N56 W17000 Ridgewood Drive Menomonee Falls, WI 53051-5660www.kohls.com

ANNUAL REPORT 2005

00 01 02 03 04 05

$10,282

$9,120

$7,489

$6,152

16.9% CAGR(2)

$11,701

$13,402

00 01 02 03 04 05

$546

$601

$458

$343

19.7% CAGR(2)

$703

$842

0

3000

6000

9000

12000

15000

0

200

400

600

800

1000

Financial Highlights

2005 2004(1)

Net Sales(In millions of dollars) $ 13,402 $11,701

Operating Income(In millions of dollars) $ 1,416 $ 1,193

Percent of Sales 10.6% 10.2%

Net Income (In millions of dollars) $ 842 $ 703

up 19.7%

up 18.7%

up 14.5%

Net Income(1)

(In millions of dollars)Net Sales(In millions of dollars)

(1) Results for 2000-2004 fiscal years have been restated to reflect expensing of stock options.(2) Compounded annual growth rate.

Kohl’s mission is to be the leading family-focused, value-oriented specialty department

store offering quality exclusive and national brand merchandise to the customer in an

environment that is convenient, friendly and exciting.

Kohl’s operates from coast to coast. At the end of fiscal 2005, we served customers in

41 states through 732 stores and Kohls.com. In 2006, we plan to open approximately

80 to 85 stores.

OUR PROFILE

“In 2005, we madesignificant strides in bringing expectgreat things to life.”

Dear Shareholder,In our letter to you last year, we introduced our new positioning

statement: expect great things. In 2005, we made significant

strides in bringing expect great things to life.

We differentiated ourselves even further in the marketplace and

provided our customer with a better-than-ever shopping experience.

We added exciting new brands and opened 95 stores in both new

and existing markets. These initiatives focused on one goal - growing

the company profitably.

Strong Financial Performance

2005 was a record year for Kohl’s. Net sales increased 14.5%

to a record $13.4 billion, while comparable store sales rose

3.4%. Net income increased 19.7% to a record $842 million or

$2.43 per diluted share. Our balance sheet remains strong and

we continue to generate significant cash flow from operations.

In February 2006, we repaid $100 million of our long-term debt.

Company Initiatives

We made excellent progress on our 2005 initiatives. These initiatives

focused on merchandise content, marketing, inventory management

and the in-store shopping experience.

From a merchandise perspective, we broadened our customer

reach by introducing new brands and categories into the

merchandise mix. We focused on our customer’s lifestyles to

provide an assortment that satisfies her needs – whether she is

shopping for herself, her family or her home.

Of course, Kohl’s means brands and this is where we continue

to excel. Kohl’s was built on the concept of emphasizing national

brands that project quality and value and have wide customer

appeal. National brands such as Levi’s, Columbia, Nike and many

others across the store are the foundation of our merchandise

offerings. Exclusive national brands, available “Only at Kohl’s,”

and our own private brands further broaden the mix and set us

apart in the market.

In 2006, we will build on our 2005 success and launch even more

new brands. We will add Chaps in women’s, boys’ and footwear,

Tony Hawk in men’s and boys’ and West End and AB Studio

in women’s. In addition, Stamp 10 by Liz Claiborne will be introduced

in 300 stores in both women’s and men’s. We are also extending

our contemporary private brands including Candie’s, daisy fuentes

and apt. 9 into other areas of the store. We will complete the

repositioning of our biggest private brands, Croft & Barrow,

Sonoma, and apt. 9, to appeal to three different lifestyles: classic,

updated and contemporary.

Our marketing strategies go hand-in-hand with our merchandise

content and are designed to raise our visibility among both loyal,

long-term customers and first-time shoppers who want to see

what all the excitement is about. A successful combination of

integrated fashion-focused advertising and the continued use of

our newspaper inserts helped to drive increases in transactions

per store in 2005. Our advertising continually reminds our

customers that they can expect great things at Kohl’s.

