keeping, subcontracting and corrective action. Our expectation is that all business partners will comply with these Terms of Engagement and quickly remediate any deficiencies, if noted, in order to maintain our business relationship. Approximately 30% of the merchandise we sell is sourced through a third-party purchasing agent. None of our vendors individually accounted for more than 5% of our net purchases during 2013. We have no significant long-term purchase commitments or arrangements with any of our suppliers, and believe that we are not dependent on any one supplier. We believe we have good working relationships with our suppliers. Seasonality Our business, like that of most retailers, is subject to seasonal influences. The majority of our sales and income are typically realized during the second half of each fiscal year. The back-to-school season extends from August through September and represents approximately 15% of our annual sales. Approximately 30% of our annual sales occur during the holiday season in the months of November and December. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the fiscal year. Revenues and costs associated with the opening of new stores may also affect our quarterly results. Trademarks and Service Marks The name \"Kohl's\" is a registered service mark of one of our wholly-owned subsidiaries. We consider this mark and the accompanying name recognition to be valuable to our business. This subsidiary has over 200 additional registered trademarks, trade names and service marks, most of which are used in our private label program. Available Information Our corporate website is www.KohlsCorporation.com. Through the \"Investor Relations\" portion of this website, we make available, free of charge, our proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, SEC Forms 3, 4 and 5 and any amendments to those reports as soon as reasonably practicable after such material has been filed with, or furnished to, the Securities and Exchange Commission (\"SEC\"). The following have also been posted on our website, under the caption \"Investor Relations-Corporate Governance\": Committee charters of our Board of Directors' Audit Committee, Compensation Committee and Governance & Nominating Committee Report to Shareholders on Social Responsibility Corporate Governance Guidelines Code of Ethics Any amendment to or waiver from the provisions of the Code of Ethics that is applicable to our Chief Executive Officer, Chief Financial Officer or other key finance associates will be disclosed on the \"Corporate Governance\" portion of the website. Information contained on our website is not part of this Annual Report on Form 10-K. Paper copies of any of the materials listed above will be provided without charge to any shareholder submitting a written request to our Investor Relations Department at N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin 53051 or via e-mail to Investor.Relations@Kohls.com. Item 1A. Risk Factors Forward-Looking Statements This Form 10-K contains \"forward-looking statements\" made within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as \"believes,\" \"anticipates,\" \"plans,\" \"may,\" \"intends,\" \"will,\" \"should,\" \"expects\" and similar expressions are intended to identify forward-looking statements. In addition, statements covering our future sales or financial performance and our plans, performance and other objectives, expectations or intentions are forward-looking statements, such as statements regarding our liquidity, debt service requirements, planned capital expenditures, future store openings, adequacy of capital resources and reserves and statements contained in the "2014 Outlook" section of Management's Discussion and Analysis of Financial Condition and Results of Operations. There are a number of important factors that could 5 Table of Contents cause our results to differ materially from those indicated by the forward-looking statements including, among others, those risk factors described below. Forward-looking statements relate to the date made, and we undertake no obligations to update them. Our sales, gross margin and operating results could be negatively impacted by a number of factors including, but not limited to those described below. Many of these risk factors are outside of our control. If we are not successful in managing these risks, they could have a negative impact on our sales, gross margin and/or operating results. Declines in general economic conditions, consumer spending levels and other conditions could lead to reduced consumer demand for our merchandise. Consumer spending habits, including spending for the merchandise that we sell, are affected by, among other things, prevailing economic conditions, levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy costs, income tax rates and policies, consumer confidence and consumer perception of economic conditions. In addition, consumer purchasing patterns may be influenced by consumers' disposable income, credit availability and debt levels. Recent economic conditions have caused disruptions and significant volatility in financial markets, increased rates of default and bankruptcy and declining consumer and business confidence, which has led to decreased levels of consumer spending, particularly on discretionary items. A continued or incremental slowdown in the U.S. economy and the uncertain economic outlook could continue to adversely affect consumer spending habits resulting in lower net sales and profits than expected on a quarterly or annual basis. As all of our stores are located in the United States, we are especially susceptible to deteriorations in the U.S. economy. 