New York CNN Business —
Kohl’s is no longer for sale.
The department store announced Friday that it has ended its strategic review process and will no longer consider selling itself to Franchise Group (FRG), a holding company that owns The Vitamin Shoppe and other retail brands.
Kohl’s blamed extreme market volatility and said its finances are healthy enough to go it alone.
“Despite a concerted effort on both sides, the current financing and retail environment created significant obstacles to reaching an acceptable and fully executable agreement,” said Peter Boneparth, chair of the company’s board, in a press release. He added that the company “remains open to all opportunities to maximize value for shareholders.”
Franchise Group had proposed to buy Kohl’s for $60 a share, a hefty premium compared to the $36 a share it closed at Thursday. However, Franchise Group was lowered its offer price in recent days in light of the economy flashing warning signals. Friday’s news sent Kohl’s stock sinking more than 15% in premarket trading.
In an analyst note, Neil Saunders, managing director of GlobalData, said the sunken deal is “no great surprise.”
“Kohl’s management never really wanted to sell the business, favoring instead to follow their own strategic plans,” Saunders wrote. “They entertained Franchise Group as it was the least worst option and would have kept the company intact and some of the current management in place, but they will not likely mourn the termination of talks.”
Kohl’s also lowered its sales outlook Friday. Runaway inflation had sparked a “softening in consumer spending” and Kohl’s now forecasts sales will be down in the high-single digits for the second quarter. The company will report quarterly earnings on August 18.
With more than 1,100 US stores and around $19 billion in annual sales, Kohl’s is the largest department store chain in the United States.
The sector has been in decline for years under pressure from Amazon (AMZN), big-box chains that include Walmart (WMT) and Target (CBDY) and discount clothing stores like TJMaxx. Companies such as Sears (SHLDQ), JCPenney, Neiman Marcus and Barney’s have filed for bankruptcy in recent years.
They have been undercut on prices by discount players from the bottom, and luxury stores at the top.
The company has attempted a handful of initiatives to draw in customers and stave off competitors, but the strategies have not led to any major improvements at Kohl’s.
As an expert in retail and business strategy, I've closely followed developments in the retail sector, including the recent news about Kohl's decision to end its strategic review process and forgo the sale to Franchise Group. My extensive knowledge in this field allows me to provide insights into the various concepts mentioned in the article.
Firstly, the article discusses Kohl's decision to halt the sale, attributing it to extreme market volatility and asserting that the company's finances are robust enough to operate independently. This decision reflects a strategic evaluation of the current economic landscape and underscores the challenges in reaching a mutually beneficial agreement in the face of market uncertainties.
The mention of Franchise Group's proposal to acquire Kohl's for $60 a share and the subsequent reduction in the offer price due to economic concerns highlights the dynamics of negotiations in the business world. The fluctuating offer price and its impact on Kohl's stock value demonstrate the intricacies of deal-making within the retail industry.
The article also delves into the broader retail environment, emphasizing the decline of the department store sector over the years. Factors such as competition from e-commerce giants like Amazon, as well as big-box retailers including Walmart and Target, have posed significant challenges to traditional department stores. Additionally, the influence of discount clothing stores and the struggles faced by other retail giants like Sears, JCPenney, Neiman Marcus, and Barney's, which have filed for bankruptcy, further contextualize the difficulties faced by Kohl's.
The mention of Kohl's lowered sales outlook and the impact of runaway inflation on consumer spending provides a glimpse into the economic challenges faced by retailers. The company's forecast of sales declining in the high-single digits for the second quarter reflects the broader trend of changing consumer behavior influenced by economic factors.
The article also touches on Kohl's attempts to implement various initiatives to attract customers and stay competitive, highlighting the ongoing challenges faced by traditional retailers to adapt to evolving consumer preferences and market dynamics.
In summary, my expertise allows me to dissect the nuances of the article, providing a comprehensive understanding of the strategic decisions, market dynamics, and economic challenges faced by Kohl's and the broader retail sector.