In 2005, better inventory management, along with continually

introducing fresh and exciting new content into our stores,

contributed to our sales increases and helped to improve

gross margin. We continue to focus on consistently buying

the right number of units, improving allocation accuracy,

streamlining the seasonal transition across our various

geographic locations and ensuring that colors and sizes

are in stock by store.

The shopping experience is where everything we do comes

together. We’ve organized departments by lifestyle for ease of

shopping, differentiated special sizes, added graphics that highlight

key trends and presented merchandise to give customers ideas

LETTER TO SHAREHOLDERS

on how to create their own look. These initiatives not only make

it easier to shop our stores, but also more exciting.

Expansion: A Leading National Retailer

In 2005, we continued to bring Kohl’s into new markets and

expand our presence in existing markets. We opened 95 stores,

operating 732 stores in 41 states at the end of the year. The new

store openings were split between new and existing markets.

New markets included Buffalo, New York, and our entry into

Florida with stores in Orlando and Jacksonville.

Looking ahead, we plan to open approximately 500 stores over

the next five years. This growth will come from a strategic blend

of new stores in both new and existing markets, along with

capitalizing on real estate opportunities that may arise as the

industry continues to consolidate.

In fiscal 2006, we plan to open approximately 80 to 85 stores.

We will enter the Northwest with stores in Portland and Seattle that

will be a combination of new builds and the takeover of former

store locations. Some of our new stores opening in October will

incorporate new design features both on the interior and exterior.

By the end of fiscal 2010, we plan to operate over 1,200 stores

all across the country. Our approach to expansion is very disciplined,

ensuring the consistent execution of our growth strategy. As part

of this strategy, we will continue to update our existing stores to

help drive meaningful gains in market share.

Capital Structure

In March, we entered into a strategic alliance with JPMorgan Chase

to enhance our credit operations. Chase will purchase Kohl’s private

label credit card accounts and the outstanding balances associated

with the accounts under a multi-year program agreement. The total

purchase price, which will be equal to the receivables balances

at the closing date, will be paid in cash and is expected to be

approximately $1.5 billion.

Our customers will continue to receive the same great credit card

benefits. We will continue to handle all customer service functions

and will be responsible for all advertising and marketing related

to our credit card customers. In return, we will receive ongoing

payments related to the profitability of the program.

In anticipation of the sale of the credit accounts receivable, the

Board of Directors has authorized a $2 billion share repurchase

program. The program is expected to be completed over the

next two to three years.

We expect to use the initial proceeds from the credit card

transaction to repurchase Kohl’s stock, fund our store expansion

and for general corporate purposes.

Our Vision

We are well positioned to continue to execute our growth strategies.

We have a strong and growing base of stores in many key markets

across the country, but there are many more markets where we

can expand. We are leveraging our core concept of brands, value

and convenience to satisfy existing customer needs, broaden our

customer base and improve our customer’s shopping experience.

We have a track record of strong financial performance. Most

importantly, we have a team of over 107,000 Associates who are

dedicated to serving our customers, as well as an experienced

Board of Directors and senior management team that are committed

to long-term profitable growth.

To our shareholders, customers, partners and most of all, our

Associates, thank you for another record year. We look forward

to building on this momentum in 2006 and beyond.

Kevin MansellPresident

Arlene MeierChief Operating Officer

Larry MontgomeryChairman and Chief Executive Officer

Pictured: Arlene Meier, Larry Montgomery and Kevin Mansell.

SHARE REPURCHASE PROGRAM

The Board of Directors has authorized a $2 billion share repurchase program. The program is expected to be completedover the next two to three years.

The story of Kohl’s is a story of profitableexpansion. We plan to open approximately500 stores over the next five years, operating more than 1,200 stores by the end of 2010.

Over the last 10 years, we’ve grown from 128 stores

to 732, moving from our Midwest base to become a

leading national retailer. We will continue to build on

this momentum through a well-defined expansion

strategy that includes both new builds and takeovers

of existing retail sites. With our three store formats –

suburban, small and urban – we have the flexibility to

add stores in markets of all sizes.