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. Actions by our competitors. The retail business 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. Those competitors, some of which have a greater market presence than Kohl's, include traditional store-based retailers, internet and catalog businesses and other forms of retail commerce. Unanticipated changes in the pricing and other practices of those competitors may adversely affect our performance. Our inability to offer merchandise our customers want and failure to successfully manage our inventory levels. Our business is dependent on our ability to anticipate fluctuations in consumer demand for a wide variety of merchandise. Failure to accurately predict constantly changing consumer tastes, preferences, spending patterns and other lifestyle decisions could create inventory imbalances and adversely affect our performance and long-term relationships with our customers. Additionally, failure to accurately predict changing consumer tastes may result in excess inventory, which could result in additional markdowns and adversely affect our operating results. We may be unable to source merchandise in a timely and cost-effective manner. Approximately 30% of the merchandise we sell is sourced through a third-party purchasing agent. The remaining merchandise is sourced from a wide variety of domestic and international vendors. Our ability to find qualified vendors and access products in a timely and efficient manner is a significant challenge which is typically even more difficult with respect to goods sourced outside the United States. Political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, and the ability to access suitable merchandise on acceptable terms are beyond our control and could adversely impact our performance. If any of our significant vendors were to become subject to bankruptcy, receivership or similar proceedings, we may be unable to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as current terms, which could adversely affect our sales and operating results. Failure of our vendors to adhere to our Terms of Engagement and applicable laws. A substantial portion of our merchandise is sourced by our vendors and by us from outside of the United States. We require all suppliers to comply with our Terms of Engagement for Kohl's Business Partners and all applicable local and national laws, rules and regulations pertaining to all aspects of factory operations in the jurisdictions they conduct business. From time to time, suppliers may not be in compliance with these standards or applicable laws. 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. 6 Table of Contents Increases in the price of merchandise, raw materials, fuel and labor or their reduced availability could increase our cost of goods. We could again experience inflation in our merchandise, raw materials, fuel and labor costs as we did during 2011. The cost of cotton, which is a key raw material in many of our products, had the most dramatic increase in 2011. The price and availability of cotton may fluctuate substantially, depending on a variety of factors, including demand, acreage devoted to cotton crops and crop yields, weather, supply conditions, transportation costs, energy prices, work stoppages, government regulation and government policy, economic climates, market speculation and other unpredictable factors. Fluctuations in the price and availability of fuel, labor and raw materials, such as cotton, could again affect our cost of goods and an inability to mitigate these cost increases, unless sufficiently offset with our pricing actions, might cause a decrease in our profitability; while any related pricing actions might cause a decline in our sales volume. Additionally, any decrease in the availability of raw materials could impair our ability to meet our production or purchasing requirements in a timely manner. Both the increased cost and lower availability of merchandise, raw materials, fuel and labor may also have an adverse impact on our cash and working capital needs as well as those of our suppliers. Ineffective marketing. We believe that differentiating Kohl's in the marketplace is critical to our success. We design our marketing programs to increase awareness of our brands, which we expect will create and maintain customer loyalty, increase the number of customers that shop our stores and website and increase our sales. If our marketing programs are not successful, our sales and profitability could be adversely affected. Damage to the reputation of the Kohl's brand or our private and exclusive brands. We believe the Kohl's brand name and many of our private and exclusive brand names are powerful sales and marketing tools and we devote significant resources to promoting and protecting them. We develop and promote private and exclusive brands that have generated national recognition. In some cases, the brands or the marketing of such brands are tied to or affiliated with well-known individuals. Damage to the reputations (whether or not justified) of our brand names or any affiliated individuals, could arise from product failures, litigation or various forms of adverse publicity, especially in social media outlets, and may generate negative customer sentiment, potentially resulting in a reduction in sales, earnings, and shareholder value. Product safety concerns. If our merchandise offerings do not meet applicable safety standards or our customers' expectations regarding safety, we could experience lost sales, experience increased costs and/or be exposed to legal and reputational risk. Events that give rise to actual, potential or perceived product safety concerns could expose us to government enforcement action and/or private litigation. Reputational damage caused by real or perceived product safety concerns, could have a negative impact on our sales. Disruptions in 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, merchandise planning and allocation functions. We also generate sales though the operations of our Kohls.com website. The failure of our information systems to perform as designed could disrupt our business and harm sales and profitability. Weather conditions could adversely affect consumer shopping patterns. Because