Kohl's CEO says rumored Amazon department stores won't ruin its relationship with the e-commerce giant

Kohl’s Chief Executive Michelle Gass said there is plenty of room for the retailer and for Amazon to operate brick-and-mortar stores, despite the two already working together through Kohl’s locations.

“Retail is vast, and there’s a lot of market to be had,” Gass told CNBC’s Courtney Reagan Tuesday afternoon, during a CNBC Evolve livestream event. “We always have to be raising the bar.”

Gass’ comments come after a report in The Wall Street Journal said that Amazon is planning to open large locations that resemble department stores, marking the e-commerce giant’s latest experiment with brick-and-mortar retail. The stores are expected to resemble the size of a TJ Maxx and hold both apparel and tech products, the paper said. When asked by CNBC at the time of the report, Amazon declined to comment.

Shares of Target, Walmart and Best Buy fell on the news, as investors worried a roughly 30,000-square-foot Amazon department store would go head-to-head with these big-box retailers in strip malls.

Kohl’s stores are largely in these types of shopping centers, too. But the department store chain has a unique relationship with Amazon. Kohl’s accepts Amazon returns at its nearly 1,200 locations. According to Gass, that relationship would not change if Amazon pursues this venture.

Kohl’s has credited the Amazon partnership with helping to drive foot traffic to its stores. Once there, a customer returning an Amazon item may end up buying something else from Kohl’s. In March, Gass said the relationship helped Kohl’s add 2 million new customers last year.

“Amazon … they’re always experimenting. They’re innovating,” Gass said Tuesday. “And so we’ll see, but I don’t think it changes our partnership. And candidly we were kind of competing with them before on their online business.”

Kohl’s shares were up nearly 3% in trading Tuesday afternoon. The stock has risen 47% year to date, pushing its market cap to $9.35 billion.