Our merchandising strategies, which are designed to

maximize our existing customer base and attract new

customers, will also help us to successfully capture a

solid share of the retail market across the country. And

with our distribution network, we have the infrastructure

to support our continued growth.

We remain committed to long-term profitable growth,

which provides continuing opportunities for our Associates.

EXPANDING OUR PRESENCE

These charts show Kohl’s evolution

over the past 10 years from our

Midwestern base to a coast-to-coast

national retailer. At the end of 2005,

Kohl’s operated in all regions of the

country except the Northwest. We will

expand into the Northwest in 2006,

beginning in Portland and Seattle.

New in 2006

Midwest Region (243 stores)

SouthCentral Region (93 stores)

Northeast Region (117 stores)

Mid-Atlantic Region (77 stores)

Southeast Region (85 stores)

Southwest Region (117 stores)

1,232 Stores by the End of 2010

A LeadingNationalRetailer

1995 2000 2005 2010

Continuing Growth fromCoast to Coast

New State in 2005

Kohl’s will grow from 128 stores in

1995 to an estimated 1,232 stores

by the end of 2010.

128

320

732

1,232(projected)In 2005, we continued to bring the Kohl’s brand into new markets and to expand

in existing markets. We added 95 stores in 2005 and entered Florida for the first

time with stores in Orlando and Jacksonville. In 2006, we will expand into the

Northwest with new stores in Portland and Seattle.

95%

1%1%3%

51%

5%

16%

12%

3%13%

33%

12%

10%

13%

16% 16%

Number of Stores by Region

New States in 2006

1995 2000 2005

Midwest Region

SouthCentral Region

Northeast Region

Mid-Atlantic Region

Southeast Region

Southwest Region

Seattle

Portland

Jacksonville

Orlando

Kohl’s is the source of inspiration,guidance and style at great valuethat lets our customer transform the way she looks, lives and feels in themany roles she plays.

Kohl’s appeals to a broadening customer base.

Our customer can be a busy mom shopping for

herself, her family and her home. She can also

be a single woman looking for updated and

contemporary fashions or a working woman

without children. The styles and looks she wants

and needs are constantly changing and Kohl’s

is in tune with those changes.

Regardless of her lifestyle, our customer is a smart

shopper who knows there is more to value than

price. She finds what she wants in a single trip

where compelling merchandise and in-store

graphics help her put together the look she wants

in a short amount of time.

Our strategy is to encourage our customer to

shop more frequently and attract new customers

to our stores by giving her great, new fashion in

an exciting, easy-to-shop environment.

INSPIRING OUR CUSTOMERS

Our collection of national brands isstrategically evolving to meet thedesires of our customers and the“Only at Kohl’s” exclusive brand portfolio continues to grow.

Our brands appeal to different customer lifestyles.

She may want to be “classic” during the day and

“updated” or “contemporary” at night. That’s why

we’ve focused on those lifestyles in our merchandise

mix. For a classic look, she can find the traditional

styling she wants in Chaps for her, designed by

Polo Ralph Lauren exclusively for Kohl’s, or our

private Croft & Barrow brand.

The updated customer’s roots are in traditional

styling, but with modern fabrics and a more

body-conscious fit. National brands such as axcess

and Nine & Company in women’s and axcess and

Axist in men’s satisfy this customer. Our private

brand, Sonoma, provides value for both our

women’s and men’s updated customer. For a

fashion-forward contemporary look, we offer daisy

fuentes and apt. 9. We also balance our assortment

of basics and wardrobe fundamentals with fresh

styles, exciting silhouettes, new fabrics, trendy colors

and unexpected pieces that surprise her.

In 2006, we will launch Tony Hawk in young men’s

and boys’ and West End and AB Studio in women’s.

In addition, Stamp 10 by Liz Claiborne will be

introduced in 300 stores in both women’s and

men’s. Candie’s and apt. 9 will extend to home and

we will launch the popular Yankee Candle brand.

We will complete the repositioning of our biggest

private brands, Croft & Barrow, Sonoma, and apt. 9,

to appeal to three different lifestyles: classic, updated

and contemporary.

