Kohl's teaming up with German grocer Aldi

NEW YORK — Kohl's shoppers will be able to pick up some groceries while shopping for clothing at select stores.

The department store chain said Thursday it is teaming up with German no-frills grocery chain Aldi to lease space in five to 10 of its stores. The move comes as Kohl's looks to scale back its footprint while making its stores more productive.

Kohl's also reported a 6 percent increase in sales at established stores for the critical fourth quarter, the largest gain since 2001. Business was helped by more customers coming into the stores as well as shopping online, where sales were up 26 percent. Kohl's also reported better-than-expected profits as it offered fewer discounts.

The report followed good results at Macy's Inc., which broke out of its three-year sales funk, as department stores try to regroup as shoppers spend more online and on items other than the clothing on which the chains are very dependent. Retailers have revamped their businesses, from closing poorly performing stores to changing their product lineups to expanding their online services.

Kohl's has been testing small-concept stores and last year started accepting returns from Amazon.com in 82 of its stores. It also has dedicated areas in 10 stores that sell Amazon Echos, Fire tablets and other gadgets.

Kohl's, which is based in Menomonee Falls, Wisconsin, reported fourth-quarter profit of $468 million, or $2.81 per share. In the year ago period, Kohl's reported income of $252 million, or $1.44 per share. Earnings adjusted for pretax gains came to $1.87 per share. That surpassed Wall Street expectations, with the average estimate of eight analysts surveyed by Zacks Investment Research for earnings of $1.77 per share.

The department store operator had revenue of $6.78 billion, also surpassing Street forecasts. Four analysts surveyed by Zacks expected $6.74 billion. For the year, the company reported profit of $859 million, or $5.12 per share. Revenue was $19.1 billion.

Kohl's expects full-year earnings of $4.95 to $5.45 per share. Analysts expected $4.72 per share for the year, according to FactSet.

But rising costs related to new initiatives caused investor concern, and its shares fell 6 percent to $61.86 in Thursday trading.