The Kohl’s logo is displayed on the exterior of a Kohl’s store on January 24, 2022 in San Rafael, California.
Justin Sullivan Getty Images
Kohl’s shares surged more than 15% Wednesday, after being briefly halted, on hopes that the retailer could still be bought following recent a volatile market and a recent disappointing earnings report.
A Reuters report said bidders competing to buy Kohl’s are preparing to make binding offers, albeit lower than the indicative bids. Kohl’s had said last week that fully-financed bids would be due in the coming weeks, and CEO Michelle Gass said she was “pleased” with the interested parties.
But retail stocks have taken a beating in recent days, amid broader market volatility, as quarterly reports from a number of retailers including Walmart, Abercrombie & Fitch and Kohl’s have revealed changing consumer behaviors amid 40-year-high inflation and ballooning inventory levels.
Reuters reported Wednesday, citing people familiar with the matter, that bidders – which include private equity firm Sycamore Partners, brand holding firm Franchise Group, as a duo of mall owner Simon Property Group and Brookfield Asset Management – plan to lower their offers by at least 10% to 15%.
Representatives from Kohl’s and Sycamore declined to comment. Representatives for Franchise Group, Simon and Brookfield are not available immediately.
Earlier this year, Kohl’s rejected an offer from Starboard Value-backed Acacia Research, of $ 64 a share, for being too low. Reuters reported Wednesday some bidders had indicated they were willing to pay at least $ 70 a share.
But investors have since lost some confidence that any deal would go through, given the state of the economy and difficulty to secure financing in the current environment. Kohl’s shares opened Wednesday at $ 36.81, having fallen about 40% this month alone.
Kohl’s last week cut its full-year profit outlook, with Gass saying fiscal 2022 started off below her expectations. The company said it doesn’t anticipate headwinds from inflation pressures to abate in the near term.
The retailer also announced it was losing its chief merchandising officer and chief marketing officer. Searches for their successors are underway.
The turmoil for Kohl’s comes as the retailer faces amplified pressure from activist hedge fund Macellum Advisors to sell the business and shake up its board. Earlier this month, Kohl’s managed to fend off Macellum’s proposal for a new slate of directors.
Macellum has argued that Gass’ efforts to grow sales and win new customers haven’t been enough relative to its competition.
This isn’t the first time Macellum has put pressure on Kohl’s, either. The two struck a deal in April 2021 to add two directors from a slate pushed by a group of activists, including Macellum. Kohl’s also appointed one independent director, with the activists’ backing.
Gass, who assumed the CEO role at Kohl’s in May 2018, has tried a number of strategies to lure customers into stores, including signing a partnership with Amazon and adding Sephora beauty shops to hundreds of Kohl’s locations.
On Wednesday morning, the company announced it will open 100 small-format shops in the next few years in markets that Kohl’s doesn’t currently serve. It also said it plans to ramp up investments in all of its stores in the coming years, though it didn’t say how much money it plans to commit to these efforts.