BUILDING OUR BRANDS

Kohl’s has the exciting styles that appeal to the lifestyles of our classic, updated and contemporary customers. Our portfolio of national and exclusive brands continues to grow with the names our customers know and trust.

adidasAerosolesArrowaxcessAxistBaliBriggsCalphalonCarter’sChampionChapsCuisinartDockersDysonGloria VanderbiltHaggarJockeyKitchenAidKrupsLaura Ashley Lifestyles

Leel.e.i.Levi’sMuddNew BalanceNikeNine & CompanyNorton McNaughtonOSHKOSHReebokRequirementsROYAL VELVETRussell AthleticSag HarborSpeedoUnionbayVanity FairVillagerWarner’sZeroXposur

National Brands

American BeautyCandie’sdaisy fuentesFLIRT!good skin

grassrootsOh Baby! by MotherhoodStamp 10Tony Hawk

Exclusive Brands

apt. 9Croft & BarrowSO...

SonomaTek GearUrban Pipeline

Private Brands

THE KOHL’S BRAND PORTFOLIO

Finding everything she needs to fit herlifestyle and having a great in-storeexperience keep customers comingback to Kohl’s.

For the Kohl’s customer, exciting shopping means

finding a well-edited selection of brands in an inspiring

and hassle-free environment. In 2005, we organized

our stores to reflect the way our customer naturally

shops. Throughout the store, we added colorful,

back-wall graphics that highlight trends and brands

and make departments easier to find. Strategically

placed mannequins differentiate departments and

show her how to put outfits together.

In spring 2006, we reorganized the floor layout in

misses’ by lifestyle. Many of her items mix and match

– taking her from day to night – from the office to a

movie. Our new misses’ department will separate

classic, updated and contemporary merchandise to

guide her to the section of the store that best reflects

her lifestyle.

Brands, value and convenience are compelling reasons

to shop at Kohl’s. But what makes the Kohl’s shopping

experience really special is our friendly, knowledgeable

Associates. They are well trained to meet customer

expectations and to provide friendly, helpful customer

service. Our customers indicated their satisfaction

with the Kohl’s experience by giving us a #1 ranking

in customer satisfaction for the fourth consecutive

year on the American Customer Satisfaction Index

prepared by the American Society for Quality.

TRANSFORMING OUR STORES

Fiscal Year 2005 2004(a) 2003(a) 2002(a) 2001(a) 2000(a)

Summary of Operations (In millions)

Net sales $13,402 $11,701 $10,282 $ 9,120 $ 7,489 $ 6,152Gross margin 4,763 4,114 3,395 3,139 2,565 2,096Selling, general & administrative expenses 2,964 2,584 2,158 1,884 1,583 1,328Preopening expenses 44 49 47 41 33 36Depreciation and amortization 339 288 239 193 159 128Operating income 1,416 1,193 951 1,021 790 604Interest expense, net 70 63 73 56 50 46Income before income taxes 1,346 1,130 878 965 740 558Net income 842 703 546 601 458 343

Diluted Earnings Per Share $ 2.43 $ 2.04 $ 1.59 $ 1.75 $ 1.35 $ 1.02 (b)

Financial Position Data (Dollars in millions)

Working capital $ 2,520 $ 2,187 $ 1,902 $ 1,776 $ 1,584 $ 1,199Property and equipment, net 4,544 3,988 3,316 2,734 2,196 1,725Total assets 9,153 7,979 6,691 6,311 4,927 3,853Long-term debt 1,046 1,103 1,076 1,059 1,095 803Shareholders’ equity 5,957 5,034 4,212 3,532 2,803 2,217Return on average shareholders’ equity 15.3% 15.2% 14.1% 19.0% 18.3% 17.6%

Other DataComparable store sales growth 3.4% 0.3% (1.6)% 5.3% 6.8% 9.0%Net sales per selling square foot $ 252 $ 255 $ 268 $ 284 $ 283 $ 281Stores open at year end 732 637 542 457 382 320Total square feet of selling space (In thousands) 56,625 49,201 41,447 34,507 28,576 23,610

REPORT OF MANAGEMENT

The management of Kohl’s Corporation is responsible for the integrity and objectivity of the financial and operating information contained in this Annual Report,

including the consolidated financial statements covered by the Report of the Independent Registered Public Accounting Firm. These statements were prepared

in conformity with generally accepted accounting principles and include amounts that are based on the best estimates and judgments of management.

