Kohls shares soar after Sephora store-in-store partnership announced

 marketwatch.com  12/01/2020 14:45:00   Tonya Garcia

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Kohls Corp. KSS, +12.67% stock soared 12.5% in early Tuesday trading after its store-in-store partnership with beauty retailer Sephora was announced.

Sephora has agreed to install at least 850 stores in Kohls locations by 2023. The first 200 Sephora at Kohls shops will open in fall 2021, with the Kohls online beauty platform transforming to the expanded Sephora merchandise assortment at that time.

The news was first reported in The Wall Street Journal.

Sephora is part of the LVMH Mot Hennessy Louis Vuitton SE LVMUY, +3.89% MC, +3.29% portfolio of brands.

Sephora has 2,600 stores around the world, 500 of them in the Americas. Kohls has 1,150 locations across 49 U.S. states. Theres little overlap between the retailers, according to the announcement.

The companies say that the partnership will give Kohls greater exposure to new, younger shoppers, while Sephora will reach millions of new customers and engage with existing Sephora shoppers who may not live near one of its stores.

The partnership will also create an elevated beauty experience for Kohls shoppers, according to a statement from Kohls Chief Executive Michelle Gass.

See: Ulta Beauty shares jump after mutually beneficial partnership with Target announced

Kohls has an existing partnership with Amazon.com Inc. AMZN, +0.91%, providing the e-commerce giant with bricks-and-mortar locations for returns.

Sephora has an existing store-in-store partnership with bankrupt department store retailer JC Penney Co. Inc. JCPNQ, -1.92%

Earlier this year, Sephora took steps to pull out of the partnership, but the two companies ultimately resolved their differences. That relationship began in 2006 and is scheduled to conclude in 2023. There are Sephora shops in 600 stores in JC Penney locations.

As part of the JC Penneys bankruptcy process, it has agreed to sell its retail and operating assets to Brookfield Asset Management Inc. BAM, +0.49% and Simon Property Group Inc. SPG, +1.87% and close one-third of its stores over the next two years.

Watch: How to pick winners in the retail sector amid the pandemic

With department stores struggling even before the coronavirus pandemic, Kohls has been undergoing a transformation that includes a new lineup of brands on its racks, private-label launches, and more.

Kohls reported adjusted earnings of a penny per share and revenue of nearly of nearly $4 billion in the third quarter, beating the FactSet consensus.

Kohls stock has dropped 36.8% for the year to date while the benchmark S&P 500 index SPX, +1.20% has gained 12.1% for the period.

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