Activist firm Macellum Advisorshas been pushing for Kohl's to consider a sale or consider other strategic alternatives since January. Kohl's, target of activist investors, gets a buyout offer - CNN Kohl's is under intense pressure from Wall Street raiders and up against stiff competition from Amazon, Target and others. Given this context, its easier to see why Kohls hasnt had the same pandemic recovery trajectory as stores like T.J. Maxx, where customers are likelier to go if they dont want to spend more. Despite having collected $4.28 billion in revenue as of the third quarter of 2022, the companys total debt was estimated to be around $5.46 billion as of Dec. 1, 2022. Major Retailers That Are Closing in 2023 - Offers.com Causes include: Dwindling foot traffic in physical stores. "It's no secret that Kohl's has a very big asset on the balance sheet: Real estate," Kohl's board chair Peter Boneparth told CNBC. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. To contact its consumers and advertise its products. In conclusion, Kohls is a reputable department store that has seen difficulties lately. But it would also pose sizable difficulties and hazards. Instead, analysts and experts point to Franchise Group's track record and its recent acquisitions for a better sense of what Kohl's future could hold. "Sometimes it's turning them from company-owned stores into franchise stores.". The hedge fund Engine Capital has also been calling on Kohls to consider a sale, along with other strategic initiatives. At the same time, he said, this would be Franchise Group's largest acquisition to date, which could come with a steeper learning curve. The shift in thinking came as the outlook for the retail industry grew increasingly grim, the person said, as fears of a recession mounted. Is Kohl's Going Out of Business? Store Closures Are Expected A little-known conglomerate of companies including Vitamin Shoppe, Pet Supplies Plus and a home furnishing chain known as Buddy's is suddenly the talk of the retail industry. Sign up for free newsletters and get more CNBC delivered to your inbox. Kohl's execs break down decision to abandon sale talks with Franchise Group, Why there could be a wave of retail bankruptcies, a different firm's buyout offer of $64 a share, Franchise Group had been weighing lowering its bid, proposed a bid of $60 per share to acquire Kohl's, was also arguing for Kohl's to revamp its slate of directors, voted to reelect the company's current slate of 13 board directors, cut its forecast for revenue in fiscal 2022, sales for the three-month period ended April 30. The store chain lowered its guidance and the stock crashes -17% here in the pre-market. It increased online sales. On Thursday, the activist investment firm Macellum Advisors, which has been fighting for changes at Kohls for more than a year, sought to take over the retailers board as part of its push to persuade the company to sell itself. However, the operating profit margin has changed. Best Debt Consolidation Loans for Bad Credit, Personal Loans for 580 Credit Score or Lower, Personal Loans for 670 Credit Score or Lower. Many retailers struggled with a glut in inventory after the pandemic, leading to markdowns on items to move them out of stores. Kohls has argued that its efforts to invest in its online and active wear business are underway and getting traction. In fact, Kohl's is doing quite well financially. Despite Kohls benefiting from brand partnerships, beauty sales, and off-price stores to drive sales, as Insider suggests, its sales have gradually slowed. I will take my business somewhere else. The company said it now expects second-quarter sales to be down by a high single-digit percentage, compared with previous expectations of low single-digit decline. Kohls called Macellums effort to take control of its board unjustified and counterproductive.. Additional reporting by Akash Sriram Kohl's, which operates more than 1,100 stores in the United States, last month announced that it had entered exclusive talks with Franchise Group after being offered $60 a share. Macellum struck a settlement with the retailer last April that included the addition of three new directors to its board. In recent weeks, the outlook for the retail industry has grown bleaker as consumers pull back their spending on certain discretionary categories, such as home goods and apparel, amid inflation and the threat of an economic slowdown. High-end furniture chain RH on Wednesday cut its forecast for revenue in fiscal 2022, anticipating softer consumed demand for its products in the back half of the year. He is a debt master, insurance expert and currently writes for most of the top financial publications on the planet. Article continues below. Draper UT 84020. An activist investment firm that has been fighting for changes at the company for more than a year has proposed a slate of candidates to the companys board. Trader Joe's locations will close at 5 pm on July 4th, the company said. Lauren Hirsch joined the New York Times from CNBC in 2020, covering business, policy and mergers and acquisitions. In addition to losing money on keeping stores open, Kohls is also having to compete with online competitors like Amazon, Temu, and Walmart which offer affordable prices on a wide range of items. The company brought in women-owned brands and unique gender-neutral . Also in 2020, Bed Bath & Beyond completed a sale-leaseback transaction with Oak Street, in which it sold about 2.1 million square feet of commercial real estate and netted $250 million in proceeds. Uday has been reporting on U.S. retail and consumer companies for over five years and has written multiple analysis pieces on the space, including about a flurry of mergers in the toy industry, how an aging population benefited the golf industry and how weak sales from retailers spooked global markets. Shifting customer behavior. Got a confidential news tip? This is such a failure of leadership and governance at Kohl's, says Macellum Capital's Jonathan Duskin, urged in early December 2021 by New York-based hedge fund Engine Capital to consider a sale, Kohl's reported that its sales for the three-month period ended April 30. Franchise Group, a publicly traded business with a market capitalization of about $1.6 billion, has entered into exclusive sale talks with Kohl's. This will increase interest in and traffic to its stores. The drawn-out bidding process for Kohl's doesn't appear to be coming to an end . "Franchise Group has a history of buying businesses, levering them up, and then freeing up capital very quickly to pay off that debt," Caintic said. