Kohl's delivers strong earnings growth in challenging time
16 Aug '11
4 min read
As a result of its second quarter performance and its third quarter share repurchase estimate, Kohl's is increasing its fiscal 2011 guidance from $4.25 - $4.40 per diluted share to $4.45 to $4.60 per diluted share.
Lease Accounting Update
On August 4, 2011, Kohl's reported that it had identified certain errors related to its accounting for leases. On August 9, 2011, the audit committee of Kohl's board of directors, in consultation with management, concluded that because of these errors, investors should no longer rely upon the financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2011 or its Quarterly Report on Form 10-Q for the period ended April 30, 2011. In addition, any related reports of the Company's independent registered public accounting firm (Ernst & Young LLP) should not be relied upon.
To correct the accounting errors, Kohl's will record additional property and related financing obligations on its Balance Sheet. In its Statements of Income, Kohl's will now recognize lease payments as depreciation and interest expense, rather than rent expense (which were previously recorded in Selling, General and Administrative Expense). The corrections will have no impact on the net increase or decrease in cash and cash equivalents reported in Kohl's Statements of Cash Flows.
Kohl's management, in conjunction with Ernst & Young LLP, is still in the process of completing a review of its historic lease accounting and is currently unable to provide reasonable estimates of the impact by reporting period and/or financial statement line item.
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