Kohl’s shares surged as contractors reportedly still compete for the company amid market volatility

Kohl’s shares rose more than 15% on Wednesday, after a brief pause, on hopes that the retailer can still be bought after a recent volatile market and a recent disappointing earnings report.

A Reuters report says bidders competing to buy Kohl’s are preparing to make binding offers, albeit lower than specified bids. Kohl’s has announced last week that fully funded tenders will be due in the coming weeksand CEO Michelle Gass said she was “satisfied” with interested parties.

But retail stocks have been beaten in recent days, amid broader market volatility, as quarterly reports from several retailers include Walmart, Abercrombie & Fitch and Kohl’s revealed changing consumer behavior amid 40-year high inflation and rising inventory levels.

Reuters reported on Wednesday, citing people familiar with the matter, that the contractors – including private equity firm Sycamore Partners, brand equity firm Franchise Group, as a main duo owns a shopping center. Simon Property Group and Brookfield Asset Management – plan to reduce their offers by at least 10% to 15%.

Representatives for Kohl’s and Sycamore declined to comment. Representing the Franchise Group, Simon and Brookfield were not immediately available.

Earlier this year, Kohl’s refuse an offer from Starboard Value backed by Acacia Research, $64 a share, because it’s too low. Reuters reported on Wednesday that some bidders said they were willing to pay at least $70 a share.

But investors have since lost some confidence that any deal would be successful, given the state of the economy and the difficulty of securing financing in the current environment. Shares in Kohl’s opened Wednesday at $36.81, down about 40% this month alone.

Last week Kohl’s cut its full-year profit outlook, with Gass saying fiscal 2022 started below her expectations. The company said that it does not anticipate difficulties due to inflation pressure will ease in the near future.

The retailer also announced that they were losing money its sales director and marketing director. The search for their successor is underway.

The turmoil for Kohl’s comes as the retailer faces increased pressure from activist hedge fund Macellum Advisors to sell the business and change its board of directors. In the first day of this month, Kohl’s manages to resist Macellum’s proposal for a new group of directors.

Macellum has argued that Gass’ efforts to increase sales and win new customers have not been enough compared to its competitors.

It’s also not the first time Macellum has put pressure on Kohl’s. Both reached an agreement in April 2021 to add two directors from a means of interception promoted by a group of activists, including Macellum. Kohl’s also appointed an independent director, with the backing of activists.

Gass, who took over as CEO at Kohl’s in May 2018, has tried a number of strategies to attract customers to the stores, including signing partnerships with Amazon and added Sephora beauty stores to hundreds of Kohl locations.

On Wednesday morning, the company announced it would open 100 small-scale stores over the next few years in markets Kohl’s does not currently serve. It also said it plans to increase investment in all of its stores in the coming years, though it did not say how much money it plans to commit to these efforts.