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Amazon and Kohl’s are expanding a pilot program to allow customers to return Amazon items for free at its stores, deepening a partnership that first surfaced last year.

On Kohl’s second quarter earnings call this morning, CEO Michelle Gass said the company is expanding the program to more than 100 stores, adding Milwaukee to its list of test markets. The two companies had been testing their partnership in 80 stores in Chicago and Los Angeles.

“It’s a big deal for us; it’s a big deal for them; but I think overarching what both parties are most pleased about is what a great customer experience we are creating for our customers and their’s,” Gass said on the call with investors.

In addition to the package return program, Kohl’s has set up 1,000-square-foot Amazon smart home sections in 10 stores in Los Angeles and Chicago. Executives did not mention this aspect of the partnership on the call.

Kohl’s has reduced inventory in hundreds of its stores in recent months, and handing some of that over to Amazon is an example of how the department store is adjusting to a challenging retail environment in the e-commerce area. On the call with investors, Gass mentioned several other concepts the company is studying to fill space, including lockers where customers can pick up online orders, wayfinding features and mobile checkout options. Kohl’s has also been experimenting with chopping up some of its bigger stores and create space for grocery store tenants or gyms.

These bets appear to be paying off as Kohl’s profits for the quarter surged 40 percent over the year prior to $292 million, and the company also raised profit expectations for the year. Kohl’s also beat Wall Street expectations for the quarter, though investors weren’t entirely satisfied and the company’s stock is down slightly this morning.

While the Amazon partnership is expanding, Gass stressed that Kohl’s is being cautious, making sure that every aspect checks out before expanding further.

“All elements have to work — the operations have to work, the financials have to work — so we are doing our best to really understand and dig deep before any decision is made going forward,” Gass said.

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