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By Dhirendra Tripathi
Investing.com – Kohl's stock (NYSE:KSS) was up over 3% in premarket Monday after a report in The Wall Street Journal said an activist investor is urging the department-store chain to consider a sale or a separation of its faster-growing e-commerce business.
According to the report, hedge fund Engine Capital has written to the company’s board urging it explore the two options to improve its lagging stock price. Engine owns around 1% in the retailer.
Kohl’s shares closed Friday at $48.45, giving it a market value of $6.74 billion. The stock has rebounded from its pandemic lows but but has essentially gone sideways for a whole decade.
Engine points out in the letter that assuming online sales revenue of around $6.2 billion, Kohl’s digital business alone would be worth $12.4 billion, the WSJ report said.
The hedge fund has argued that private-equity firms would pay at least $75 a share and that its interactions with potential buyers suggest they could do this by monetizing Kohl’s real estate. Kohl’s has earlier pushed back against the idea, saying that its e-commerce unit works in tandem with the stores.
For most retailers, digital is the faster growing business compared to their legacy physical stores. Financial investors thus see more value in them and consider the old businesses as dragging down the more lucrative piece, and hence the push for such sales.
Kohl’s has recently made efforts to position its stores as a beauty destination in order to attract a younger audience. The company’s total revenue in the third quarter was around 15% higher at $4.6 billion. It also raised its guidance last month for the third time when it said it expects net sales to rise by around 25% this year.
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