Kohl’s partners with Aldi

In an earnings call on Thursday, department store Kohl’s announced that it was partnering with German grocery retailer Aldi, by leasing space adjacent to as many as 10 of its stores through a pilot test in 2018.

“We’re focused on traffic-driving retailers: Groceries, supermarket chains, they drive a lot of traffic. We’re finally on a path where we’re getting more,” Kevin Mansell, Kohl’s CEO said on a Thursday earnings call.

In January 2018, Mansell said Kohl’s was “right-sizing” locations by creating smaller, more profitable stores within its 87,000-square-foot boxes, leaving unused space at 300 locations that could benefit from traffic-generating retailers like those that sell food.

During the call, Mansell said he envisioned expanding the store-sharing idea to as many as 500 Kohl’s stores in the US, however media reports said not all partnerships would be with Aldi and other businesses that were, “traffic drivers, strong brands, strong balance sheets where we know that we can coexist together for a long time,” were options for him.

Julia Fennelly, a company spokesperson for Kohl’s said in media reports, “We plan to lease separate retail space to Aldi to operate Aldi stores. These would be Aldi stores adjacent to Kohl’s stores, not inside of Kohl’s stores.”

The partnership will benefit both companies by optimizing Kohl’s massive, under-utilized real estate footprint of more than 1,100 stores and reducing the need of acquiring real estate for Aldi which plans to add 2,500 stores by 2022.