It looks increasingly likely that a Kohl’s sale may be imminent, with the retailer receiving final bids from potential buyers in the coming weeks. Poor Q1 results and the departure of two senior executives could further ramp up pressure for the department store retailer to sell itself. Kohl’s reported a 5.2% net sales drop during Q1 2022, causing total revenue to fall 4.4% to $3.7 billion, and revised its net sales outlook for the year down to 0% to 1% growth.
The retailer did not provide detailed reasons for the declines but it is likely facing the same inflationary pressures, exacerbated by supply chain challenges and higher workforce costs, that put downward pressure on Walmart and Target Q1 results. However, the company noted that weak sales in March were already starting to turn around in April, and it expects results to improve later in the year.
“We remain committed to our long-term strategy and are encouraged that our updated store experience, with Sephora at Kohl’s shops, delivered positive comparable store sales across these 200 locations for the quarter,” said Michelle Gass, CEO of Kohl’s in a statement. “We continue to expect our business to improve as the year progresses, with growth in the second half as we benefit from the rollout of 400 additional Sephora stores, enhanced loyalty rewards and further investment in our stores.”
In the meantime, Kohl’s is continuing to explore strategic alternatives, including a sale. The retailer has engaged with more than 25 interested parties and multiple bidders have been invited to meetings with management. Gass noted in a statement that the retailer is “pleased with the number of parties who recognize the value of our business and plan”. This is in contrast to a takeover offer Sycamore Partners and Acacia Research made in February 2022, which was rejected on the grounds that the bid undervalued the company
Kohl’s has been under pressure from activist investors unhappy with its slow turnaround, but a recent push by Macellum Advisors to shake up its board failed when shareholders voted on May 11 to re-elect all 13 of its current Board Directors. However, Macellum framed this not as a loss but as further confirmation that a sale is desirable and that shareholders didn’t want to disrupt the process.
Kohl’s also is grappling with the departure of two of its C-level executives. According to a filing with the SEC, Chief Merchandising Officer Doug Howe left the company on May 18, while Chief Marketing Officer Greg Revelle will depart on June 1.
“A search for the replacements is already underway,” said Kohl’s in a statement seen by CNBC. “In the meantime, we have a deep bench of marketing and merchandising talent that will ensure the continued execution of our strategies.”