KOHLS CORPORATION (Form: 10-Q, Received: 06/04/2010 16:04:35)

The Compensation Committee (the “Committee”) of the Board of Directors of Kohl’s Corporation (“Kohl’s”) has approved granting to the Executive named above (“Executive”) a nonstatutory option (“Option”) to purchase shares of Kohl’s common stock on the terms and subject to the conditions described below. Kohl’s and the Executive agree as follows:

Kohl’s grants to Executive the right and option to purchase, in the aggregate, the number of shares of Kohl’s $0.01 par value common stock (“Common Shares”) shown above at the option price per share shown above. Except as provided by this Agreement, the Option granted shall be irrevocable. The Common Shares which Executive is entitled to purchase will be either Kohl’s authorized but unissued common stock or Kohl’s treasury shares. The Option granted is not intended to be treated, and will not be treated, as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. Except as provided herein, the Option shall impose no obligation on Executive to exercise such Option.

Except as provided in Kohl’s 2010 Long-Term Compensation Plan (the “Plan”) or in this Agreement, and unless the Committee establishes otherwise, Executive may exercise his/her Option to purchase, in whole or in part, not more than that portion of the total number of Common Shares shown above according to the percentages and the anniversary dates specified below:

Except as provided in the Plan, an employment agreement, executive compensation agreement, or other similar agreement between Executive and Kohl’s, or in this Agreement, this Option may not be exercised before the anniversary dates specified above or after the expiration of seven (7) years from the date it is granted (the “Expiration Date”). This Option may not be exercised for fractional Common Shares.

Except as provided in an employment agreement, executive compensation agreement, or other similar agreement between Executive and Kohl’s:

(a) If Executive, on a permanent basis, ceases to be actively employed by Kohl’s as a full time employee for any reason other than Retirement, Disability or death, Executive shall have until the earlier of: (i) the Expiration Date; (ii) ninety (90) days following the date of termination of Executive’s employment with Kohl’s; or (iii) ninety (90) days following the date Executive ceases to be a full time employee, to exercise this Option to the extent Executive is otherwise entitled to exercise it as provided in Paragraph 2; and

(b) To the extent Executive is not entitled to exercise this Option at the time Executive ceases to be actively employed by Kohl’s as a full time Employee, the outstanding and unexercised portion of the Option shall immediately lapse and Executive shall have no further rights with respect to it.

Nothing contained herein shall limit Kohl’s right to terminate the employment of Executive at any time for any reason.

4.	Rights in the Event of Retirement or Disability.

If Executive’s employment with Kohl’s is terminated due to Retirement (or due to an early retirement approved by the Committee) or Disability (as each of those terms are defined in the Plan), Executive shall have until the earlier of: (i) the Expiration Date; or (ii) one (1) year from the effective date of such Retirement or Disability to exercise this Option to the extent to which Executive would otherwise be entitled to exercise it on the effective date of such Retirement or Disability. To the extent Executive is not entitled to exercise any portion of this Option prior to Executive’s Retirement or Disability, such outstanding and unexercised portion of the Option shall immediately lapse on the date of Executive’s Retirement or Disability.

5.	Rights In the Event of Executive’s Death.

In the event of Executive’s death: (i) while actively employed by Kohl’s as a full time employee; or (ii) during any period following Executive’s Retirement or Disability during which any then outstanding and unexercised Option is exercisable by Executive pursuant to Paragraph 4, the term during which the Option is exercisable shall be the earlier of:

(a) the expiration of the period during which the Option is exercisable pursuant to Paragraph 4;

(b) twelve (12) months after the date of Executive’s death; or

In the event of Executive’s death while actively employed by Kohl’s as a full time employee, the number of Common Shares for which the Option may be exercised shall be the total number of Common Shares granted to Executive pursuant to this Option Agreement (irrespective of whether they are exercisable on or before the date of Executive’s death) that remain outstanding and unexercised on the date of Executive’s death. In the event of Executive’s death following Executive’s Retirement or Disability, the number of Common Shares for which the Option may be exercised shall be limited to that number of Common Shares for which Executive would otherwise be entitled to exercise this Option on the date of Executive’s Retirement or Disability, as provided in Paragraph 4. In the event of Executive’s death, the Option may be exercisable by the beneficiary designated by Executive, if any, or the personal representative, administrator or other representative of Executive’s estate.

6.	Rights in the Event of a Change in Control.

In the event of a Change in Control, the Option shall be subject to the provisions of Paragraph 19 of the Plan, any references to “cause” and “good reason” used in Paragraph 19 of the Plan shall be interpreted by applying the definitions of “cause” and “good reason” set forth in any employment agreement, executive compensation agreement, or any similar agreement between Kohl’s and the Executive in effect as of the date of the Change in Control.

