Acquisition of Kohl’s Corp. falls apart in shaky retail environment | Business News
The potential sale of the Kohl’s department store chain has fallen apart in a shaky retail environment of rising inflation and consumer anxiety.
Menomonee Falls-based Kohl’s Corp. entered exclusive talks last month with Franchise Group, the owner of Vitamin Shoppe and other retail outlets, for a deal potentially worth about $8 billion.
“Given the environment and market volatility, the Board determined that it simply was not prudent to continue pursuing a deal,” said Kohl’s chair Pete Boneparth.
It was the second time this week that a major retailer retreated from a potential sale due to worsening economic conditions. Walgreens said Thursday that it was giving up on its hopes of selling its Boots business in the UK.
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“Kohl’s decision to terminate acquisition talks with Franchise Group comes as no great surprise,” said Neil Saunders, managing director of GlobalData. “Current market conditions are not conducive to corporate dealmaking, with issues around financing and raising debt and capital all acting as barriers to closure.”
Saunders said that while Franchise Group was serious about the bid, it “likely found it increasingly difficult to make the math stack up against a backdrop of a deteriorating retail environment.”
Shares of Kohl’s Corp. tumbled more than 20% at the opening bell.
U.S. data released two weeks ago showed that inflation has begun to erode the will of Americans to shop as they once had, unable to travel much and flush with money from government stimulus checks. Economic growth in the U.S. is slowing and potential takeovers face stiffening headwinds from rising interest rates that make financing such deals much more expensive.
Kohl’s struggled with anemic sales before the pandemic. Sales and profits rebounded in 2021, but the department store is now battling higher costs and a pullback from its price conscious shoppers who are being more cautious with their spending in the face of rising prices for gas, food, and just about everything else.
The spending retreat is broader than that, however. Just weeks after telling its investors what to expect in the year ahead, the luxury furniture chain RH revised those expectations lower Thursday, citing worsening macro-economic conditions and rising mortgage rates.
The day before, the CEO of Bed, Bath & Beyond was ousted after another dismal quarter of sales.
Driving home the weak environment for some retailers, Kohl’s said Friday that it now expects sales to be down in high-single digits in the current quarter compared with 2021. It had anticipated sales to be down in the low-single digits previously.
That comes less than two months after Kohl’s Corp. cut its annual earnings and sales forecast following a gloomy first quarter. Sales at stores open at least a year dropped 5.2% compared with 2021.
Kohl’s has more than 1,100 stores in 49 states.
Photos: Retail during the pandemic
T-shirts that tell the story of Madison lakes are among the popular otems at Zip-Dang on Monroe Street.
Orange Tree Imports has been a part of Madison’s retail scene for over 45 years.
Even the smallest businesses have added e-commerce options during the pandemic.
Natalie Bass, co-owner and founder of Zip-Dang, said she adjusted to the pandemic by making masks, putting more of her inventory online and bringing her husband’s T-shirt screening production into the store. She no longer has employees and has reduced the hours she is open.
The hand-sewn women’s clothing made by Natalie Bass at Zip-Dang has always been a part of the store’s website, but the rest of the store’s inventory has also been added to the site as more people turned to online shopping.
Coffee mugs line the shelves at Orange Tree Imports where signage reminds visitors of social distancing.
At Vanilla Bean, customers began requesting smaller packaging as both professional and home bakers began making cakes, cookies and candy in smaller sizes and quantities.
Orange Tree Imports has been a part of the retail scene on Monroe Street for over 45 years, but over the past year has been challenged by the pandemic. Sales in 2020 were off by 38%, and the number of customers allowed in the store at one time was limited to five.
Social distancing reminders abound in Orange Tree Imports in Madison.
Shoppers at Vanilla Bean on Odana Road peruse the collection of cooking and baking inventory. The store, a staple in Madison since 1983, saw sales crash in spring 2020, but business has since rebounded as the pandemic has inspired more people to bake and cook.
Vanilla Bean, a supply depot for area bakers and candy makers, saw the pandemic strike on the cusp of Easter, graduation parties and wedding events in 2020. The Odana Road business scaled back its staffing and halted classes, but saw increased interest in home baking and cooking.