Executives for Menomonee Falls-based Kohl’s Corp. are considering plans to take the company private or break up the company, according to a report today in the Wall Street Journal.
Kohl’s stock fell 22 percent in 2015 and this morning was trading at about $49.35. Kohl’s directors are concerned that the company’s low share price could make it a target for activist investors, the Wall Street Journal report says. Kohl’s directors are considering plans to hire an investment bank to advise the company on alternatives, which could include a sale to a private equity firm, the report says.
“We are currently in a quiet period and are not able to share any information that has not already been publicly disclosed,” said Kohl’s spokeswoman Julia Fennelly.
In November, Kohl’s reported third quarter net income of $120 million, or 63 cents per share, down from $142 million, or 70 cents per share, in the third quarter of 2014. Its quarterly operating income was $308 million, up from $304 million in the same period a year ago. Revenue was $4.4 billion in the quarter, flat from the third quarter of 2014. Comparable store sales were up 1 percent, compared with a 1.8 percent decrease in the same period last year.
Kohl’s, which has about 1,200 stores, is still opening new locations. In fact, the company announced today that it will open its discount Off/Aisle stores in Wauwatosa and Waukesha.
The Wall Street Journal story also says that New York-based private equity firm Sycamore Partners, which acquired Charlotte, N.C.-based Belk Inc. in December, has approached Boston Store parent company Bon-Ton Stores Inc., which has headquarters in Milwaukee and York, Pa., about combining Belk with Bon-Ton. Bon-Ton president and chief executive officer Kathryn Buffano was previously president and chief merchandising officer of Belk.
In November, Bon-Ton reported net loss of $34 million, or $1.72 per share, compared with a net loss of $11 million, or 57 cents per share, in the third quarter of 2014. Quarterly revenue totaled $623.4 million, down from $642.7 million in the third quarter of 2014. Comparable store sales were down 2.6 percent year-over-year.
Retail analyst Mary Ross Gilbert, managing director at Imperial Capital LLC in Los Angeles, said in order for Bon-Ton Stores Inc. to survive, it will need to consolidate.
“(Bon-Ton and Belk) have been friendly with each other for some time,” said Gilbert, who is a Bon-Ton’s analyst. “Consolidation makes sense, but it would make more sense to do it after (Bon-Ton) restructures its debt rather than pay for it at a premium now.”
Across the board, retail has been struggling as consumers are spending their money on experiences, Gilbert said.
“If we’re talking about the better-incomed consumer, they are buying homes and furniture for their homes, autos and going on trips,” Gilbert said. “There has been a lack of newness in apparel and a transition to leisure.”
Lower gas prices have had a positive impact on sales on lower-end retailers, such as J.C. Penney, Ross Dress for Less and TJ Maxx.
“Kohl’s should be benefiting as well, but J.C. Penney could be taking that away,” she said.
At the same time, depreciation of the Chinese yaun and the euro has negatively impacted tourism, which in turn, has negatively impacted the higher-end stores such as Neiman Marcus and Bloomingdale’s -Macy’s, Inc., which has a flagship store in New York City, Gilbert said.
Last week, Macy’s announced it would close 40 stores, while J.C. Penney reported sales were up 4 percent.
