Kohl's Accounts Receivables

CFA General
#1

I was talking with a buddy at work today and now I’m looking at Kohl’s financial statements. How can Kohl’s have $0.00 accounts receivables for the last several years? I also don’t see any footnotes about any off balance sheet info (recourse)…

#2

I found an answer: In April 2006, we completed the sale of our private label credit card accounts and the outstanding balances associated with the accounts. As a result of the sale, the credit card operations are now subject to numerous federal laws that impose disclosure requirements upon the origination, servicing and enforcement of credit accounts and limitations on the maximum amount of finance charges that may be charged by a provider. The effect of these regulations or any changes in regulations of credit agreements could affect our results. HOWEVER, my wife and I still have a Kohl’s credit card–how does that work then?

#3

Chase runs Kohl’s charge card. So when you use your card at Kohl’s, Chase pays Kohl’s and you owe Chase.

#4

Wouldn’t that still be considered an A/R for Kohl’s? After all, they’re waiting for the payment from Chase…

#5

I would think the interest on the card represents the risk of payment. So Chase pays Kohls immediately and now bears the risk of payment from the end user. They get compensated for taking that risk. Still doesn’t make sense that they have no A/R.

#6

Depends on the payment terms. If they are close enough the AR could be immaterial.

#7

soxboys21 Wrote: ------------------------------------------------------- > > HOWEVER, my wife and I still have a Kohl’s credit > card–how does that work then? I recommend keeping this bit of knowledge to yourself

#8

RIGWDL3 Wrote: ------------------------------------------------------- > soxboys21 Wrote: > -------------------------------------------------- > ----- > > > > > HOWEVER, my wife and I still have a Kohl’s > credit > > card–how does that work then? > > > I recommend keeping this bit of knowledge to > yourself At least he didn’t say it was a Rent-A-Center card.

#9

depends if there is recourse back to Kohls for charges that are not paid. If not, then there is no reason to have any A/R. If the sale was with recourse then they have to have some sort of allowance for bad debt or similar. I think Target did something like this the other year but cant remember who they sold it to, but it didnt eliminate their stake in it entirely.

#10

Credit card operationswere sold and run as a private label brand by Chase. Chase handles the approvals, risk management and almost certainly has no recourse back to Kohl’s since they are handling all aspects of the operation. Beyond a private label credit card there is very little reason for Kohl’s to have A/R, and what very small amounts they do have are lumped in other current assets. Also note that Kohl’s is including its credit and debit card receivables from this program in its “cash” line on the balance sheet ($71mm as of the end of the year). The $1.6bn you saw as A/R in 2006 was related to the credit card program which they sold for $1.6bn

#11

RIGWDL3 Wrote: ------------------------------------------------------- > soxboys21 Wrote: > -------------------------------------------------- > ----- > > > > > HOWEVER, my wife and I still have a Kohl’s > credit > > card–how does that work then? > > > I recommend keeping this bit of knowledge to > yourself I’m not ashamed–they’ve got good deals all the time!