Kohl's (KSS) shares moved sharply higher Wednesday as activist investors prodded the board to consider a sale of the department store retailer and reports suggested Canada's Hudson's Bay company could be considering a takeover bid.
Engine Capital LP, which asked management to consider the sale or the separation of the e-commerce division, said Kohl's recent sales and profit guidance, as well as its "underwhelming" growth, outlined during a recent investor presentation on March 1.
Kohl's said it sees net sales rising 2.2% this year, with earnings in the region of $7.00 and $7.50 per share, and a modest expansion in gross profit margins.
"We believe it is imperative for the Board to reassess its view of the Company’s intrinsic value," the group said. "It is our understanding that Kohl’s is finally running a competitive sale process months after we urged the Board to do so."
"We urge the Board to let shareholders make the ultimate assessment about a sale of Kohl’s. The Board and management have overseen so much value destruction over the years that we believe it is emotionally and financially conflicted to make that assessment," Engine Capital said. "The best offer, whether it be $65 per share or hopefully higher, should be negotiated and put in front of shareholders for a vote so that the Company’s true owners can decide whether the offer is appropriate."
Kohl's shares were marked 15% higher by midday Wednesday trading to change hands at $61.90 each. The stock has risen more than 25% since competing private investors reportedly lined-up bids for the group in late January.
Earlier this year, Sycamore Partners, a New York-based private equity group was ready to offer $65 a share for Kohl's, a price that would value the Menomonee Falls, Wisconsin-based retailer at around $9 billion.
The move came just days after after several media outlets said activists investor-backed Acacia Research offered $64 a share for Kohl's following public criticism of the group's management from activist investors Macellum Advisors, which owns 5% of the retailer, and the urging of a whole-enterprise sale after what it called a 'lost year' for the department store icon.
Kohl's said digital sales rose 6% from last year over the third quarter, and were up 33% from 2019 levels, with CEO Michelle Gass telling investors on November 18 that digital and brick-and-mortar retail "reinforce each other, together delivering an exceptional customer experience through a seamless omnichannel integration of offerings and conveniences."
Kohl's posted much stronger-than-expected third quarter earnings of $1.85 per share in December, on revenues of $4.3.7 billion, while raising its full-year earnings guidance to between $7.10 to $7.30 per share, amid what Gass called an ongoing effort to "transform Kohl’s into the leading destination for the active and casual lifestyle."
