The department store announced on Friday that it has completed its strategic review process and will no longer consider selling to Franchise Group (FRG), a holding company that owns The Vitamin Shoppe and other retail brands. Kohl’s blamed the extreme volatility of the market and said its finances are healthy enough to go it alone.
“Despite a concerted effort by both parties, the current environment of financing and retailing has created significant obstacles to reaching an acceptable and fully enforceable agreement,” Peter Boneparth, chairman of the company’s board, said in a press release. . He added that the company “is open to all opportunities to maximize shareholder value.”
Franchise Group had proposed buying Kohl’s for $ 60 per share, a strong premium compared to the $ 36 per share that closed Thursday. However, Franchise Group lowered its bid price in recent days in light of the economy’s warning signs. Friday’s news caused Kohl’s shares to plunge more than 15% in pre-market trading.
In a note from the analyst, Neil Saunders, CEO of GlobalData, said the collapsed deal “is not a big surprise.”
“Kohl’s management never wanted to sell the business, instead encouraging them to pursue their own strategic plans,” Saunders wrote. “They entertained Franchise Group as it was the worst option and would have kept the company intact and part of the current management in place, but they probably won’t mourn the end of the talks.”
Kohl’s also narrowed its sales outlook on Friday. Overflowing inflation had caused a “softening of consumer spending” and Kohl’s forecasts now that sales will fall in high digits for the second quarter. The company will release its quarterly earnings on Aug. 18.
With more than 1,100 stores in the United States and about $ 19 billion in annual sales, Kohl’s (KSS) is the largest department store chain in the United States. The sector has been in decline for years under pressure from Amazon (AMZN), large 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.
Discount players at the bottom and luxury stores at the top have lowered their prices.
The company has tried a handful of initiatives to attract customers and avoid competitors, but the strategies have not led to any major improvements at Kohl’s.