Kohl's Corp. (KSS) stock is getting pumped up on Tuesday, thanks in large part to key partnerships.
Shares of the Wisconsin-based retailer are running upward after besting analyst estimates with its earnings release for the February 2-ended quarter. Yet, key partnerships with companies like Amazon (AMZN) , Planet Fitness (PLNT) , and WW International (WTW) ,appear to be the major indicators to watch for investors.
"Kohl's was a bad call until they dropped the bomb at the end," Action Alerts PLUS portfolio manager Jim Cramer said.
The bomb he referred to was the company's expanded relationship with Amazon, which is proving quite positive, according to CEO Michelle Gass.
"We continue to be encouraged and learn a great deal through our returns pilot [with Amazon] that we have now in approximately 100 stores," she told analysts on Tuesday morning. "We've also been partnering with Amazon in selling devices within our stores both in a traditional wholesale relationship as well as in 30 store-within-store concepts."
The share reaction to the upside accelerated rapidly once Gass disclosed that this relationship will be expanded even further, pushing shares a couple percent higher immediately during the call.
"Going forward, and in partnership with Amazon, we've made the decision to transition from the store-within-a-store concept to a more robust wholesale relationship with amazon as we found it a better way to serve our customers," Gass added. "As a result, we'll be extending our assortment of Amazon-branded product into over 200 stores."
The expansion of the relationship with Amazon is a key catalyst for Kohl's, as a battle for grocery between Amazon and Walmart (WMT) could mean a great deal more reliance on Kohl's existing locations by Amazon.
"[Amazon] needs to be delivering grocery to compete with Walmart," Jim Cramer explained. "They need to have a strategy of buy and pick up like Walmart has. They're doing it with Kohl's."
The expansionary potential of the relationship appears strong already, having grown from a location for returns to a wholesale relationship. The lean on Kohl's for grocery could further make sense, as the company has already stated its intention to lease space to grocers like Aldi in its over-sized stores.
Amazon is rumored to be examining the opportunity to significantly grow its real estate footprint in order to grow its grocery presence. Given Kohl's grocery focus with Aldi and existing partnership with Amazon for electronics and returns, the prospect of further partnership in this area certainly makes logical sense.
Of course, with a company like Amazon, the possibilities are multitudinous.
"We are excited about the company's possibilities with Amazon and there is still plenty of room for additional expansion to this relationship," the Action Alerts PLUS team wrote on Tuesday.
Still, Kohl's was not happy to rely entirely on Amazon for its partnership interests as new relationships with Planet Fitness and Weight Watchers International were disclosed by Gass on the earnings call.
"We continue to see our Rightsizing strategy as an important initiative to not only leverage our real estate assets but also drive traffic to our stores through key partnerships," Gass said. "Today, I am excited to announce our new partnership with Planet Fitness, which will initially include up to 10 Planet Fitness locations. We see the Rightsizing strategy as a large opportunity for Kohl's."
Adding the 12.5-million-person strong membership base as visitors to Kohl's locations on a regular basis could certainly help sustain the company's strong same store sales targets.
To be sure, Weight Watchers is a less promising partnership given its seriously weak outlook that led to a nearly 35% drop in share value on February 26. That makes it a less than ideal partner as the keto diet craze eats its lunch and offers likely less traffic than the aforementioned partners.
In any event, the partnerships the company is promoting is clearly one of the key indicators to the stock's surge on Tuesday and investors must take note of any elaboration to come on these key initiatives.