a significant portion of our business is apparel and subject to weather conditions in our markets, our operating results may be adversely affected by severe or unexpected weather conditions. Frequent or unusually heavy snow, ice or rain storms; natural disasters such as earthquakes, tornadoes, floods and hurricanes; or extended periods of unseasonable temperatures in our markets could adversely affect our performance by affecting consumer shopping patterns, diminishing demand for seasonal merchandise and/or causing physical damage to our properties. Inability to successfully develop and maintain a relevant omni-channel experience for our customers. Omni-channel retailing is rapidly evolving as our customers become increasingly technologically savvy. Computers, mobile phones, tablets and other similar devices are progressively becoming a more important aspect of the shopping experience. Additionally, the Internet and other new technologies facilitate competitive entry and comparison shopping. We strive to offer an omni-channel shopping experience for our customers and use social media as a way to interact with our customers and enhance their shopping experiences. Our ability to compete with other retailers and to meet our customer expectations may suffer if we are unable to maintain or improve relevant customer-facing technology in a timely manner or if we or our third-party shipping and 7 Table of Contents 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. Our revenues, operating results and cash requirements are affected by the seasonal nature of our business. 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. This seasonality causes our operating results and cash needs to vary considerably from quarter to quarter. Growth in our E-Commerce business could adversely affect some of our operating metrics. In recent years, we have experienced significant growth in our E-Commerce business. Some of this growth has resulted in lower sales in our stores. Though this has no impact on our consolidated sales, it has had a negative effect on our net income as a percentage of sales as our stores are currently more profitable than our E-Commerce business. This profitability variance is due to a variety of factors including, but not limited to, a higher mix of lower margin merchandise in our E-Commerce business, shipping costs, and investments to provide the infrastructure necessary to grow the E-Commerce business. Though we are aggressively working to improve the profitability of our E-Commerce business, there can be no assurances that our E-Commerce business will become as profitable as our stores. Our inability to raise additional capital and maintain bank credit on favorable terms 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. 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 liquidity sources on favorable terms depends on multiple factors, including our operating performance and maintaining strong debt ratings. If our credit rating were lowered, our ability to access the debt markets and our cost of funds for new debt issuances could be adversely impacted. Additionally, if unfavorable capital market conditions exist if and when we were to seek additional financing, we may not be able to raise sufficient capital on favorable terms and on a timely basis (if at all). If our access to capital were to become significantly constrained or costs of capital increased significantly due to lowered credit ratings, prevailing industry conditions, the volatility of the capital markets or other factors, then our financial condition, results of operations and cash flows could be adversely affected. Inefficient or ineffective allocation of capital could adversely affect our operating results and/or shareholder value. 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. The actions taken to address other specific risks may affect how well we manage the more general risk of capital efficiency. 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. Changes in our credit card operations could adversely affect our sales and/or profitability. Our credit card operations facilitate merchandise sales and generate additional revenue from fees related to extending credit. The proprietary Kohl's credit card accounts have been sold to an unrelated third-party, but we share in the net risk-adjusted revenue of the portfolio, which is defined as the sum of finance charges, late fees and other revenue less write-offs of uncollectible accounts. Changes in funding costs related to interest rate fluctuations will be shared similar to the revenue if 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 credit card use, payment patterns and default rates may also result from a variety of economic, legal, social and other factors that we cannot control or predict with certainty. Changes that adversely impact our ability to extend credit and collect payments could negatively affect our results. An inability to attract and retain quality employees could result in higher payroll costs and adversely affect our operating results. Our performance is dependent on attracting and retaining a large number of quality associates. Many of those associates are in entry level or part-time positions with historically high rates of turnover. Our ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and changing demographics. Changes that adversely impact our ability to attract and retain quality associates could adversely affect our performance. 8 Table of Contents Regulatory and litigation developments could adversely affect our business operations and financial performance. Various aspects of our operations are subject to federal, state or local laws, rules and 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. For example, new legislation or regulations may result in increased costs directly for our compliance or indirectly to the extent such requirements increase prices of goods and services, reduce the availability of raw materials or further restrict our ability to extend credit to our customers. We continually monitor the state and federal legal/regulatory environment for developments that may impact us. Failure to detect changes and comply with such laws and regulations may result in an erosion of our reputation, disruption of business and/or loss of employee morale. 