Kohl's is cashing in as the retail apocalypse decimates its competitors
- Bon-Ton Stores filed for bankruptcy Sunday after announcing dozens of store closures.
- Analysts say this could create an opportunity for Kohl's to cash in on lost foot traffic, as it has many stores located nearby.
- Kohl's is benefiting from its competitors' store closures and has reported stronger-than-expected sales numbers.
100-year-old department-store chain Bon-Ton Stores filed for bankruptcy Sunday after announcing dozens of store closures earlier that week.
Bon-Ton Stores has 260 stores in the US, most of which are located in the Northeast and Midwest.
Analysts believe that these store closures could present an opportunity for Kohl's, given the proximity of its stores. Of the 47 Bon-Ton stores that have been slated to close between January and April 2018, 33 are within a five-mile drive of a Kohl's location, Jefferies analyst Randal Konik wrote in a note to investors on Monday.
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Konik is advising investors to buy Kohl's stock.
"We believe the materialization of Bon-Ton's closures could be a cherry on top to accelerating fundamentals at Kohl's this year," he wrote.
While department-store chains across the country have announced store closures and reported weak sales, Kohl's has become somewhat of an industry anomaly.
During the holiday period, it trumped competitors Macy's and JCPenney with an impressive 6.9% surge in same-store sales during November and December. These stores reported a growth of 1% and 3.4%, respectively, in the same period.
This is partly because Kohl's has been able to capitalize on the store closures of its competitors.
"We estimate that for every Macy’s store closed, 40% of the volume is transferred to Kohl's," Konik wrote.
Konik predicts that there could be a similar level of transfer from Bon-Ton Stores, given the product and demographic overlap.
Kohl's has been able to buck the trend of closing stores as the majority of its stores (9 out of 10) are located outside of enclosed shopping malls, which have been plagued by falling foot traffic.
"We believe Kohl's is a beneficiary of its off-mall physical store footprint, which is more convenient for customers to visit," Oliver Chen, an analyst at Cowen and Co., wrote in a note to investors in January.
Kohl's has also invested money into making its stores more relevant and appealing to shoppers.
Its new "smart basket" program, for example, gives customers discounts for picking up items in stores instead of shipping them to their homes. It has also partnered up with Amazon to sell its devices in stores and offer free returns for Amazon products at several locations.
Plus, it's reduced the size of stores to 35,000 square feet (about one-sixth the size of a Macy's store) to make them more efficient.
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