A Kohl’s store in San Rafael, Calif.
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Kohl’s is ending negotiations to sell its business to the owners of The Vitamin Shoppe Franchise groupTwo people familiar with the matter told CNBC on Thursday.
These people requested anonymity because the decision from Kohl’s has not been made public.
Representatives from Kohl’s and Franchise Group did not immediately respond to CNBC’s request for comment.
The decision from Kohl’s comes amid a slump in the company’s share price and falling sales. It has faced months of pressure from activist investors to pursue a sale and embark on business with a new group of directors. It was not immediately clear which path Kohl’s would take.
Funding such a deal has also become more difficult due to stock market volatility and the broader economy, as the Federal Reserve raises interest rates to combat rising inflation. Walgreens Boots Alliance earlier this week rejected plans to sell UK pharmacy chain Boots, saying that no third party could make a satisfactory offer due to the volatile situation in global financial markets.
Franchise Group considered lowering its bid CNBC reported last week, citing a person familiar with the matter, to nearly $50 per share from about $60 per share. The change in thinking comes as the outlook for the retail industry has become increasingly dire, as fears of a recession increase, the person said.
Franchise group in early June offer a bid of $60 per share to buy back Kohl’s with a valuation of about $8 billion. The two companies then enter an exclusive three-week period, during which they can consolidate any final due diligence and financing processes. That happened last weekend.
Shares of Kohl closed Thursday at $35.69. At one point in 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, with shares down about 28% so far this year.
Kohl’s earlier this year received a per-share offer of $64 from Starboard-backed Acacia Research, but it thinks the bid is too low.
Operations firm Macellum Advisors has pushed Kohl’s to consider selling or considering other strategic alternatives. from january. Macellum is also arguing about Kohl’s reshuffle of its board of directorsargues that the retailer, under CEO Michelle Gass, has underperformed in recent years relative to its peers.
Macellum did not immediately respond to a request for comment.
However, in mid-May, Kohl . shareholders voted to re-elect the company’s current group of 13 board directorsthus defeating Macellum’s suggestion.
In recent weeks, the outlook for the retail industry has become more bleak as consumers withdraw their spending across some discretionary categories, such as household goods and clothing, amid inflation and the threat of an economic slowdown.
High-end furniture chain RH on Wednesday revenue forecast cut for fiscal year 2022predicts lower demand for its products in the second half of the year. Outdoor shower bed saw its sales plummet in the most recent quarter and overthrow its chief executive.
Companies are also seeing inventories pile up as shipments arrive later than planned, due to supply chain problems. Big box retailer Target at the beginning of June warn investors that its profits will suffer in the short term, as it flags unwanted items, cancels orders, and takes aggressive steps to eliminate excess inventory.
Kohl’s sales for the three-month period ending April 30 fell to $3.72 billion from $3.89 billion in 2021. When it reported these numbers in mid-May, the retailer also cut its profit and revenue forecasts for the full financial year, further blurs the picture of a potential deal.