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. Unauthorized disclosure of sensitive or confidential customer information could severely damage our reputation, expose us to risks of litigation and liability, disrupt our operations and harm our business. As part of our normal course of business, we collect, process and retain sensitive and confidential customer, employee and company information. The protection of this data is extremely important to us, our employees and our customers. Despite the considerable security measures we have in place, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of 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. Item 1B. Unresolved Staff Comments Not applicable Item 2. Properties Stores As of February 1, 2014 , we operated 1,158 stores in 49 states. Our typical, or \"prototype,\" store has approximately 88,000 gross square feet of retail space and serves trade areas of 150,000 to 200,000 people. Most \"small\" stores are 55,000 to 68,000 gross square feet and serve trade areas of 100,000 to 150,000 people. Our typical lease has an initial term of 20-25 years and four to eight renewal options for consecutive five-year extension terms. Substantially all of our leases provide for a minimum annual rent that is fixed or adjusts to set levels during the lease term, including renewals. Approximately one-fourth of the leases provide for additional rent based on a percentage of sales over designated levels. 9 Table of Contents The following tables summarize key information about our stores. Selling Number of Stores Net Change 2012 Square Footage 2013 2013 (In Thousands) Mid-Atlantic Region: Delaware Maryland Pennsylvania Virginia West Virginia Total Mid-Atlantic 5 23 48 30 7 113 2 2 5 23 50 30 399 1,634 3,556 2,175 7 500 115 8,264 66 4,930 2,794 Midwest Region: 65 Illinois Indiana Iowa Michigan Minnesota 38 16 45 26 7 Nebraska North Dakota 3 Ohio South Dakota 58 Wisconsin Total Midwest Northeast Region: Connecticut 40 3 301 21 5 Maine Massachusetts New Hampshire 24 10 38 New Jersey 51 New York Rhode Island Vermont Total Northeast South Central Region: Arkansas Kansas Louisiana Missouri Oklahoma Texas Total South Central 3 1 153 8 12 6 26 10 84 146 10 1 1 2 1 5 1 1 2 1 1 39 18 45 1,131 3,336 40 1,976 479 263 4,250 244 2,894 306 22,297 21 38 51 1,474 388 1,907 761 2,901 3,844 3 1 227 77 155 11,579 8 572 26 7 4 58 3 5 25 11 12 810 6 421 26 10 1,859 85 6,140 147 10,522 720 Table of Contents Selling Number of Stores 2012 Net Change Square Footage 2013 2013 (In Thousands) Southeast Region: Alabama Florida 13 53 35 16 5 Georgia Kentucky Mississippi North Carolina South Carolina 31 15 20 Tennessee Total Southeast 188 1 1 14 53 35 16 904 3,874 2,554 1,127 15 20 378 2,195 1,033 1,398 189 13,463 5 31 West Region: 1 26 128 Alaska Arizona California Colorado Idaho Montana Nevada New Mexico Oregon 24 5 2 12 5 10 12 18 2 245 1,146 Utah Washington Wyoming Total West Total Kohl's 1 1 12 Number of Stores by Store Type Prototype Small 5 2 12 117 5 326 1 11 12 2013 993 165 1,158 2012 11 12 18 2 98 246 17,546 1,158 83,671 Additions 4 411 Leased* Operating lease 312 4 316 427 4 431 739 1,146 8 12 1,158 Net 771 85 290 1,146 Additions 6 6 12 2013 777 85 296 1,158 11 2013 407 Total leased Number of Stores by Location Strip centers Community & regional malls Freestanding 695 874 1,190 Owned On-balance sheet 2012 851 Net Additions 992 154 1,146 73 1,953 9,206 1,835 328 Number of Stores by Ownership Net 2012 1 26 128 24 * Includes locations where we lease the land and/or building 747 Table of Contents Distribution Centers The following table summarizes key information about each of our distribution centers. Year Square Location Opened Footage Retail: Findlay, Ohio 1994 780,000 Winchester, Virginia 1997 420,000 Blue Springs, Missouri 1999 540,000 Corsicana, Texas 2001 540,000 Mamakating, New York 2002 605,000 San Bernardino, California Macon, Georgia 2002 2005 575,000 560,000 Patterson, California 2006 360,000 Ottawa, Illinois 2008 328,000 2001 2010 1,200,000 970,000 1,450,000 1,200,000 States Serviced Indiana, Kentucky, Michigan, New York, Ohio, Pennsylvania, West Virginia Delaware, Maryland, New Jersey, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia Arkansas, Colorado, Illinois, Iowa, Kansas, Kentucky, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Wyoming Arkansas, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee, Texas Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont Arizona, California, Colorado, Nevada, Utah Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Approximate Store Capacity 185 135 110 115 145 110 150 Tennessee E-Commerce: Monroe, Ohio San Bernardino, California Edgewood, Maryland DeSoto, Texas 2011 2012 Alaska, California, Idaho, Montana, Nevada, Oregon, Utah, Washington Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Wisconsin 110 155 We own all of the distribution centers except Corsicana, Texas, which is 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. Item 3. Legal Proceedings We are not currently a party to any material legal proceedings, but are subject to certain legal proceedings and claims from time to time that arise out of the conduct of our business. Item 4. Mine Safety Disclosures Not applicable 12 Table of Contents PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Market information Our Common Stock has been traded on the New York Stock Exchange since May 19, 1992, under the symbol \"KSS.\" The prices in the table set forth below indicate the high and low sales prices of our Common Stock per the New York Stock Exchange Composite Price History and our quarterly cash dividends per common share for each quarter in 2013 and 2012. 