As Kohl’s slims down its inventory and real estate footprint, the retailer will test the traffic-building appeal of food, with plans to bring discount grocer Aldi into 10 stores later this year. The news comes as Kohl’s announced strong Q4 financial results, including a comparable store sales increase of 6.2% and a 9.2% jump in total sales.
Kohl’s has made approximately 300 of its stores operationally smaller, according to CNBC, which reported in January that the retailer would partner with grocers or convenience stores to fill vacant space.
In a conference call, Kohl’s CEO Kevin Mansell said that smaller stores have a “phenomenal improvement in customer engagement, which is improved…by ease of shopping,” according to CNBC. While there’s less inventory on the store floors, what remains is curated based on what customers are most interested in. Additionally, because of Kohl’s off-mall locations, its stores are “highly wanted from a real estate perspective,” said Mansell.
For the 2017 fiscal year, which ended Feb. 3, 2018, Kohl’s had total sales of $19.1 billion, a 2.2% increase over the $18.6 billion in fiscal 2016. Comparable store sales increased 1.5%, compared to a 2.4% decrease the previous year.
“I am very pleased with our fourth quarter and full year results, which exceeded the high end of our most recent guidance by $0.11 per share,” said Mansell in a statement. “We improved our merchandise margins through strong inventory management and improved promotional and permanent markdowns. All areas effectively managed their expenses. And, we ended the year with 7% less inventory.”
If Kohl’s and Aldi expand their relationship beyond the 10-store pilot, it could bring Kohl’s into even sharper competition with big box retailers that also offer groceries, including Walmart and Target. The supermarket sector has been the site of major disruption since Amazon’s purchase of Whole Foods. On its own, Aldi has signaled its determination to conquer the U.S. market, investing $3.4 billion to reach the goal of a 2,500-store footprint by 2022.