Activist investor proposes two options to lift Kohl’s stock price

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Dec 6, 2021
  • Engine Capital wants Kohl's to either sell itself or separate its digital business.
  • Retail mogul Mickey Drexler says the proposal doesn't make sense to him.
  • Shares of the U.S. department store retail chain are up 19% year-to-date.

Shares of Kohl’s Corporation (NYSE: KSS) are up nearly 10% on Monday after activist investor Engine Capital proposed two options that could boost the retailer’s stock price.

Engine Capital: sell or separate

The New York-based hedge fund wants Kohl’s to consider selling itself to private equity firms, some of which, it is convinced, would pay at least $75 a share for the department store retail chain.

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The other alternative, Engine Capital wrote in its letter to Kohl’s Board, is to consider separating the company’s digital business. At roughly $6.2 billion in revenue from eCommerce, the segment could be valued at $12.4 billion as a standalone entity.  

The proposal stems from Kohl’s lacklustre performance in the stock market. Shares of the retailer, as of Friday’s close, stood at where they were a decade ago, despite a 19% gain this year. Engine Capital has a rather small, 1.0% stake in Kohl’s.

The news comes only weeks after Kohl’s reported a blowout quarter and said from a supply standpoint, it was in a great shape for the holiday season.

Mickey Drexler: ‘it doesn’t make sense to me’

On CNBC’s “Squawk Box”, retail mogul Mickey Drexler voiced a different opinion. Disagreeing with Engine Capital’s demand, he said:

How do you split them off? You change the name of one, have different merchant and operating teams? It doesn’t make sense to me. I couldn’t imagine splitting them off when they are so embracing each other.

Drexler has held top position at notable U.S. retailers, including GAP and J. Crew. Currently, he’s the CEO of Alex Mill. At none of the companies he has run, he added, he’d consider separating eCommerce from bricks and mortar.  

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