2013 High Fourth Quarter Third Quarter Second Quarter First Quarter $58.47 57.04 54.16 49.32 Low 2012 Dividend $0.35 0.35 0.35 0.35 $49.97 49.84 47.00 45.21 High Low $55.11 53.77 51.25 52.19 $41.81 49.72 43.13 45.56 Dividend $0.32 0.32 0.32 0.32 We have filed with the Securities and Exchange Commission (\"SEC\"), as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K, the SarbanesOxley Act Section 302 certifications. In 2013, Kevin Mansell, our Chief Executive Officer, submitted a certification with the New York Stock Exchange (\"NYSE\") in accordance with Section 303A.12 of the NYSE Listed Company Manual stating that, as of the date of the certification, he was not aware that we had violated any of the NYSE's corporate governance listing standards. On February 26, 2014, our Board of Directors approved a dividend of $0.39 per share which will be paid on March 26, 2014 to shareholders of record as of March 12, 2014. In 2013, we paid aggregate cash dividends of $302 million . (b) Holders As of March 12, 2014, there were approximately 4,400 record holders of our Common Stock. (c) Securities Authorized For Issuance Under Equity Compensation Plans See the information provided in the \"Equity Compensation Plan Information\" section of the Proxy Statement for our May 15, 2014 Annual Meeting of Shareholders, which information is incorporated herein by reference. 13 Table of Contents (d) Performance Graph The graph below compares our cumulative five-year shareholder return to that of the Standard & Poor's 500 Index and a Peer Group Index that is consistent with the retail peer group used in the Compensation Discussion & Analysis section of our Proxy Statement for our May 15, 2014 Annual Meeting of Shareholders. The Peer Group Index was calculated by Capital IQ, a Standard & Poor's business and includes Bed, Bath & Beyond Inc.; The Gap, Inc.; J.C Penney Company, Inc.; Limited Brands, Inc.; Macy's, Inc.; Nordstrom, Inc.; Ross Stores, Inc.; Sears Holding Corporation; Target Corporation; and The TJX Companies, Inc. The Peer Group Index is weighted by the market capitalization of each component company at the beginning of each period. The graph assumes an investment of $100 on January 31, 2009 and reinvestment of dividends. The calculations exclude trading commissions and taxes. Jan 31, Jan 30, Jan 29, Company / Index 2009 2010 2011 Kohl's Corporation S&P 500 Index Peer Group Index $100.00 100.00 100.00 $137.21 $139.47 161.44 217.01 133.14 183.36 Jan 28, 2012 $129.78 170.04 257.88 Feb 2, 2013 $131.42 199.98 311.11 Feb 1, 2014 $148.60 240.58 343.50 (e) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities We did not sell any equity securities during 2013 which were not registered under the Securities Act. (f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers Since first authorizing our share repurchase program in 2007, our Board of Directors has increased the authorization in 2011 and again in November 2012. Purchases under the repurchase program may be made in the open market, through block trades and other negotiated transactions. We expect to execute the share repurchase program primarily in open market transactions, subject to market conditions and to complete the program in early fiscal 2016. There is no fixed termination date for the repurchase program, and the program may be suspended, discontinued or accelerated at any time. 14 Table of Contents The 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, 2014 : Period Total Number of Shares Purchased as Part of Total Number of Shares Purchased During Average Period Share Price Paid Per Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (Dollars In Millions) November 3 - November 30, 2013 December 1, 2013 - January 4, 2014 January 5 - February 1, 2014 Total 550,943 $ 1,909,447 2,184,134 4,644,524 $ 15 54.94 55.12 52.40 53.82 549,082 $ 1,908,334 2,179,209 4,636,625 $ 2,542 2,437 2,322 2,322 Table of Contents Item 6. Selected Consolidated Financial Data The selected consolidated financial data presented below should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this document. The Statement of Income and Balance Sheet Data have been derived from our audited consolidated financial statements. 2013 2012(a) 2011 2010 2009 (Dollars in Millions, Except Per Share and Per Square Foot Data) Statement of Income Data: Net sales Cost of merchandise sold Gross margin $ 889 833 1,742 338 $ 778 2,158 299 1,859 692 1,167 $ $ $ 6,944 Selling, general and administrative expenses Depreciation and amortization Operating income $ 889 $ 1,890 329 1,561 575 986 $ $ $ 4.08 4.05 $ $ $ 4.19 4.17 1.28 Interest expense, net Income before income taxes Provision for income taxes Net income $ 18,804 11,625 7,179 4,313 $ 19,279 12,289 6,990 4,267 19,031 12,087 1,404 515 $ 4,243 $ 18,391 11,359 7,032 4,190 750 2,092 $ 17,178 10,680 6,498 3,951 688 1,859 304 301 1,788 668 1,120 1,558 585 973 $ Net income per share: Basic Diluted Dividends per share 1.40 4.33 4.30 $ $ 1.00 3.69 3.66 $ $ 3.19 3.17 Operating Data: Net sales growth Comparable sales growth (b) Net sales per selling square foot (c) As a percent of sales: Gross margin Operating income Net income Total square feet of selling space (in thousands) Number of stores open (end of period) Return on average shareholders' equity (d) Balance Sheet Data (end of period): Working capital Property and equipment, net Total assets Long-term debt Capital lease and financing obligations Shareholders' equity (1.3)% (1.2)% $ 207 2.5% $ 213 36.5 % 36.3% 9.2 % 4.7 % 9.8% 5.1% 83,098 1,146 15.8% 83,671 1,158 14.8 % $ 2,556 8,745 14,378 2,792 2,069 5,978 2.2% 0.5% 0.3% $ 2,184 8,872 13,905 2,492 2,061 6,048 $ 220 7.1% $ 38.2% 11.5% 6.2% 82,226 1,127 16.4% $ 2,222 8,905 14,148 2,141 2,103 6,508 4.8% 0.4% 4.4% $ 222 $ 217 38.2% 11.4% 37.8% 10.8% 6.1% 80,139 1,089 14.1% 5.7% 78,396 1,058 13.8% 2,888 8,692 14,891 1,894 2,104 7,850 $ 3,054 8,506 14,502 1,894 2,046 7,595 (a) Fiscal 2012 was a 53-week year. During the 53rd week, total sales were $169 million; selling, general and administrative expenses were approximately $30 million; interest was approximately $2 million; net income was approximately $15 million and diluted earnings per share was approximately $0.06. (b) Comparable sales growth is based on sales for stores (including relocated or remodeled stores) which were open throughout both the full current and prior year periods and E-Commerce. Fiscal 2013 comparable sales growth compares the 52 weeks ended February 1, 2014 to the 52 weeks ended January 26, 2013. Fiscal 2012 comparable sales growth compares the 52 weeks ended January 26, 2013 to the 52 weeks ended January 28, 2012. (c) Net sales per selling square foot is based on stores open for the full current period, excluding E-Commerce. 