Kohl's CEO: Planet Fitness, Amazon partnerships are critical to right-sizing our stores

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Kohl’s CEO Michelle Gass told CNBC on Wednesday that partnering with companies, such as Planet Fitness and Amazon, will be integral to cutting costs and rightsizing its stores in efforts to drive traffic and grow sales.

The department chain, whose locations typically cover more than 80,000 square feet, signed a deal with Planet Fitness last month to convert as much as 25,000 square feet at 10 stores into a gym to double down on its active and wellness initiative.

“[Active and wellness] has doubled over the course of the last four years. It’s now 20% of our business,” Gass told “Mad Money’s” Jim Cramer. “As we look ahead, it’s going to be even more important.”

Kohl’s has plans to expand activewear and wellness products, including golf apparel and Fitbit wearables, by more than 25% in 160 stores. As the gym concept grows, the company expects gymgoers will also walk next door to pick up workout gear, Gass said.

“As we look ahead, we’re committed to stores … We have 1,160 of them, it’s the core of our business,” she said. “But we think there’s opportunity in some cases to make them a little smaller.”

As opposed to lamenting the impact that Amazon has had on retailers across the country, Kohl’s is working to adjust to the times through its pilot with the internet giant. Kohl’s recently announced it will stretch its relationship with Amazon, including selling devices like the Echo and accepting Amazon return items for free, in 200 stores.

The retail and marketplace behemoths first launched their partnership in 2017 with Amazon kiosks in 10 locations around the Los Angeles and Chicago areas.

“I think one of the benefits of being in brick and mortar and having an online business is to accommodate easy returns,” Gass said. “I think we can all relate to sometimes returning things isn’t the most convenient. And as it relates to Kohl’s 80 percent of America lives within 10 miles of a Kohl’s.”

In order to move forward, the partnership will have to be a win-win for both companies, she added.

Earlier this year, Kohl’s began testing another health concept with WW — the newly-branded Weight Watchers — to create a 1,800-square-foot studio for wellness activities in a Chicago store. These partnerships and removing low-selling products to focus on top-selling goods are ways that Kohl’s is looking to stave off declines that have hit the retail industry, including other department stores such as Macy’s, J.C. Penney, and Sears.

“Technology is a huge enabler of this, so we are investing a lot of our capital into creating personalized experiences for our customer and that can mean more personalized in the store or reaching them on a more personalized basis online,” Gass said.

Kohl’s is still confident that the consumer is strong, she said. Besides a sales blip in February that a plethora of retailers blamed on poor winter weather, she’s still optimistic about the rest of the year. After reporting better-than-expected sales of 1% growth during the holiday shopping quarter, the franchise is guiding 2019 earnings per share between $5.80 and $6.15, above Wall Street’s expectations of $5.77 per share.

“We’ve guided our business to be positive again this year both on the top line and in earnings and we always stay close to the customer,” she said. “But I think importantly, Jim, we stand for value and that never goes out of style.”

Shares of Kohl’s fell 1.3% in Wednesday’s session. The stock has climbed more than 7% in 2019.

Disclosure: Carmer’s charitable trust owns shares of Kohl’s and Amazon.

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