Aldi to open grocery stores next to Kohl’s
In January, Kohl’s CEO Kevin Mansell said the retailer had “identified a whole list of partners” from the convenience and grocery channels to lease space within Kohl’s stores that had been “right-sized” in recent years. The first food retailer to partner with Kohl’s, it was announced yesterday, is Aldi. The hard-discount grocer will open stores next to — not inside as previously speculated — between five and 10 Kohl’s locations.
Speaking on the company’s fourth quarter earnings call yesterday, Mr. Mansell said the company was “accelerating” its plans to right-size stores and that he believed that roughly 500 standard stores would have additional space for lease by the end of the year.
“We believe the opportunity to leverage our real estate through this effort has benefits on both the top line with increased traffic and the bottom line through expense offsets, both fixed and variable,” said Mr. Mansell (via Seeking Alpha), who will be stepping down as Kohl’s CEO in May.
Kohl’s reported an increase in same-store sales of 6.3 percent during the fourth quarter, while its earnings per share were 11 cents higher than its guidance.
“We’re focused on traffic driving retailers with good strong balance sheets and outlooks. So certainly, the one [Aldi] that we’re doing the pilots with falls into that category,” Mr. Mansell told analysts.
Aldi, which is known for a no-frills approach to retailing that uses high quality private labels and low prices to drive sales, has been rapidly expanding its store count. Last year, it announced a plan to invest $3.4 billion to expand to 2,500 locations across the U.S. by the end of 2022. If all goes according to plan, Aldi will be the third largest supermarket chain by then.
“We pioneered a grocery model built around value, convenience, quality and selection and now Aldi is one of America’s favorite and fastest growing retailers,” said CEO Jason Hart last June. “We’re growing at a time when other retailers are struggling.”
Aldi has taken steps in recent years to upgrade its image, including adding more organic foods, antibiotic-free meats and other healthier options. The chain began a test of home delivery in partnership with Instacart last year. The chain currently offers the service in select areas in California, Florida, Illinois and Texas.
- Kohl’s Q4 2017 Results (Earnings Call Transcript) – Seeking Alpha
- Kohl’s Corporation Reports Financial Results – Kohl’s Corporation
- Kohl’s to share space with grocery store partner(s) – RetailWire
- Will Aldi upset the grocery home delivery cart? – RetailWire
DISCUSSION QUESTIONS: Do you think the Kohl’s/Aldi pilot will prove successful? Is the decision to operate the businesses next to one another rather than placing Aldi inside a Kohl’s primarily based on operational issues or do you see other factors being involved?