7.	Method of Exercising Option.

The Executive may exercise the Option on or after the appropriate anniversary date (and before an event of termination) in whole or in part, from time to time in accordance with any manner permitted by Kohl’s in effect on the date of exercise. The Executive may contact the office of Kohl’s Executive Vice President of Human Resources at the address specified in Paragraph 9 to receive details regarding the manner(s) of exercise permitted by Kohl’s which are in effect on the date of exercise.

Executive shall not acquire any rights or privileges as a shareholder of Kohl’s for any Common Shares issuable upon the exercise of this Option until such Common Shares have been duly issued by Kohl’s. Kohl’s shall have the right to delay the issue or delivery of any Common Shares to be delivered hereunder until (i) the completion of such registration or qualification of such shares under federal or state law, ruling or regulation as Kohl’s deems to be necessary or advisable; and (ii) receipt from Executive of such documents and information as Kohl’s deems necessary or appropriate in connection with such registration or qualification or the issuance of Common Shares hereunder.

8.	Prohibition Against Transfer, Pledge, and Attachment.

This Option, and the rights and privileges conferred by it, is personal to Executive and, absent a binding court order, may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) during Executive’s lifetime and shall be exercisable only by Executive. Executive may transfer this Option, and the rights and privileges conferred by it, upon Executive’s death, either by will or under the laws of descent and distribution, or by beneficiary designation made in such form and subject to such limitations as may from time to time be acceptable to the Committee and delivered to and accepted by the Committee. All distributees shall be subject to all of the terms and conditions of this Agreement to the same extent as would Executive if still alive. This Option, and the rights and privileges conferred by it, may not be subjected to execution, attachment or similar process.

9.	Notices.

Any notice to be given to Kohl’s under the terms of this Agreement shall be addressed to the attention of Kohl’s Executive Vice President of Human Resources, N56 W17000 Ridgewood Drive, Menomonee Falls, Wisconsin 53051, and any notice to be given to Executive may be sent to Executive’s address as it appears on the payroll records of Kohl’s, or at such other addresses as either party may designate in writing to the other.

10.

Provisions of the Plan Control.

This Option is subject to, and qualified in its entirety by reference to, the terms and conditions of the Plan under which it is granted, a copy of which may be obtained from Kohl’s Executive Vice President of Human Resources and the provisions of the Plan shall be incorporated into and be a part of this Option Agreement. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Plan. The Plan empowers the Committee to make interpretations, rules and regulations under it. Determinations made by the Committee with respect to the Plan shall be binding upon Kohl’s and Executive.

11.

Taxes.

Executive shall pay all taxes applicable to the grant or exercise of this Option. Kohl’s may require payment of or withhold any tax which it believes is required to be the obligation of Executive as a result of the grant or exercise of this Option, and Kohl’s may defer making delivery of Common Shares or cash payable hereunder until arrangements satisfactory to Kohl’s have been made for such tax obligations.

12.

Choice of Law.

This Agreement shall be governed by and construed in accordance with the laws of the state in which the majority of Executive’s job responsibilities are carried out as of the date of this Agreement.

Kohl’s has caused this Agreement to be executed and Executive has executed the same as evidence of Executive’s acceptance hereof and upon the terms and conditions herein set forth as of the grant date shown above.


KOHL’S CORPORATION

By:



Executive:


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)


PART I	FINANCIAL INFORMATION

Item 1	Financial Statements:

	Condensed Consolidated Balance Sheets at May 1, 2010, January 30, 2010 and May 2, 2009	3

	Condensed Consolidated Statements of Income for the Three Months Ended May 1, 2010 and May 2, 2009	4

	Condensed Consolidated Statement of Changes in Shareholders’ Equity for the Three Months Ended May 1, 2010	5

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 1, 2010 and May 2, 2009	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3	Quantitative and Qualitative Disclosures about Market Risk	20

Item 4	Controls and Procedures	20

PART II	OTHER INFORMATION

Item 1A	Risk Factors	21

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 6	Exhibits	23

	Signatures	24


	May 1, 2010		January 30, 2010		May 2, 2009
Assets	(Unaudited)		(Audited)		(Unaudited)
Current assets:
Cash and cash equivalents	$	2,388	$	2,267	$	856
Merchandise inventories		3,017		2,923		2,804
Deferred income taxes		91		73		74
Other		209		222		188


Total current assets		5,705		5,485		3,922

Property and equipment, net		7,109		7,018		7,001
Long-term investments		318		321		327
Favorable lease rights, net		201		204		198
Other assets		133		132		115


Total assets	$	13,466	$	13,160	$	11,563


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,412	$	1,188	$	1,003
Accrued liabilities		895		1,002		777
Income taxes payable		113		184		82
Current portion of long-term debt and capital leases		318		16		17