2012 excludes the impact of the 53rd week. (d) Average shareholders' equity is based on a 5-quarter average for 2013, 2012, 2011, and 2010, and the two most recent year-end balances for 2009. 16 Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Summary As of February 1, 2014 , we operated 1,158 family-focused, value-oriented department stores and a website (www.Kohls.com) that sell moderately priced exclusive and national brand apparel, footwear, accessories, beauty and home products. Our stores generally carry a consistent merchandise assortment with some differences attributable to regional preferences. Our website includes merchandise which is available in our stores, as well as merchandise which is available only on-line. The following table summarizes our recent financial results: 2013 2012 2011 (Dollars and Shares in Millions) $ 19,031 Net sales Change in: Net sales Comparable sales Gross margin as a percent of net sales Selling, general and administrative expenses Net income Net income per diluted share Shares repurchased Treasury stock purchases Cash flow from operations (1.3)% (1.2)% 36.5 % $ 4,313 $ 889 $ 4.05 15 $ 799 $ 1,884 $ 19,279 $ 18,804 2.5% 2.2% 0.5% 38.2% 0.3% 36.3% $ 4,267 $ 986 $ 4.17 26 $ 1,259 $ 1,265 $ 4,243 $ 1,167 $ 4.30 46 $ 2,331 $ 2,139 For additional details about our financial results, see Results of Operations and Liquidity and Capital Resources. Our main business objective is to profitably increase sales. In order to increase sales, we believe that we need to continue to increase transactions per store, which is our primary sales driver. We have a number of initiatives which we believe will increase transactions per store. We continue to improve the quality of our merchandise and to offer items at great values. We are pleased with the progress we have made in these areas, but believe that we have additional opportunities to improve. We continue to focus on creating excitement for our customers to increase customer traffic to our stores and website. In fiscal 2014, we expect to launch several new brands, including Juicy Couture, IZOD, and a Jumping Beans collection featuring Disney characters. The Juicy Couture assortment will include women's and girl's apparel, footwear, accessories, bedding, and home accessories. The IZOD assortment will be one of the largest men's launches in our history and will feature men's sportswear and dress apparel, including golf separates, woven sport shirts, sweaters, knit shirts, shorts, suit separates, dress shirts, and dress pants. The Jumping Beans collection will combine Disney, one of the most recognizable brands in the world, and our own highly-successful Jumping Beans brand. We will also launch the next DesigNation designer, our limited-time special collection. Approximately 280 of our stores had renovated beauty departments at the end of fiscal 2013. We expect to renovate the beauty department in approximately another 200 stores in 2014. We are testing three different beauty renovations - new fixtures with expanded and/or relocated floor space, new fixtures with no change to department size or location, and existing fixtures with acrylic retrofits. Initial test results are showing a significant increase in beauty sales in the renovated stores. We are designing a rewards system to increase customer loyalty, especially for customers who do not have a Kohl's-branded credit card. The program allows enrolled customers to earn various rewards or discounts based upon the volume of their purchases. The loyalty program is currently available in approximately 30% of our stores. Initial results have been very positive and we expect this loyalty program to be available in all stores by the end of fiscal 2014. 17 Table of Contents We are also making significant investments to create an exciting omni-channel shopping experience for our customers. Whether they are shopping in one of our stores, from their phones or from their laptops, we are creating a consistent experience to ensure that they can connect with us wherever and however they wish. We remain committed to meeting the changing shopping needs of our customer, to strengthening our omni-channel experience and to investing in our future in a strategic and profitable manner. 2014 Outlook Our current expectations for fiscal 2014 compared to 2013 including estimated impacts of these initiatives are as follows: Increase 0.5 - 2.5% Increase 0 - 2% Increase 10 - 30 bps Increase 1.5 - 2.5% $4.05 - $4.45 Total sales Comparable sales Gross margin as a percent of sales SG&A Earnings per diluted share Our earnings per diluted share expectation assumes share repurchases of $1 billion at an average price of $50 per share. Results of Operations 53rd Week. Fiscal 2012 was a 53-week year. During the 53rd week, total sales were $169 million; selling, general and administrative expenses were approximately $30 million; interest was approximately $2 million; net income was approximately $15 million and diluted earnings per share was approximately $0.06. Our comparable sales in both 2013 and 2012 exclude the impact of the 53rd week. Net Sales. Comparable sales include sales for stores (including relocated or remodeled stores) which were open during both the current and prior year periods. We also include E-Commerce sales in our comparable sales. Omni-channel sales are recorded as store or E-Commerce sales based on the fulfillment channel. For example, customer purchases from our in-store kiosks are generally recognized as E-Commerce sales as the orders are shipped from our E-Commerce fulfillment centers and on-line orders which are shipped from our stores are recognized as store sales. Merchandise returns reduce sales at the location of the return. As a result, store sales are reduced by merchandise purchased on-line, but returned to a store. The following table summarizes net sales: 2013 Net sales (In Millions) $ 19,031 Sales growth: Total Comparable stores (a) Net sales per selling square foot (b) 2012 $19,279 (1.3)% (1.2)% $ 207 2011 $ 18,804 2.5% 2.2% 0.5% 0.3% $ 213 $ 220 (a) Includes sales for stores (including relocated or remodeled stores) which were open throughout both the full current and prior year periods and E-Commerce. 2013 compares the 52 weeks ended February 1, 2014 to the 52 weeks ended January 26, 2013. 2012 compares the 52 weeks ended January 26, 2013 to the 52 weeks ended January 28, 2012. (b) Net sales per selling square foot is based on stores open for the full current period, excluding E-Commerce. 2012 excludes the impact of the 53rd week. 18 Table of Contents The following table summarizes the changes in net sales: 2013 2012 % $ Comparable sales: Stores E-Commerce Total (a) $ New stores and other revenues Net change before 53rd week Net sales in 53rd week Increase (decrease) in net sales % $ (Dollars in Millions) (517) 284 (3.0)% 20.4 % (233) (1.2)% (0.4)% (1.3)% 154 (79) (169) $ (248) (354) $ 411 57 249 306 169 475 (2.0)% 41.8 % 0.3 % 1.6 % 2.5 % 2013 compares the 52 weeks ended February 1, 2014 to the 52 weeks ended January 26, 2013. 2012 compares the 52 weeks ended January 26, 2013 to the 52 weeks ended January 28, 2012. (a) Drivers of the changes in comparable sales were as follows: 2013 Selling price per unit (0.4)% Units per transaction Average transaction value Number of transactions Comparable sales 1.5 1.1 (2.3) (1.2)% 2012 1.8% 1.8 (1.5) 0.3% The decrease in selling price per unit was primarily due to slightly deeper discounts and clearance merchandise which represented a slightly higher percentage of our total sales than in the prior year periods. Units per transaction increased as customers purchased more items in response to the lower prices. Increases in the number of E-Commerce transactions were more than offset by decreases in our stores. Transactions in 2013 were also negatively impacted by an unseasonably cold spring and winter which reduced customer visits throughout the year. From a regional perspective, the West, which reported sales consistent with 2012, was the strongest region in 2013. All other regions reported low to mid single-digit sales decreases. E-Commerce revenue, which includes shipping and other revenues and the 53rd week in 2012, increased $286 million to $1.7 billion for 2013. The increase is primarily due to increased transactions and units per transaction. We have renewed our emphasis on national brands in 2013 in an effort to drive customer traffic and maximize sales growth. In the last 6 months of 2013, national brands had improved sales results and represented a growing percentage of our sales. This focus will continue into 2014, as we continue to rebalance our mix between private and exclusive brands and national brands to drive sales growth. By line of business, all categories reported low single-digit sales decreases in 2013. Children's, Men's and Home outperformed the Company average and Women's was consistent with the Company average. Toys was the strongest category in Children's. Outerwear and active were the strongest categories in both the Men's and the Women's businesses. Electrics and luggage reported the highest sales increases in the Home business. Comparable sales in the Accessories and Footwear categories were below the Company average. Bath and beauty reported the strongest increase in the Accessories business as a result of our beauty remodel program. In Footwear, athletic shoes reported the highest sales increase. Net sales per selling square foot (which is based on stores open for the full current period and excludes E-Commerce and the 53rd week in 2012), decreased $6 to $207 in 2013. The decrease is primarily due to a 3% decrease in sales at our comparable stores. Net sales for 2012 increased 2.5% over 2011 and comparable sales increased 0.3%. From a line of business perspective, Children's and Men's reported the strongest comparable sales in 2012. Footwear outperformed the Company average for the year, with a low single-digit increase. Comparable sales in the Accessories, Women's and Home businesses declined slightly for the year. All regions reported modest comparable sales decreases. E-Commerce revenue, which includes shipping and other revenues and the 53rd week, increased $432 million to $1.4 billion in 2012. 19 Table of Contents Gross margin. 2013 2012 2011 (Dollars in Millions) Gross margin As a percent of net sales $ 6,944 $ 6,990 $ 7,179 36.5% 36.3% 38.2% Gross margin 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 and handling expenses of E-Commerce sales; and terms cash discount. Our gross margin may not be comparable with that of other retailers because we include distribution center costs in selling, general and administrative expenses while other retailers may include these expenses in cost of merchandise sold. Gross margin as a percentage of sales increased approximately 20 basis points over 2012. The increase includes a 45 basis point increase in our merchandise sales margin. This increase was primarily due to modest decreases in apparel costs in 2013. Partially offsetting this increase were higher shipping losses in our on-line business. The losses were due to higher costs to ship merchandise during the fourth quarter holiday season and to growth in our on-line business. Gross margin as a percent of net sales decreased approximately 190 basis points from 2012 to 2011 due to reductions in selling price to drive customer traffic and higher apparel costs, especially in the first six months of 2012, which were only partially offset by higher selling prices early in the year. Selling, general and administrative expenses. 