The consolidated financial statements and related notes have been audited by Ernst & Young LLP, independent registered public accounting firm, whose report

is based on audits conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States). As part of its audit, the

firm performed a review of the Company’s system of internal controls and conducted such tests and employed such procedures as considered necessary to

render its opinion on the consolidated financial statements. The Company’s consolidated financial statements including the Report of the Independent

Registered Public Accounting Firm are included in the Company’s Form 10-K for the year ended January 28, 2006.

The Audit Committee of the Board of Directors is composed of three independent Directors. The Committee is responsible for assisting the Board in its oversight

of Kohl’s financial accounting and reporting practices. The Audit Committee is directly responsible for the compensation, appointment and oversight of the

Company’s independent registered public accounting firm. The Audit Committee meets periodically with the independent registered public accounting firm, as

well as with management, to review accounting, auditing, internal accounting control and financial reporting matters. The independent registered public

accounting firm has unrestricted access to the Audit Committee.

Larry Montgomery Wesley S. McDonald

Chairman and Chief Executive Officer Executive Vice President - Chief Financial Officer

(a) Results for the 2000-2004 fiscal years have been restated to reflect expensing of stock options.(b) Adjusted for stock split.

Financial Summary

Every day across the country, Kohl’s is putting time, effort and funding toward health and educational opportunities for children.

PARTNERING WITH OUR COMMUNITIES

This Kohl’s A Team worked

side by side with neighbors

to construct the first of five

new Chicago playgrounds

built to the latest Consumer

Products Safety Council

standards. The playgrounds

are part of the Kohl’s Cares

for Kids® Safety Network

program.

Kohl’s is a strong partner in our communities through programs

involving our company and our Associates. In 2005, we

donated more than $22 million to support our communities

nationwide.

Kohl’s Cares for Kids® is not just a program. It’s a

promise of hope for a brighter, healthier future for kids in

our communities. Throughout the year, Kohl’s sells special

merchandise in our stores with 100% of the net profit

benefiting health and educational opportunities for children

nationwide. In 2005, we partnered with 75 children’s hospitals

in 41 states to fulfill the health element of our Kohl’s

Cares for Kids® mission.

Our annual Kohl’s Kids Who Care® scholarship program

is an opportunity for us to recognize and reward youth who

volunteer in their communities. In 2005, we honored more

than 1,000 young volunteers. Also in 2005, Kohl’s

Associates volunteered more than 20,000 hours of service

through the Kohl’s A Team. Associates volunteer their

time and talent to support youth-serving organizations and

Kohl’s supports their efforts with corporate grants. The

Kohl’s Fundraising Card program is a simple, effective way

for schools and other youth-serving nonprofit organizations

to raise money to purchase supplies and equipment. In 2005,

Kohl’s supported more than 3,000 nonprofit organizations.

In the fall of 2005, Kohl’s and our Associates rallied to

support the victims of Hurricane Katrina. Kohl’s matched

the contributions of Associates to the National Red Cross

dollar-for-dollar, for a combined contribution of more

than $500,000.

Kohl’s is also taking a leadership role in supporting a

healthy, active lifestyle for kids as the official department

store of U.S. Youth Soccer. In 2005, the Kohl’s

American Cup soccer tournament visited 36 states

and welcomed over 40,000 youth participants.

Certain statements made within this report are “forward-looking statements” within the meaning of the Private Securities

Litigation Reform Act of 1995. Such forward-looking statements reflect management’s current views of future events and

financial performance. These statements are subject to certain risks and uncertainties which could cause Kohl’s actual results

to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not

limited to, those described in Exhibit 99.1 to Kohl’s annual report on Form 10-K and other factors as may periodically be

described in Kohl’s filings with the SEC.