Total current liabilities		2,738		2,390		1,879

Long-term debt and capital leases		1,754		2,052		2,056
Deferred income taxes		380		377		323
Other long-term liabilities		497		488		420

Shareholders’ equity:
Common stock		4		4		4
Paid-in capital		2,133		2,085		1,981
Treasury stock, at cost, 46 shares		(2,642)		(2,639)		(2,639)
Accumulated other comprehensive loss		(36)		(36)		(46)
Retained earnings		8,638		8,439		7,585


Total shareholders’ equity		8,097		7,853		6,885

Total liabilities and shareholders’ equity	$	13,466	$	13,160	$	11,563


	Three Months (13 Weeks) Ended

	May 1, 2010		May 2, 2009

Net sales	$	4,035	$	3,638
Cost of merchandise sold (exclusive of depreciation shown separately below)		2,498		2,270


Gross margin		1,537		1,368

Operating expenses:
Selling, general, and administrative		1,031		961
Depreciation and amortization		151		141
Preopening expenses		4		15


Operating income		351		251

Interest expense, net		31		32

Income before income taxes		320		219
Provision for income taxes		121		82

Net income	$	199	$	137


Net income per share:
Basic:
Basic	$	0.65	$	0.45
Average number of shares		307		305

Diluted:
Diluted	$	0.64	$	0.45
Average number of shares		309		306


								Accumulated Other
	Common Stock			Paid-In		Treasury		Comprehensive		Retained
	Shares	Amount		Capital		Stock		Loss		Earnings		Total

Balance at January 30, 2010	353	$	4	$	2,085	$	(2,639)	$	(36)	$	8,439	$	7,853

Net income and other comprehensive income	-		-		-		-		-		199		199

Share-based compensation	-		-		15		-		-		-		15

Exercise of stock options and other	1		-		32		-		-		-		32

Net income tax impact from exercise of stock options	-		-		1		-		-		-		1

Treasury stock purchases	-		-		-		(3)		-		-		(3)


Balance at May 1, 2010	354	$	4	$	2,133	$	(2,642)	$	(36)	$	8,638	$	8,097

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	Three Months (13 Weeks) Ended
	May 1, 2010		May 2, 2009

Operating activities
Net income	$	199	$	137
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt discount and deferred financing fees		152		141
Share-based compensation		14		11
Excess tax benefits from share-based compensation		2		-
Deferred income taxes		(16)		4
Other non-cash revenues and expenses		8		24
Changes in operating assets and liabilities:
Merchandise inventories		(92)		(5)
Other current and long-term assets		12		21
Accounts payable		224		122
Accrued and other long-term liabilities		(146)		(36)
Income taxes		(70)		(25)


Net cash provided by operating activities		287		394


Investing activities
Acquisition of property and equipment and favorable lease rights		(191)		(186)
Sales of investments in auction rate securities		4		7
Other		(1)		2


Net cash used in investing activities		(188)		(177)


Financing activities
Treasury stock purchases		(3)		(1)
Capital lease payments		(5)		(4)
Proceeds from stock option exercises		32		1
Excess tax benefits from share-based compensation		(2)		-


Net cash provided by (used in) financing activities		22		(4)


Net increase in cash and cash equivalents		121		213
Cash and cash equivalents at beginning of period		2,267		643


Cash and cash equivalents at end of period	$	2,388	$	856


Supplemental information:
Interest paid, net of capitalized interest	$	15	$	17
Income taxes paid		207		103


Maturing	Weighted Average Effective Rate	May 1, 2010		January 30, 2010		May 2, 2009
	(Dollars in Millions)
Non-callable and unsecured senior debt:
March 2011	6.32%	$	300	$	300	$	300
October 2011	7.41%		100		100		100
2017	6.31%		650		650		650
2029	7.36%		200		200		200
2033	6.05%		300		300		300
2037	6.89%		350		350		350

Total senior debt	6.55%		1,900		1,900		1,900

Capital lease obligations			178		174		180
Unamortized debt discount			(6)		(6)		(7)
Less current portion			(318)		(16)		(17)

Long-term debt and capital leases		$	1,754	$	2,052	$	2,056


	2010	2009
Volatility	33.6%	42.8%
Risk-free interest rate	2.5%	1.7%
Expected life in years	5.4	5.4
Dividend yield	0%	0%
Weighted-average fair value at grant date	$19.51	$16.98


	2010		2009
		(In Millions)
Balance at beginning of year	$	320	$	332
Sales (at par)		(4)		(7)
Unrealized gains		1		1

Balance at end of quarter	$	317	$	326


	Three Months Ended
	May 1, 2010		May 2, 2009
		(In Millions)
Numerator - net income	$	199	$	137

