Kohl concludes sales talks with the Franchise Group, lowering expectations

Kohl’s a store in San Rafael, California.

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Kohl’s announced on Friday that talks to sell its business are coming to an end, as the retail environment has deteriorated significantly since the start of its bidding process.

The company also cut its fiscal forecast for the second quarter, citing softer consumer spending.

The trader’s shares were halted in the news release.

CNBC reported late Thursday that Kohl had no plans to sell his business to The Vitamin Shoppe owner’s Franchise Group, according to two friends who know the subject. People asked for anonymity because a decision by Kohl’s was not publicly announced.

This decision by Kohl’s comes as stock prices fall and sales fall. It has faced months of pressure from activist investors to get a sale and shake up the business with a new board of directors. It was not immediately clear which path Kohl would take.

“The current funding and retail environment was reflected in the price and terms of the FRG’s latest proposal, which was not fully enforceable or complete,” Kohl’s said in a note Friday morning.

Financing this agreement has also become more difficult due to the volatility of the stock market and the wider economy as the Federal Reserve raises interest rates to deal with rising inflation. The Walgreens Boots Alliance this week canceled its plan to sell its UK pharmaceutical chain, Boots, saying a third party could not make a suitable offer due to the turmoil in global financial markets.

The Franchise Group thought about reducing Kohl’s offerings by about $ 60 by CNBC last week, citing a person who knows the subject. The change in thinking came at a time when the retail industry’s outlook was increasingly harsh, the person said, as fears of a recession escalated.

The Franchise Group proposed an offer of $ 60 per share in early June to buy Kohl’s at a valuation of approximately $ 8 billion. The two companies then entered into an exclusive three-week window in which due diligence and final financing agreements could be finalized. That continued last weekend.

Kohl’s shares closed Thursday at $ 35.69. During the day, the shares touched a 52-week low at $ 34.33. Kohl’s ended the day with a valuation of about $ 4.6 billion, and its shares fell about 28% this year.

Kohl’s received an offer of $ 64 per share this year from Starboard-sponsored Acacia Research, but felt the offer was too low.

Activist company Macellum Advisors has been calling on Kohl’s to look into a sale or other strategic alternatives since January. Macellum also argued that Kohl’s would renew its list of directors, arguing that the shopkeeper had been underestimated by CEO Michelle Gass in recent years compared to his peers.

Macellum did not immediately respond to a request for comment.

In mid-May, however, Kohl’s shareholders voted to re-elect the company’s current list of 13 directors, defeating Macellum’s proposal.

In recent weeks, the outlook for the retail industry has deteriorated, with consumers reversing spending in certain discretionary categories, such as household goods and clothing, amid the threat of inflation and the economic slowdown.

The RH high-end furniture chain on Wednesday cut its 2022 fiscal revenue forecast by forecasting a softer demand for its products in the latter half of the year. Bed Bath & Beyond dropped its sales in its last quarter and removed its CEO.

Companies are also seeing inventories piling up as shipments of goods arrive later than expected due to supply chain errors. The big box office Target warned investors in early June that its profits would be a short-term hit as it marks unwanted items, suspends orders and takes aggressive measures to remove additional inventory.

Kohl’s three-month sales ended April 30, falling $ 3.7 trillion from $ 3.89 trillion in 2021. When it reported those figures in mid-May, the retailer also cut its earnings and revenue forecasts for the full year, and the picture was further distorted. for a potential deal.

Kohl concludes sales talks with the Franchise Group, lowering expectations

Source link Kohl concludes sales talks with the Franchise Group, lowering expectations

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