A Kohl’s store in San Rafael, California.
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Kohl’s is ending talks to sell its business to the owner of The Vitamin Shoppe Franchise Group, two people familiar with the matter told CNBC on Thursday.
The people spoke on condition of anonymity because Kohl’s decision has not been made public.
Representatives for Kohl’s and Franchise Group did not immediately respond to CNBC’s requests for comment.
This decision by Kohl’s comes amid a decline in its stock price and declining sales. It faces months of pressure from activist investors to proceed with the sale and shake up the business with a new slate of board directors. It was not immediately clear what path Kohl would take.
Financing such a deal has also become more difficult due to volatility in the stock market and the economy as a whole, as the Federal Reserve raises interest rates to counter rising inflation. Walgreens Boots Alliance earlier this week abandoned its plan to sell its UK pharmacy chain Boots, saying no third party had been able to make an adequate offer due to turmoil in global financial markets.
Franchise Group was considering lowering its offer for Kohl’s to nearly $50 a share from about $60, CNBC reported last week, citing a person familiar with the matter. The change in thinking came as the outlook for the retail industry grew increasingly bleak, the person said, as fears of a recession increased.
Franchise Group in early June made an offer of $60 per share to acquire Kohl’s at a valuation of approximately $8 billion. The two companies then entered into an exclusive three-week window during which they can confirm all due diligence and final financing agreements. This happened last weekend.
Kohl’s shares closed Thursday at $35.69. At one point during the day, shares hit a 52-week low of $34.33. Kohl’s ended the day with a market valuation of roughly $4.6 billion, with its stock down about 28% so far this year.
Kohl’s earlier this year received a $64 per share offer from Starboard-backed Acacia Research, but deemed the offer too low.
Activist firm Macellam Advisors has been urging Kohl’s to consider a sale or other strategic alternatives since January. Macellum also pushed for Kohl’s to review its board of directors, arguing that the retailer, under Chief Executive Officer Michelle Gass, has underperformed its peers in recent years.
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 slate of 13 board directors, thereby rejecting Macellum’s proposal.
The outlook for the retail industry has darkened in recent weeks as consumers pulled back spending on certain discretionary categories, such as home goods and clothing, amid rising inflation and the threat of an economic slowdown.
High-end furniture chain RH on Wednesday cut its fiscal 2022 revenue forecast, anticipating weaker consumption of its products in the last half of the year. Bed Bath & Beyond saw its sales plummet last quarter and ousted its CEO.
Companies are also seeing inventory build-up as shipments of goods arrive later than planned due to supply chain issues. Major retailer Target warned investors in early June that its earnings would take a short-term hit as it marks unwanted items, cancels orders and takes aggressive steps to get rid of extra inventory.
Kohl’s sales for the three months ended April 30 fell to $3.72 billion from $3.89 billion in 2021. When it reported those numbers in mid-May, the retailer also cut its profit and revenue forecasts for the entire fiscal year, further clouding the picture for a potential deal.
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