While you might have treated your friends to a bottle of champagne on New Year's, your stock portfolio could probably use a lump of Kohl's ( KSS). In 2005, the retail picture is divided into two camps. In one, you've got your department store old-timers, facing an uphill battle against a new generation of powerhouses like Wal-Mart ( WMT) and Target ( TGT). In the other, discount superstores are approaching a saturation point for growth in the U.S., forcing them to look overseas for new opportunities that tend to present their own set of problems. In the middle sits Kohl's -- a discount department store chain whose smaller, stand-alone stores offer a nice option for consumers looking for convenience and low prices. Its attractive growth prospects earn the company a premium valuation, but the price is probably worth it. "Kohl's is in the enviable position of being able to expand its retail footprint substantially over the next several years," wrote Sanford Bernstein analyst Emme Kozloff in a recent report. "Our analysis shows that the company should comfortably be able to grow its square footage at a rate of approximately 15% for the next five years." Over the past decade, Kohl's averaged sales growth at 23% annually, dwarfing the low-single-digit growth logged by many traditional department stores, like Federated ( FD) and May Department Stores ( MAY), over the same period. Much of this success is owed to rapid store expansion, but the company's same-store sales, those at stores open at least a year, have increased consistently as well. Thanks to an unexpected drop-off in demand in 2003, Kohl's got caught with excess inventories and was forced to take deep discounts that year. Lower pricing whittled away at its margins, making for a disappointing year. Margins recovered in 2004.