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Kohl’s Earnings Surprise Was Powered by the Amazon Returns Program

By Rich Duprey - Mar 4, 2020 at 12:22PM

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The retail chain got a significant boost in sales from people visiting its stores to drop off packages in January.

Shareholders of Kohl's (KSS 2.19%) have Amazon (AMZN 1.73%) to thank for the better-than-expected fourth-quarter results the discount retail chain posted Tuesday. 

After warning last month that its holiday-season sales had been disappointing and that earnings would come in lower than it had guided toward, this week, Kohl's revealed revenues of $6.54 billion and earnings of $1.99 per share, topping Wall Street's consensus forecasts of $6.52 billion in revenue and $1.91 per share in profits.

The retailer was able to outperform its own expectations for the period that ended Feb. 1 because its January sales turned out surprisingly strong thanks to the Amazon returns program, which helped lift comparable sales for the month, bringing them to flat for the quarter.

Woman taping up a box

Image source: Getty Images.

Return to sender

The Amazon partnership has been hit and miss for Kohl's; the e-commerce giant's customers have been using the retailer's stores as convenient drop-off points for packages they want to return, but they haven't been shopping its aisles much while there.

However, January is a massive month when it comes to returning packages -- so much so that UPS has dubbed Jan. 2 as National Returns Day. This year, it handled close to 2 million packages going back to retailers that day.

So it's not too surprising that Kohl's would see a big influx of people bearing cardboard boxes destined for Amazon in January, and by the sheer weight of their numbers, they helped lift its same-store sales. The problem is, Kohl's business may return to normal as the flood of returns ebbs. However, CEO Michelle Gass said, "we're encouraged with the tailwind we're seeing and we expect that to continue into the year."

Profit margins are expected to shrink in 2020, partially as a result of the costs associated with the returns program.

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Stocks Mentioned

Kohl's Corporation Stock Quote
Kohl's Corporation
KSS
$27.97 (2.19%) $0.60
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$116.31 (1.73%) $1.98
United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
UPS
$184.24 (-0.50%) $0.93

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