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. 14203 Minuteman Drive #200 Macellum has argued that Kohl's should sell some of its real estate and lease it back as a way to unlock capital, particularly during tough times. Franchise Group is working with Oak Street Real Estate Capital to finance the deal mostly through real estate, according to a person familiar with the matter. Big-box retailer Targetin early June warned investors that its profits will take a short-term hit, as it marks down unwanted items, cancels orders and takes aggressive steps to get rid of extra inventory. With the latest Consumer Price Index numbers coming in under 5%, consumers are more likely to spend money on discretionary items like clothing that Kohls provides., Another persistent problem for Kohls is related to inventory. "We've got a lot of conviction in the brands that we operate now," Kahn also said on the call. All three were eventually unable to make their loan payments and filed for bankruptcy. Dwindling foot traffic in physical stores. The price of managing Amazon returns and items has affected Kohls profitability. Another sign that trouble could be on the horizon for Kohls is that the bidding war for it seems as though it has been shelved. Baker used Franchise Group's most recent acquisition of Badcock, a deal valued at about $580 million, as one example. Rob Burnette remains in his role as Badcock president and CEO. Kohls financial statements fully portray the companys financial health and success. A spokeswoman for Kohls did not immediately respond to a request for comment. The quick procession of Macellums letter and the consortiums offer may be the beginning of a dance to put pressure on Kohls to consider a sale or otherwise quickly boost its share price. Eric Rosenberg is a personal finance expert. The department store chain announced the closings last month after reporting a 20% drop in fourth quarter profit. Davidson. "And then they have a different strategy on how to capitalize or how to monetize those acquisitions," he added. Kohl's total revenue surpassed $19.4 billion in the 12-month period ended Jan. 29. When the Fed increases the Fed funds rate, it influences the rate at which banks borrow and lend money to each other from their reserves. Well also examine Kohls plans for the future. In response to the epidemic, Kohls implemented many safety precautions in their stores. read more. Besides, Kohls would have to consider the logistical and supply-chain difficulties. Kohl's ends sale talks with Franchise Group, shares plunge Got a confidential news tip? Plans For Kohl's Closings in 2022 - NewsBreak Original Discontinued News All rights reserved. Got a confidential news tip? The company said it's not going to be a department store anymore and instead add Sephora mini-shops to about 75% of its U.S. stores. The business recorded a net loss of $12 million for the fourth quarter of 2020, as opposed to a net income of $265 million for the same quarter in 2019. Proponents of sale-leaseback deals argue it's a convenient way for companies to come up with funds to put toward future growth, so long as there is a buyer for the real estate. Journalism that makes our home better by celebrating the good, solving the bad, and investigating the ugly. Earlier this year, it rejected a different firm's buyout offer of $64 a share, which it considered too low. While it is true that Kohl's has been in talks with Amazon about a possible sale, the company is not currently in danger of going out of business. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. The firm focuses on various measures to give customers a smooth shopping experience across all channels. And heightened competition from internet shops is just a few reasons the companys revenues have decreased. Franchise Group is mostly in the business of owning franchises. While Kohl's board decided that it is in the best interest of shareholders for management to continue to operate on a standalone basis, the retailer also said Friday that its board "nonetheless remains open to any opportunities to maximize shareholder value.". Get this delivered to your inbox, and more info about our products and services. But outside of the clearance section, Kohls has a reputation for having clothes at a higher average price point, surrounded by messaging for huge discounts. Consumers may join Kohls Rewards for free, and online and in-store registration is available. Also, activist investors have pressured the corporation to alter its strategy and leadership. "Maybe they can get some additional pricing power by becoming a larger player.". The private equity firm Sycamore Partners has also reached out to Kohls about a potential deal, according to one of the people familiar with the matter, as well as a second person close to the matter. Kohl's also cut its outlook for the fiscal second quarter, citing softer consumer spending amid decades-high inflation. Although analysts didnt blatantly state that Kohls will be closing stores, they did say that stores like Kohls and Nordstrom will be under pressure in the first half of 2023. And that could result in Kohls having to shutter some of its locations. Kohl's, however, has been resistant to so-called sale leaseback transactions, at least at such a large scale.