Kohl’s goes back on the shelf

Franchise

01/07/2022 15:48

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
    NEW YORK, July 1 (Reuters Breakingviews) - Kohl’s  KSS.N  is
going it alone  urn:newsml:reuters.com:*:nL4N2YH30T. The U.S. retailer said on Friday https://investors.kohls.com/news-releases/news-details/2022/Kohls-Concludes-Strategic-Review-Process/default.aspx
 it had ended talks over a takeover by Franchise Group  FRG.O 
after the bidder revised its offer down and didn’t come up with
“definitive financing arrangements.” The market’s reaction gives
a hint at the lonely road ahead. 
    Kohl’s shares dropped 19% to $28.90 early on Friday. That
leaves the company with a $3.7 billion market value. Over the
past 15 years, Kohl’s has tended to be valued at around 11.5
times its forecast earnings, according to Refinitiv. So one way
of reading the current share price is to say that investors
think earnings could be around $320 million over the next year. 
    That’s dismal, by any measure. It would be the lowest Kohl’s
has produced in at least 20 years, excluding its loss in 2020,
the year Covid-19 hit. Analysts are still predicting more than
twice that amount for this year. 
    The onus is now on Kohl’s to beat that low bar. It owns lots
of real estate, which gives it some options. But if a
recessionary storm is coming, a stand-alone Kohl’s is right in
its path. (By Amanda Gomez)
    
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 (Editing by John Foley and Oliver Taslic)
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