HomeSTATESKohl's is slammed after backing down over major decision

Kohl’s is slammed after backing down over major decision

- Advertisement -

KOHL’S has left hedge funds doubting its future after dragging its feet on a business decision to sell its physical locations and then lease them back, according to a new report.

The move has reportedly opened a conflict with hedge funds and shareholders after the company tried and failed to sell itself earlier this year.

Macellum Capital Management LLC and Ancora Advisors LLC are among the hedge funds currently pressuring Kohl’s to cash out on assets and return money to shareholders, according to Yahoo! Finance.

After the failed sales bid in the first half of 2022, investors are concerned about the Menomonee, Wisconsin-based store’s plummeting revenue.

Kohl’s shares are down 37 percent year-to-date, which is double the drop of the broader stock market, Acesparks reported.

The US department store operator is being pushed to sale-leaseback following its launch of challenges in the last two years that ultimately led to three newcomers coming on to the company’s board.

The retail chain’s chief executive Michelle Gass recently announced that she’s leaving Kohl’s to join American denim jeans maker Levi Strauss & Co.

Kohls could reportedly be the target of another proxy contest at its annual shareholder meeting unless it can turn its assets around, according to Morningstar analysts, per Acesparks.

The department store’s next shareholder meeting is set to be held next spring.

The sale-leaseback technique works by selling the underlying real estate of the company and turning them from landlords into tenants.

Advocates of the method claim the move can unlock hidden value in the company because it allows retailers to raise capital without shedding stores.

Those who are against it say that the leases are another form of debt that makes a company’s finances more burdensome, and also note that companies often spend the money on share buybacks and dividends.

They say that the money put into the buybacks and dividends could be invested into the business.

On Kohl’s third-quarter earnings call, its chief financial officer Jill Timm said that the company would continue to assess possible sale-leasebacks.

He also noted that Kohls would not engage in any “transformative transaction.”

She quoted “the market volatility and current rate environment,” and did not elaborate.

The Kohl’s board decided against a sale-leaseback because of worries over the impact it would have on the company’s financial health, according to specialists who spoke with Acesparks.

The news outlet stated that the “people familiar with the matter” requested to remain anonymous.

The board directors who carried out the review were reportedly concerned that Kohl’s’ drops in sales would make it risky to add to its liabilities, the sources told Acesparks.

After Kohl’s net sales dropped 8.5 percent to $3.9 billion during its second quarter, S&P cut Kohl’s credit rating to junk in September, which gives insight into the state of its finances.

Shoppers are said to have snubbed it in favor of discount chains and fast-fashion online retailers like Shein.

Due to Kohl’s lack of sales, its debt as of October stood at $1.5 billion, according to Acesparks.

The US Sun contacted Kohl’s for comment in response to plans to sell its physical locations but did not receive a response by publication time.

Credit :

- Advertisement -
- Advertisement -
Must Read
- Advertisement -
Related News
- Advertisement -spot_img