What happened
Shares of Kohl's (KSS 0.77%) jumped nearly 15% last month, according to data provided by S&P Global Market Intelligence.
Investors cheered as the department store chain announced a surprise partnership with e-commerce titan Amazon.com (AMZN -2.35%).
So what
Amazon smart home and mobile devices will be available in 10 select Kohl's stores in Los Angeles and Chicago starting this month. Kohl's will dedicate approximately 1,000 square feet of space in each store where customers can see, feel, and interact with an array of Amazon's products, including the Echo, Echo Dot, Amazon Fire TV, Fire tablets, and more.
Amazon's Echo smart home device. Image source: Amazon.com.
Later in the month, Kohl's said that it would also accept returns for Amazon products in 82 of its stores located near LA and Chicago. Kohl's will pack, ship, and return them to Amazon for free. It's an unprecedented move -- accepting returns of a competitor's goods -- and it's unclear whether Amazon is compensating Kohl's for providing this service to its customers.
Now what
Perhaps Kohl's is attempting to make itself a more attractive takeover candidate for Amazon. With early evidence indicating that its recent merger with Whole Foods is progressing nicely, some have questioned whether Amazon would purchase another brick-and-mortar retailer to further expand its physical footprint. With its large and relatively high-performing store base, Kohl's would be a logical choice -- and these recent moves only make it more so.
Still, this partnership with Amazon is a risky move for Kohl's. It's also a dangerous strategy to invest in Kohl's simply on hopes of a buyout, because a deal may not occur. And with Kohl's still facing multiple long-term challenges to its core business, I'm content to watch this situation play out from the sidelines.
