Just a few days ago, retail expert Jan Kniffen made the case for Amazon.com, Inc. (NASDAQ:AMZN) acquiring brick and mortar department store chain Kohl’s Corporation (NYSE:KSS), pointing out that at the current price of KSS stock, the company sports a market cap of only around $8.0 billion.
That’s plenty affordable for the ecommerce giant, which paid $13.7 billion for a less fruitful Whole Foods Market.
It’s not exactly a new idea either. The premise first surfaced as a whisper months ago, but with the acquisition of Whole Foods and the opening of a handful of physical bookstores in the meantime, it’s a discussion that’s come to the forefront.
Most observers don’t see it happening, mind you, citing comments from Kohl’s incoming CEO Michelle Gass, who bluntly said of the idea in October “I don’t think so, no.”
Before jumping to the conclusion that it’s just never going to happen though, current and would-be owners of KSS stock may want to take a closer look at all the brick-and-mortar efforts Amazon has already made, with a few of them in partnership with Kohl’s.
In no certain order….
1. Developing its own apparel brands
In October it was reported that Amazon was in talks with clothing manufacturers to launch its own private label athletic wear brand.
Though it wouldn’t necessarily have to sell that clothing in a physical store to make it viable, considering it’s also already selling private label clothing with names like Goodthreads and Paris Sunday, a foray into the brick and mortar on its own world doesn’t seem like a stretch.
2. Setting up Amazon Smart Home Shops in Kohl’s stores
It should be noted Kohl’s and Amazon.com already have a sales partnership, even if it’s an uncomfortable one. That is, in ten Kohl’s locales, Amazon’s “smart home” wares are prominently displayed in a space that looks like something one might expect from Best Buy Co Inc (NYSE:BBY).
Some experts have criticized the deal, suggesting Kohl’s could be facilitating customer relationships with Amazon that end up siphoning much-needed business away. Clearly Kohl’s thinks the partnership will bear more fruit than not, though, drawing foot traffic into its stores.
3. A Budding Affinity for Brick and Mortar Retailing
It’s not just a strange partnership with Kohl’s that suggests to people holding KSS stock that it’s more than just a little curious about what physical storefronts could become.
Indeed, the August acquisition of Whole Foods Market is a seemingly stranger fit than Kohl’s might be. Amazon.com has opened 13 bookstores using the Amazon name, with three more in the works.
It’s very much an un-Amazon move that was unthinkable just a few years back, but says the company now sees reason to develop a branded presence in the real world.
4. Accepting Amazon Returns at Kohl’s Stores
Not only has Amazon set up smart-home shops in ten Kohl’s locales, 82 Kohl’s stores now accept returns of merchandise purchased via Amazon.com.
The idea is to generate foot traffic for Kohl’s, and in that regard it’s a win for the department store outfit. If a consumer doesn’t want something they bought from Amazon, they may well swap it with something purchased directly from/at Kohl’s.
Again though, this is a strangely-symbiotic relationship from two entities that should see themselves as competitors more than they are.
Bottom Line for KSS Stock
The potential for an acquisition isn’t a good enough reason by itself to own Kohl’s stock, though the KSS stock price has rallied a great deal in just the past couple of days on such speculation. Far more M&A deals are theorized than ever actually materialize.
Still, there’s a certain degree of logic to the idea, and there’s no denying Amazon already has a healthy working relationship with the retailer, even if it’s only a small-scale relationship now. Given the direction the e-commerce giant is slowly moving, the premise of an acquisition isn’t a completely crazy one.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.