A Kohl’s store in San Rafael, California.
The people asked not to be known because a decision by Kohl’s was not publicly announced.
Kohl’s and Franchise Group officials did not immediately respond to CNBC’s requests for comment.
Kohl’s decision comes at a time when its stock price is plummeting and sales are declining. It has been pressured for months by activist investors to seek a sale and shake up the business with a new roster of board members. It was not immediately clear which path Kohl’s would take next.
Funding such a deal has also become more difficult due to volatility in stock markets and the broader economy as the Federal Reserve hikes interest rates to counter rising inflation. Walgreen’s Boots Alliance Earlier this week, the company scrapped its plan to sell its UK pharmacy chain, Boots, saying that due to the turmoil in global financial markets, no third party was able to make a reasonable offer.
The Franchise Group had considered lowering its offering for Kohl’s approach of $50 a share from about $60, CNBC reported last week, citing a person familiar with the matter. The shift in thinking came as the outlook for the retail industry grew increasingly bleak, the person said, as fears of a recession mounted.
Franchise group in early June proposed an offer of $60 per share to acquire Kohl’s at a valuation of approximately $8 billion. The two companies then entered an exclusive three-week window in which to consolidate all due diligence and final financing agreements. That started last weekend.
Kohl’s shares closed at $35.69 on Thursday. At one point during the day, the stock hit a 52-week low of $34.33. Kohl’s ended the day with a market valuation of about $4.6 billion, and its shares are down about 28% so far this year.
Earlier this year, Kohl’s received an offer of $64 per share from Acacia Research, which is backed by Starboard. but it considered the offer too low.
Activist firm Macellum Advisors has urged Kohl’s to consider a sale or other strategic alternatives since January. macellum also advocated that Kohl’s reshuffle its roster of directorsargues that the retailer, under Chief Executive Officer Michelle Gass, has underperformed its peers in recent years.
Macellum did not immediately respond to a request for comment.
In mid-May, however, Kohl’s shareholders voted to re-elect the company’s current roster of 13 directorsfrustrating Macellum’s proposal.
The outlook for retail has clouded over the past few weeks Consumers are withdrawing their spending on certain discretionary categories, such as housewares and apparel, amid inflation and the threat of an economic slowdown.
High quality furniture chain RH On Wednesday lowered its guidance for revenue in fiscal 2022expects weaker consumer demand for its products in the latter half of the year. bed bath beyond saw its sales plummet last quarter and ousted its CEO.
Businesses are also seeing inventories piling up as shipments of goods arrive later than planned due to supply chain issues. Big Box Dealer target at the beginning of June warned investors that its profits will collapse in the short term as it sorts out unwanted items, cancels orders, and takes aggressive steps to get rid of extra inventory.
cabbage Sales for the three months ended April 30 fell to $3.72 billion from $3.89 billion in 2021. When those numbers were announced in mid-May, the retailer also lowered its profit and sales guidance for the full fiscal year, further clouding the picture for a potential deal.