Kohl’s Could Sell to Vitamin Shoppe Owner
Menomonee Falls-based company negotiating with Franchise Group Inc., which has offered $60 per share.
Kohl’s Corp. Photo by Tara Golshan of the Wisconsin Center for Investigative Journalism.
Kohl’s Corp. leaders have entered into negotiations to sell the company to the owner of The Vitamin Shoppe and several other brands.
The Menomonee Falls-based retailer announced on Monday that the Kohls’ Board of Directors has entered into a three-week period of exclusive negotiations with Franchise Group, Inc. The holding company owns seven brands, including pet stores, furniture retailers and a tutoring service.
A spokesperson for Kohl’s Corp. declined a Wisconsin Public Radio request for comment. The press release on Monday said the company’s board “remains focused on selecting the path that maximizes value for all Kohl’s shareholders.”
In reaction to the news, Kohls’ shares were up more than 12 percent before the market open on Tuesday.
Hart Posen is an expert on business strategy at the University of Wisconsin-Madison’s School of Business. He said he was surprised to see Kohl’s move forward with Franchise Group, Inc. because the holding company runs such a different set of retail businesses.
“There are two reasons one firm acquires another firm. One reason is they believe that the firm’s assets are undervalued, they think they’re getting a good deal on it,” Posen said. “More often than not what we would like to see in these situations is what we would call a strategic buyer — a buyer that brings specific assets or knowledge or expertise to bear — that we believe may add value within Kohl’s. And it’s not at all clear to me that this buyer is a strategic buyer in that sense.”
He said department stores have faced a tough market for years, but Kohl’s has fared better than many of its competitors. But Posen said the company has faced tremendous pressure from shareholders to entertain buyout offers.
“I think this buyer sees a business that it can buy at a reasonable price. Kohl’s is trading at a large discount,” he said. “Even with the hefty premium this buyer is offering, it simply may be a good deal. But it might not be a deal in which this buyer believes that they can markedly fix Kohl’s in some way.”
Leadership of the department store chain said in February that the corporation would entertain “expressions of interest” in acquiring the company. In addition to Franchise Group, Saks Fifth Avenue owner Hudson’s Bay Co. and JCPenney owners Simon Property Group and Brookfield Asset Management expressed interest in purchasing the company this year.
In May, Kohl’s Corp. shareholders rejected a bid from activist investors to take over the company’s board, voting instead to leave the previous board of directors intact.
Kohl’s faced hits in revenue in the 2019 holiday season and a sales slump during the COVID-19 pandemic, which resulted in corporate layoffs. But by August of last year, leadership said the company had recovered to pre-pandemic sales levels.
Kohl’s CEO Michelle Gass said in a March statement that the brand was “undergoing a significant transformation” to become “the retailer of choice for the Active and Casual lifestyle.” Gass has brought in partnerships with businesses and brands like Amazon and Sephora during her tenure with the company.
Listen to the WPR report here.
Kohl’s Corp. negotiating company sale to owner of The Vitamin Shoppe was originally published by Wisconsin Public Radio.
Don’t you love it when Wall Street vultures swoop into Milwaukee to destroy another 10-20 thousand working class lives?
P.S. The standard of living and life expectancy in Russia and China is now higher than the US…they have free health care and free college… we don’t.
Something called the Institute for Policy Studies examined compensation over the past year at the 300 publicly held U.S. corporations that had the lowest median wages in 2020. Both Kohl’s and Franchise Group made that group. “The Institute” compared CEO compensation to median employee wage of these 300 companies for the year 2021. They note that Kohl’s CEO made $13 million in compensation while median employee compensation was $11,921. Franchise Group CEO compensation was $9.3 million while median employee compensation was $13,436. To be sure, both companies employ part time workers which leads to a lower median wage. (Kohl’s employed 99,000 associates, 35,000 full-time and 64,000 part-time associates. Franchise Group employed 9,119 full-time and 5,551 part-time employees. Franchise Group states part time worker is defined as less than 30 hours a week. I didn’t notice such a qualifier on Kohl’s 10K).
“The Institute” also noted the extent that share buybacks are used by these companies to boost stock prices. Kohl’s spent $1.355 billion on stock buybacks in 2021. That would have equaled a $10K bonus for each part time workers and a $20K bonus for each full time workers. (Another extreme example would be Lowe’s,which spent $13 billion on buybacks last year. That $13B would have amounted to giving each of Lowe’s 325,000 employees a $40,000 bonus. Median wage at Lowe’s is $22,697).