Denominator - weighted average shares:
Basic		307		305
Impact of dilutive employee stock options and non-vested stock (a)		2		1

Diluted		309		306


					Increase
	2010		2009		$		%
	(Dollars in Millions)
Net sales	$	4,035	$	3,638	$	397	10.9 %


	2010		2009
Selling price per unit	(1.8)	%	5.8	%
Units per transaction	0.4		(7.4)

Average transaction value	(1.4)		(1.6)
Number of transactions	8.8		(2.6)

Comparable store sales	7.4	%	(4.2)	%

Stores	6.3	%	(4.9)	%
E-Commerce	50.2		33.6

Total Kohl’s	7.4	%	(4.2)	%


					Decrease
	2010		2009		$		%
	(Dollars in Millions)
Preopening expenses	$	4	$	15	$	(11)	(73.3) %
Number of stores opened		9		19


					Increase (Decrease) in Cash
	2010		2009		$		%
	(Dollars in Millions)
Net cash provided by (used in):
Operating activities	$	287	$	394	$	(107)	(27.2) %
Investing activities		(188)		(177)		(11)	(6.2)
Financing activities		22		(4)		26	100+


	May 1, 2010		January 30, 2010		May 2, 2009
Working capital (In Millions)	$	2,967	$	3,095	$	2,043
Current ratio		2.08:1		2.29:1		2.09:1
Debt/capitalization		20.4%		20.8%		23.1%


	2010			2009
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
	(Shares in Thousands)
Balance at beginning of year	19,848	$	52.10	19,134	$	53.01
Granted	458		55.66	2,617		41.51
Forfeited/expired	(139)		54.06	(300)		56.70
Exercised	(872)		36.27	(26)		29.38

Balance at end of quarter	19,295	$	52.89	21,425	$	51.58


	2010			2009
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
	(Shares in Thousands)
Balance at beginning of year	883	$	45.44	276	$	54.39
Granted	430		55.74	657		41.63
Vested	(179)		47.41	(58)		60.73

Balance at end of quarter	1,134	$	49.03	875	$	44.38


		(Dollars in Millions)
	Total Debt per Balance Sheet	$ 2,072
	Other Debt	-

	Subtotal	2,072
	Rent x 8	4,017

A	Included Indebtedness	$ 6,089


	Net Worth	$8,097
	Investments (accounted for under equity method)	-

	Subtotal	8,097
	Included Indebtedness	6,089

B	Capitalization	$14,186


	Leverage Ratio (A/B)	0.43
	Maximum permitted Leverage Ratio	0.70


Period	Total Number of Shares Purchased During Period	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
					(In millions)
Jan. 31 – Feb. 27, 2010	4,269	$	50.93	-	$ 1,866
Feb. 28 – Apr. 3, 2010	59,362		55.77	-	1,866
Apr. 4 – May 1, 2010	20		56.90	-	1,866

Total	63,651	$	55.45	-	$ 1,866


10.1		Form of Executive Stock Option Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan.*

10.2		Form of Executive Restricted Stock Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan.*

10.3		Form of Outside Director Stock Option Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan.*

10.4		Form of Outside Director Restricted Stock Agreement pursuant to the Kohl’s Corporation 2010 Long Term Compensation Plan.*

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Periodic Report by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Periodic Report by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

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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: June 4, 2010		/s/ Wesley S. McDonald
		Wesley S. McDonald Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)


Executive	Employee ID	Grant Date	Expiration Date	Number of Shares	Option Price Per Share


		Anniversary Date After Option Grant		Total Number of Shares For Which Option is Exercisable

		1 ^st Anniversary Date		20%
		2 ^nd Anniversary Date		40%
		3 ^rd Anniversary Date		60%
		4 ^th Anniversary Date		80%
		5 ^th Anniversary Date		100%


				Shares Vesting
		1 ^st Anniversary Date		20%
		2 ^nd Anniversary Date		20%
		3 ^rd Anniversary Date		20%
		4 ^th Anniversary Date		20%
		5 ^th Anniversary Date		20%


NAME	GRANT DATE	EXPIRATION DATE	NUMBER OF SHARES	OPTION PRICE PER SHARE


		Kevin Mansell
		Chairman, President, Chief Executive Officer

Director:


KOHL’S CORPORATION

By:
		Kevin Mansell
		Chairman, President, Chief Executive Officer

DIRECTOR


Dated: June 4, 2010		/s/ Kevin Mansell
		Chairman, President and Chief Executive Officer (Principal Executive Officer)


Dated: June 4, 2010		/s/ Wesley S. McDonald
		Wesley S. McDonald
		Executive Vice President, Chief Financial Officer
		(Principal Financial and Accounting Officer)