Kohl’s (NYSE:KSS) reports its second-quarter results Aug. 20 before the markets open. After a poor first quarter, Kohl’s stock is going to need a solid Q2 report or it could be a very long fall season for the Menomonee Falls company.
If you follow retail stocks you’re probably thinking the one thing that could boost Kohl’s stock would be positive same-store sales, higher gross margins, or an increase in earnings per share over the same period a year earlier. You’re not wrong.
An improvement in any of those financial metrics would be welcome news to Kohl’s CEO Michelle Gass. However, that’s not the one thing I believe could give KSS stock a boost heading into fall.
Here’s What Can Give Kohl’s Stock a Boost
Kohl’s began accepting Amazon (NASDAQ:AMZN) returns in 2017 on a limited basis as part of a pilot program between the two companies. It went so well that in April, Kohl’s announced it would expand the program from 100 stores in Los Angeles, Chicago, and Milwaukee to its entire 1,150-store network across the country.
“We are thrilled to bring Amazon Returns at Kohl’s to all of our stores across the country,” Gass said April 23. “Amazon and Kohl’s have a shared passion in providing outstanding customer service, and this unique partnership combines Kohl’s strong nationwide store footprint and omnichannel capabilities with Amazon’s reach and customer loyalty.”
Amazon Returns officially launched July 8.
At the same time, it announced that it would carry Amazon products at more than 200 stores. If all goes well, investors can expect that relationship to also expand nationwide.
Earlier in 2019, I recommended that investors keep an eye on the Amazon partnership because I saw Kohl’s in-store revenues improving as a result of increased traffic from Amazon buyers returning goods.
In July, I said that the partnership proved to be a winner and as a result, they were rolling it out across the country. Eventually, owners of KSS stock would reap the benefits.
Well, the chickens have come home to roost.
Return Numbers and Kohl’s Stock
Location data advertising firm, inMarket, had some interesting statistics to share about the first three weeks of the nationwide Amazon Returns rollout, and they were all welcome news for Kohl’s shareholders.
The advertising company found that shopper visits to Kohl’s stores were up 24% in the three weeks after the July 8 launch compared to the three weeks immediately prior to the nationwide rollout.
Furthermore, while “micro” visits of five minutes or less increased the most, it found that visits of 16 minutes or longer increased by 14%, a sign that Amazon customers were hanging around Kohl’s once they had completed the return.
Now, while there’s no guarantee these longer-duration visits would translate into revenues, common sense says they will.
“Kohl’s has no interest in making Amazon more money,” Cameron Peebles, inMarket’s chief marketing officer told Business Insider. “But they made a strong business case that these people coming in to make Amazon returns are going to stick around and shop. And it seems, based on foot traffic, that it’s working.”
Investors ought to pay close attention to the retailer’s earnings release and conference call transcript. While it’s unlikely to reveal too much information about the Amazon Returns results to date, Gass will likely provide some hints of its success.
The second-quarter results will include approximately one month of sales post-launch so it could have some effect on top-line sales.
However, I would say the most important results will come in the third- and fourth quarters. By then, Kohl’s will have an excellent picture of how beneficial the Amazon partnership has been.
As Peebles said, the partnership is a slam dunk for both companies.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
