Coming to Kohl’s: groceries

Less is more, Kohl's executives are finding, as the department store chain continues to shrink its existing locations and whittle down the items in its stores.

Smaller stores, less inventory and newly formed partnerships with Amazon.com and UnderArmour have helped the company turn around its business in recent months. On Thursday, Kohl's reported the largest increase in quarterly sales since 2001.

Now the retailer is teaming up with discount grocer Aldi to test groceries at up to 10 of its department stores. Soon, some customers will be able to pick up milk and eggs along with their cargo shorts and yoga pants.

The goal, executives say: To get more people into their stores.

'The key priority we have as a company is to drive traffic,” Kevin Mansell, the CEO of Kohl's said in a Thursday earnings call. '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” shoppers.

Sales at Kohl's stores open at least a year rose 6.3 percent during the most recent quarter, the company said Thursday, while profits increased 38 percent.

The bump in sales comes as retailers around the country experiment with new ways to reinvent their bricks-and-mortar locations. Some, such as Target, Macy's and Nordstrom, are distilling inventory into smaller, more-focused locations.

Others - Apple and Best Buy, for example - are adding communal spaces, demonstration areas and workshops in hopes of getting shoppers to linger.

Selling groceries also has become a popular tactic. The country's largest retailers, including Wal-Mart, Target and Amazon are investing heavily in their grocery businesses as a way to convince shoppers to stop by on a weekly basis.

'Groceries are one of the few things that most people buy routinely, which is why Amazon, Wal-Mart, and Target have been making big moves in this space,” said Stephanie Waters, global retail industry principal for SAP Hybris.

'But,” she added, 'selling groceries is also very hard. It takes a lot of investment and expertise, and profit margins are very slim.”

The Kohl's-Aldi tie-up, though, could be promising for both retailers, she said. The arrangement allow Kohl's to rack up additional foot traffic without having to figure out how to operate a grocery business.

And for Aldi, renting space within Kohl's stores is likely to be less costly than building stand-alone locations.