Kohl’s said Thursday it would bring discount grocer Aldi into as many as 10 stores later this year in a pilot test, as the retailer aims to scale down its real estate footprint and leverage space for others.
CNBC reported in January that Kohl’s would be working with grocers and convenience stores to lease space in its stores. At the time, the company didn’t disclose which companies would be moving in.
The retailer’s right-sizing efforts are expected to impact an additional 200 Kohl’s stores this year. On a call with analysts and investors, CEO Kevin Mansell said the moves would allow the company “to achieve further inventory reductions and margin acceleration as a result.”
In Kohl’s latest quarter, more controlled inventory levels helped profit margins and boosted sales, as stores had a cleaner appearance overall.
At the start of this year, Mansell had told CNBC the company had readjusted the square footage of roughly 300 stores over the past several years. He said the company had “a whole list of partners” ready to fill the leftover space.
The Kohl’s partnership with grocers notably threatens Target, which has struggled to make itself a strong player in the food industry.
For Target, food has often been overlooked as part of its overall strategy, as it invests more in apparel, electronics and home goods. Kohl’s, though, will bring in outside industry experts to manage a food business and meet customers’ evolving needs and preferences. The goal is to boost foot traffic to Kohl’s stores.
For this pilot to be successful, Kohl’s will need to make sure its shopper profile matches that of Aldi. From a logistics standpoint, the two companies must figure out a way to bring fresh food into stores, if that’s ultimately what they decide to sell there.