Less is more, Kohl’s executives are finding, as the department store chain continues to shrink its existing locations and whittle down the items in its stores.
Smaller stores, less inventory and newly-formed partnerships with Amazon and UnderArmour have helped the company turn around its business in recent months. On Thursday, Kohl’s reported the largest increase in quarterly sales since 2001. Now the retailer is teaming up with discount grocer Aldi to test groceries at up to 10 of its department stores. Soon, some customers will be able to pick up milk and eggs along with their cargo shorts and yoga pants.
The goal, executives say: To get more people into their stores.
“The key priority we have as a company is to drive traffic,” Kevin Mansell, the chief executive of Kohl’s said in a Thursday earnings call. “We’re focused on traffic-driving retailers: Groceries, supermarket chains, they drive a lot of traffic. We’re finally on a path where we’re getting more [shoppers].”
Sales at Kohl’s stores open at least a year rose 6.3 percent during the most recent quarter, the company said Thursday, while profits increased 38 percent. Kohl’s has two locations in Clark County.
The bump in sales comes as retailers around the country experiment with new ways to reinvent their brick-and-mortar locations. Some — like Target, Macy’s and Nordstrom — are distilling inventory into smaller, more-focused locations. Others, like Apple and Best Buy, are adding communal spaces, demonstration areas and workshops in hopes of getting shoppers to linger.
Selling groceries has also become a popular tactic. The country’s largest retailers — including Walmart, Target and Amazon — are investing heavily in groceries as a way to convince shoppers to stop by on a weekly basis.
“Groceries are one of the few things that most people buy routinely, which is why Amazon, Walmart and Target have been making big moves in this space,” said Stephanie Waters, global retail industry principal for SAP Hybris.
“But,” she added, “selling groceries is also very hard. It takes a lot of investment and expertise, and profit margins are very slim.”
The Kohl’s-Aldi tie-up, though, could be promising for both retailers, she said. The arrangement allows Kohl’s to rack up additional foot traffic without having to figure out how to operate a grocery business. And for Aldi, renting space within Kohl’s stores is likely to be less costly than building stand-alone locations. The partnership would also help familiarize mainstream America with the German grocery chain, which arrived in the U.S. less than a year ago.
“We’ve seen so many different business models throughout retail, but this is the first time I’ve seen a department store look to groceries,” Waters said. “Everyone’s trying to get a share of the food dollar these days.”
Analysts say Kohl’s has been particularly innovative in repurposing its stores in new ways. The company’s stores are primarily located in strip malls and stand-alone shopping centers, making it convenient for customers to quickly run in and out. Analysts say that approach has also given the retailer a leg up against competitors like Macy’s and Sears, which are often located in sprawling shopping malls on the outskirts of town.
