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Can Kohl's Extended Tie-Up with Amazon Drive Store Traffic?

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Shares of Kohl’s Corporation (KSS - Free Report) moved up to eventually close the day 1.1% higher after it announced to extend its partnership with online giant Amazon.com, Inc. (AMZN - Free Report) . The retailer has decided to start accepting returns for Amazon customers on selected products in 82 of its U.S. store locations from October 2017. Additionally, the retailer will provide free service of packing and shipping the merchandises to Amazon’s fulfillment centers.

The latest move comes after Kohl's decided to sell Amazon devices, accessories and smart home devices in 10 selected stores in Los Angeles and Chicago earlier this month. Kohl’s believes this store-within-store concept will boost stores traffic.

The partnership is poised to benefit both companies. Kohl’s will make use of its stores and omni-channel capabilities, while Amazon will now be serving a widened customer base. Leveraging the benefits of the two, we believe Kohl’s is expected to generate more store traffic, curtesy of the availability of Amazon’s varied electronics options and the return facility. Amazon, on the other hand, will be able to lower set-up costs and get more visibility through Kohl’s stores.

Like Kohl’s, retailers such as Best Buy Co. Inc. (BBY - Free Report) and Sears Holdings Corporation have also teamed up with the online giant ahead of the holiday season. While Best Buy is creating in-store Amazon concepts, Sears plans to sell Kenmore appliances on Amazon. Apart from Amazon, the company has also teamed up with Apple Inc. last year to develop small shops within its stores.

Kohl's Corporation Price, Consensus and EPS Surprise

 

Kohl's Corporation Price, Consensus and EPS Surprise | Kohl's Corporation Quote

Other Initiatives to Boost Traffic and Drive Sales

Kohl’s of late, has been taking a number of initiatives to attract shoppers and improve sales. The company has added Under Armour workout tights and sneakers in its portfolio and is focusing on sales growth with both Nike and Adidas. Kohl’s plans to sell Clarks shoes to capture the back-to-school shopping season and is also contemplating to add other brands to store aisles.

The company gained significant market share in active apparel and footwear segment in the first half of the year and expects the momentum to continue in the latter half, based on assortment improvements. The company also intends to focus on three largest private-label brands such as SONOMA, Croft & Barrow and Apartment 9 to propel traffic, thanks to the improving sales in the past, driven by an impact of speed initiative in the supply chain. In order to drive comps, the company has also taken an initiative of Greatness Agenda during the first quarter of 2014 to increase transactions per store and sales.

Inventory Reduction Initiatives

Kohl’s has also undertaken several steps to reduce inventory to raise profits. Lower stock levels have led to improvement in merchandise margins, thus leading to gross margin growth. The company continues to expect supply to be down at low to mid-single digits for fiscal 2017.

Growing e-commerce Business

The company is also striving to boost its e-commerce business over the last few years. As a result, digital conversion improved at a double-digit rate in the recently reported second quarter of fiscal 2017 on the back of better customer experiences on smartphone and smartphone app. In fact, technological advancement in terms of online applications, order placement on phone handsets and omni-channel efforts are expected to have a substantial impact on customer experience.

Regular Innovations

Kohl’s has been introducing new brands regularly to keep the inventory assortment fresh and the flow of customer traffic to both company’s stores and website stable. Popular launches like Fit Bed under the active and wellness business, the Jumping Beans collection featuring Disney characters, IZOD branded menswear and the Juicy Couture brand for women and girls, Gaiam Yoga product, Stride Rite branded kids’ footwear collection and many more further provide stimulus to the company’s robust product portfolio. Kohl’s also partnered with designer Reed Krakoff to unveil an exclusive, limited-edition collection called REED, exclusively at Kohl’s retail outlets and on Kohls.com in April 2016.

We believe these efforts are well-reflected in the share prices of this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here. Over the last three months, the stock has rallied more than 25% in comparison to the industry and the broader Retail and Wholesale sector. While the industry has increased 10.7% in the last three months, the sector has grown around 3%.

Kohl’s also flaunts a VGM Score of A, which makes it a favorable investing option.

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