FORWARD-LOOKING STATEMENTS

Corporate HeadquartersKohl’s CorporationN56 W17000 Ridgewood DriveMenomonee Falls, WI 53051-5660(262) 703-7000Web site: www.kohls.com

Transfer Agent and RegistrarThe Bank of New YorkShareholder Relations Dept. 11-EP.O. Box 11258Church Street StationNew York, New York 10286(800) 524-4458Web site: www.stockbny.com

Annual MeetingThe Kohl’s 2006 Annual Meeting ofShareholders will be held on Wednesday,April 26, 2006 at 10:00 a.m. at theMidwest Airlines Center, Milwaukee,Wisconsin.

Investor Information/Quarterly ReportsFor quarterly earnings reports and otherinvestor information, please visit our Web site at www.kohls.com or direct your inquiries to the company, Attention: Investor Relations.

Form 10-KParts I-III of Kohl’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, are includedwith this report for all shareholders.

Fiscal 2005 High LowFirst Quarter $53.86 $45.26Second Quarter 58.90 46.50Third Quarter 57.44 43.63Fourth Quarter 50.96 42.78

Fiscal 2004 High LowFirst Quarter $54.10 $39.59Second Quarter 48.83 40.10Third Quarter 52.86 43.70Fourth Quarter 53.24 45.40

Common Stock Price Range

DirectorsJay H. Baker Retired President, Kohl’s Corporation (b) (c)

Steven A. Burd Chairman, President and Chief Executive Officer,Safeway Inc. (b) (c)

Wayne Embry Senior Advisor to the General Manager of theToronto Raptors (a) (c)*

James D. Ericson Retired Chairman, President and Chief Executive Officer, Northwestern Mutual Life Insurance Company (b)* (c)

John F. Herma Retired Chief Operating Officer, Kohl’s Corporation (a) (c)

William S. Kellogg Retired Chief Executive Officer, Kohl’s Corporation

Kevin Mansell President, Kohl’s Corporation

Arlene Meier Chief Operating Officer, Kohl’s Corporation

R. Lawrence Montgomery Chairman and Chief Executive Officer,Kohl’s Corporation

Frank V. SicaPresident, Menemsha Capital Partners, Ltd. (b) (c)

Peter M. Sommerhauser Shareholder in the law firm of Godfrey & Kahn, S.C.

Stephen E. Watson Retired President and CEO, Gander Mountain, L.L.C. (a) (c)

R. Elton White Retired President, NCR Corporation (a)* (c)

(a) 2005 Audit Committee

(b) 2005 Compensation and Stock Option Committee

(c) 2005 Governance and Nominating Committee

*Denotes Chair

Executive Committee Back row: Donald A. Brennan, Executive Vice President – General Merchandise Manager, Men’s and Children’s; Jon Nordeen, Executive Vice President – Planning & Allocation; Gary Vasques, Executive Vice President – Marketing; Kenneth Bonning, Executive VicePresident – Logistics; John Worthington, Executive Vice President – Director of Stores; Telvin Jeffries, Executive Vice President – Human Resources;Chris Capuano, Executive Vice President – General Merchandise Manager, Home and Footwear; Richard D. Schepp, Executive Vice President – GeneralCounsel, Secretary. Bottom row: Peggy Eskenasi, Executive Vice President – Product Development; Jack Boyle, Executive Vice President – GeneralMerchandise Manager, Women’s Apparel and Accessories; Wesley McDonald, Executive Vice President – Chief Financial Officer; John J. Lesko,Executive Vice President – Administration. (Larry Montgomery, Kevin Mansell and Arlene Meier also serve on the Executive Committee).

Stock Listing/ShareholdersKohl’s common stock is listed on the New York Stock Exchange under the symbol KSS.

As of March 1, 2006, there were 5,973 holders of record of Kohl’s common stock.