Kohl's Amazon Returns Test Fails to Drive Traffic, Forces Strategic Reevaluation

The retail world is bracing for a familiar post-holiday wave, but this year it's a tidal surge. January has become known as 'Returnuary,' a term capturing the massive volume of goods sent back after the holidays. The National Retail Federation estimates a 17% return rate for all U.S. merchandise this year, translating to a staggering $890 billion in returns. For investors, this isn't just a logistical headache; it's a major theme that's capturing market attention and creating clear winners and losers.

The trend is a clear catalyst for specific stocks. Companies that handle the return logistics or profit from the resulting inventory are the main characters in this story. UPS, which delivers countless packages back to retailers, is a direct beneficiary of the e-commerce return wave. Similarly, TJX Companies, with its off-price chains like TJ Maxx and Marshalls, is positioned to buy and resell a significant portion of returned goods. Both have seen their stories dominate the financial news cycle as the 'Returnuary' narrative heats up.

Contrast that with the fading spotlight on Kohl's. While the market focuses on the $890 billion opportunity, Kohl's is grappling with a steep sales decline. The retailer's fourth-quarter 2024 sales fell 9.4%, and for the full year, they dropped 7.2%. Its forward view is even weaker, with management projecting a 2% net decrease in sales for 2025. This isn't just a bad quarter; it's a sustained downward trajectory that has pushed the stock into a defensive, almost experimental mode.

The market's attention is sharply divided. On one side, you have UPS and TJX riding the wave of return-driven activity, with their stories tied directly to the scale of the problem. On the other, Kohl's is testing a new strategy-temporarily stopping Amazon returns at some stores-as part of a broader plan to cut costs and close underperforming locations. In this high-stakes game, the trend is clear: capital is flowing to the beneficiaries of 'Returnuary,' while the retailer struggling to adapt gets left behind.

The Catalyst: Kohl's Test and the Traffic Gambit

The test is now live. Kohl's has temporarily stopped accepting Amazon returns at three specific stores: Leominster, Massachusetts; Eau Claire, Wisconsin; and Washington, Missouri. This move is a direct test of the retailer's core traffic strategy, which for years has been pinned on the promise that Amazon returns would drive shoppers through its doors.

The original benefit was simple: customers returning Amazon packages would receive a discount coupon for Kohl's merchandise. The theory was that this would create a new, low-friction path to the store, converting a return trip into a potential purchase. For a retailer drowning in sales declines, the math seemed straightforward. But the test now signals the program failed to deliver on its promise.

This isn't happening in a vacuum. It's the latest move in a broader operational strain. Kohl's is simultaneously planning to close 27 underperforming stores by April and cut 10% of its corporate workforce. The Amazon returns program, which has been criticized for slowing down store operations without adding sales, has become a visible point of friction. The relief expressed by Kohl's employees on internal forums suggests the program was a burden, not a benefit.

The bottom line is that the partnership did not live up to its hype. Despite the initial fanfare and the 2 million new customers Kohl's claimed to gain in 2021, the expected sales boost never materialized. The retailer's same-store sales have declined for 12 straight quarters. In this light, the test is a classic "test and learn" move that has clearly failed its primary objective. With capital flowing to the real beneficiaries of the 'Returnuary' trend, Kohl's is now forced to ask if even this traffic gambit was worth the cost.

The Headline Risk: Is Kohl's the Main Character?

The test is a clear admission of failure. Kohl's is not capitalizing on the 'Returnuary' trend; it is pulling back from a key traffic driver that was supposed to be its lifeline. The move to stop Amazon returns at three stores is a direct challenge to the original thesis that powered the partnership. That thesis was simple: make returns easy for Amazon shoppers, give them a Kohl's coupon, and convert that trip into a sale. The data shows that gamble did not pay off. Despite the program's launch in 2019 and the promise of new customers, Kohl's same-store sales have declined for 12 straight quarters. The traffic never materialized, leaving the program as a burden.

That burden was felt on the front lines. Store associates, who had to manage the returns process, have expressed relief. One employee told Modern Retail the change was "largely greeted with praise by associates on the forum". The sentiment echoed online, with workers noting the program consumed "man hours" without adding sales. This internal feedback is a red flag for headline risk. It signals operational friction that hurt morale and efficiency, a cost the company can no longer afford as it plans to close 27 stores and cut 10% of its corporate workforce.

The contrast with market attention is stark. While Kohl's is quietly testing an exit, the real beneficiaries of the $890 billion return wave are in the spotlight. UPS is a direct benefactor of the logistics, and TJX Companies is positioned to buy and resell the returned goods. Both have stronger financials and clearer exposure to the return economy. For investors, the trend is obvious: capital is flowing to these clear winners. Kohl's, by contrast, is a retailer trying to solve a problem it didn't create, with a strategy that has now failed its primary test.

The bottom line is that Kohl's is not the main character in the 'Returnuary' story. It is a minor player trying to adapt to a trend that is reshaping the retail landscape. The test confirms that its traffic gambit was a dead end. With the market's attention fixed on the companies that actually profit from the returns flood, Kohl's faces a tougher path to prove it can survive without this failing lifeline.

What to Watch: The Next Move and Market Reaction

The test is live, but the market is waiting for the verdict. The key signals to watch now will confirm whether Kohl's is quietly pivoting away from a failed strategy or if this is just a minor, temporary adjustment. The stock's reaction to any news will be a direct vote on the traffic gambit thesis.

First, monitor if the test expands beyond a few stores or is quickly rolled back. Kohl's has called it a "temporary test" in a "handful of stores," but the company has not said how many locations are involved or how long it will last. The spokesperson said it was a temporary test. If the program is quietly reinstated or limited to just those three locations, it suggests the company is hedging its bets. But if Kohl's announces a broader rollout or a permanent end to the service, that would be a clear signal the partnership's perceived value is near zero. The internal employee sentiment, which was "largely greeted with praise", indicates the burden was real. A wider move would validate that cost.

Second, watch for any change in the company's sales or traffic guidance. The entire rationale for the Amazon returns program was to drive foot traffic and boost sales. With same-store sales declining for 12 straight quarters, the program's failure to move the needle is now a glaring red flag. If Kohl's management updates its outlook to reflect that this partnership was not a meaningful driver, it would force a reassessment of the retailer's entire traffic strategy. The recent plan to close 27 stores and cut 10% of its corporate workforce shows the pressure is mounting. Any guidance that acknowledges the returns program's lack of impact would underscore the urgency of finding a new path.

Finally, track the stock's reaction to any news about the program's future. This is the direct link to the traffic gambit thesis. The market has already moved on, with capital flowing to clear beneficiaries of the 'Returnuary' trend like UPS and TJX. For Kohl's, the stock's movement will show whether investors see this test as a minor operational tweak or the start of a strategic retreat. A positive reaction to news of a broader end could signal relief that the company is finally cutting a losing program. A negative reaction might suggest investors fear the test confirms the retailer's core traffic problem is deeper than a single partnership.

The bottom line is that the next move is a test of conviction. Kohl's is using a small-scale experiment to gauge the waters, but the market will be watching for the first clear sign of a pivot. The stock's path will depend on whether this test leads to a broader strategic shift or a quick return to the status quo.