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Kohl’s removes “for sale” sign

The department store announced on Friday that it had ended its strategic review process and would no longer consider selling to franchise group (FRG)a holding company that owns The Vitamin Shoppe and other retail brands.
Kohl’s blamed extreme market volatility and said its finances were sound enough to go it alone.

“Despite a concerted effort from both sides, the current financing and retail environment has created significant hurdles to reaching an acceptable and fully enforceable agreement,” said Peter Boneparth, Chairman of the Board of Directors of the company, in a press release. He added that the company “remains open to all opportunities to maximize shareholder value.”

Franchise Group had offered to buy Kohl’s for $60 a share, a significant premium to the $36 a share it closed Thursday. However, Franchise Group has lowered its offer price in recent days in light of the economy’s flashing red flags. Friday’s news sent Kohl’s stock plummeting more than 15% in premarket trading.

In an analyst note, Neil Saunders, chief executive of GlobalData, said the engulfed deal was “not a big surprise”.

“Kohl’s management never really wanted to sell the business, preferring instead to follow their own strategic plans,” Saunders wrote. “They entertained Franchise Group as it was the least worst option and would have kept the business intact and some of the current management in place, but they are unlikely to mourn the end of the talks.”

Kohl’s also lowered its sales outlook on Friday. Rampant inflation had triggered a “consumer spending slowdown” and Kohl’s now expects sales to be down single digits for the second quarter. The company will release its quarterly results on August 18.

With over 1,100 stores in the United States and approximately $19 billion in annual sales, Kohls (KSS) is the largest department store chain in the United States.
The sector has been in decline for years under the pressure of Amazon (AMZN)large surface chains including walmart (WMT) and Target (CBDY) and discount clothing stores like TJMaxx. Companies such as sear (SHLDQ)JCPenney, Neiman Marcus and Barney’s have filed for bankruptcy in recent years.

They were undercut on price by discount players at the bottom and luxury stores at the top.

The company tried a handful of initiatives to attract customers and ward off competitors, but the strategies didn’t lead to any major improvements at Kohl’s.

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