Kohl’s shares could rally 50% from ‘win-win’ partnership with Amazon
Shares of Kohl’s Corp (KSS) rallied in morning trading after an analyst called the retailer’s partnership with Amazon (AMZN) a “win for both companies” and said Kohl’s stock could rise another 50% or more.
JEFFERIES ANALYST EXPRESSES OPTIMISM
Jefferies analyst Randal Konik raised his price target for Kohl’s stock to $100 from $66 and said the stock could rally at least another 50%.
In a note to clients, Konik asid Kohl’s is “addressing the digital revolution head on” and beating rivals with its emphasis on proprietary brands, rightsizing its square footage and its partnership with Amazon.
Konik said Kohl’s partnership with Amazon is “sleeping with the enemy,” but believes their agreement is a “win for both companies.”
He expects the pilot to roll out nationally, allowing Kohl’s stores to see stronger traffic and “a nice added convenience” for Amazon customers. Konik also said he expects Kohl’s sales growth to accelerate and margins to rise, and views current consensus estimates as “way too low.”
The company’s off-mall real estate is an additional positive, as is the closing of peer stores, Konik added.
In order to combat weakness stemming from the increasing popularity of fast-fashion retailers and an increase in online shopping on sites like Amazon Kohl’s is currently offering free Amazon returns in 82 stores.
The retailer previously announced plans to roll out a “smart home experience” in 10 stores across the Los Angeles and Chicago areas.
Shoppers at these stories are able to purchase Amazon devices, accessories and smart home devices and services directly from Amazon.
Kohl’s said 1,000-square-foot “zones” within its stores will be dedicated to Amazon products, including the Echo, Echo Dot, Fire TV and Fire tablets.
Kohl’s has also partnered with Under Armour (UA, UAA), Nike (NKE) and adidas (ADDYY) to sell the companies’ shoes and apparel in Kohl’s stores.
Earlier this month, Kohl’s CEO told CNBC at ICR’s conference that the retailer plans to lease portions of its bigger stores to other retailers like grocery stores. The retailer is also testing smaller store formats of about 35,000 square feet.
Kohl’s is up 2.8% to $66.66 in morning trading.
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