2013 2012 2011 (Dollars in Millions) $ Selling, general, and administrative expenses As a percent of net sales 4,313 $ 22.7% 4,267 $ 22.1% 4,243 22.6% Selling, general and administrative expenses (\"SG&A\") include compensation and benefit costs (including stores, headquarters, buying and merchandising and distribution centers); occupancy and operating costs of our retail, distribution and corporate facilities; freight expenses associated with moving merchandise from our distribution centers to our retail stores and among distribution and retail facilities; advertising expenses, offset by vendor payments for reimbursement of specific, incremental and identifiable costs; net revenues from our Kohl's credit card operations; and other administrative revenues and expenses. We do not include depreciation and amortization in SG&A. The classification of these expenses varies across the retail industry. The following table summarizes the changes in SG&A by expense type: 2013 2012 (Dollars In Millions) $ Distribution costs Corporate expenses Store expenses Marketing costs, excluding credit card operations Net revenues from credit card operations SG&A in 53rd week Total increase 27 32 27 $ (11) 14 (41) 9 (19) (30) $ 46 42 (10) 30 $ 24 Many of our expenses, including store payroll and distribution costs, are variable in nature. These costs generally increase as sales increase and decrease as sales decrease. We measure both the change in these variable expenses and the expense as a percent of sales. If the expense as a percent of sales decreased from the prior year, the expense \"leveraged\" and indicates that the expense was well-managed or effectively generated additional sales. If the expense as a percent of sales increased over the prior year, the expense "deleveraged" and indicates that sales growth was less than expense growth. SG&A as a percent of sales increased, or "deleveraged," by approximately 60 basis points in 2013. 20 Table of Contents Distribution costs increased in 2013 due to higher distribution and fulfillment costs related to our growing on-line business, particularly in the fourth quarter. IT spending, which is included in corporate expenses, increased over 2012 due to growth and infrastructure investments related to our omni-channel strategy. The increases in store expenses are the result of higher store payroll, higher rent-related expenses due to new stores, increases in real estate taxes, and higher controllable expenses including repairs and maintenance. Marketing costs were higher in 2013 as we increased our spending in digital and broadcast and added additional markets to our loyalty program pilot. The increases in net revenues from credit card operations are the result of higher finance charge revenues and late fees due to growth in the portfolio. Partially offsetting these increases were higher bad debt expenses and operational costs. The increased operating costs were primarily due to growth in the portfolio. SG&A for 2012 increased $24 million, or 1% over 2011. As a percentage of sales, SG&A decreased, or "leveraged", by approximately 40 basis points in 2012. The increase in SG&A is due primarily to higher distribution costs, increased marketing, investments in technology and infrastructure related to our E-Commerce business and the extra week in the 2012 retail calendar. These increases were partially offset by lower incentive costs. Other Expenses. 2013 2012 2011 (Dollars In Millions) $ Depreciation and amortization Interest expense, net Provision for income taxes Effective tax rate 889 338 515 36.7% $ 833 329 575 36.8% $ 778 299 692 37.2% The increase in depreciation and amortization in 2013 was primarily due to our E-Commerce fulfillment centers and IT amortization. The increase in depreciation and amortization in 2012 was primarily due to recent computer and hardware additions which have a short amortization period as well as the addition of new stores, remodels and the opening of our fourth E-Commerce fullfillment center in DeSoto, Texas. Net interest expense, including $2 million in the 53rd week of 2012, increased $9 million, or 3%, in 2013 and increased $30 million in 2012. The increases in interest expense are primarily due to the increases in our outstanding long-term debt. The decreases in the effective tax rate for 2013 and 2012 were primarily due to favorable settlements of state tax audits in the first six months of both years. Inflation Although we expect that our operations will be influenced by general economic conditions, including rising food, fuel and energy prices, we do not believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be affected by such factors in the future. We experienced 10-15% increases in apparel costs in 2011. We saw modest increases in apparel costs in the first six months of 2012 and modest decreases in the last six months of 2012 and in 2013. In 2014, we expect to see modest increases in apparel costs. Liquidity and Capital Resources Our primary ongoing cash requirements are for capital expenditures for new stores, remodels and IT spending and for seasonal and new store inventory purchases. Share repurchases and dividend payments to shareholders are currently other significant usages of cash. These payments are discretionary and can be discontinued at any time should we require cash for other uses. Our primary source of funds is cash flow provided by operations. Short-term trade credit, in the form of extended payment terms for inventory purchases, often represents a significant so