Insights

Why Kohl’s Stock Crashed and Burned on Friday

What happened

Shares of Kohl’s (NYSE: KSS) flamed out on Friday, falling as much as 22.5%. As of 2:05 p.m. ET, the stock was still down 16.9%.

The catalyst that sent the retailer plunging was the company’s decision to end buyout talks without a deal.

So what

Kohl’s is one of a number of brick-and-mortar retailers that have struggled in recent years, as the ease and convenience of digital retail siphoned shoppers away from physical locations. Many investors had hoped that talks between Kohl’s and Franchise Group (NASDAQ: FRG) would result in the retailer being bought out.

The company dashed those hopes today, announcing that Kohl’s concluded its “strategic review process” and ended its exclusive talks with Franchise Group without securing a deal.The operator of The Vitamin Shoppe was granted a three-week exclusive window to conduct its due diligence and secure financing after its proposal to acquire Kohl’s for $60 per share. 

The companies didn’t explain exactly why they were unable to reach an accord, but dropped some hints. Kohl’s board chair Peter Boneparth said in a statement, “Despite a concerted effort on both sides, the current financing and retail environment created significant obstacles to reaching an acceptable and fully executable agreement. Given the environment and market volatility, the board determined that it simply was not prudent to continue pursuing a deal.”

This suggests that after reviewing its books, Franchise may have wanted to pay a lower price for Kohl’s.

Now what

Kohl’s tried to put the best possible spin on its decision, saying it’s “a financially strong company that generates substantial free cash flow and has a clear plan to enhance its competitive position and improve performance over the long term.”

Perhaps more telling for investors, however, the company updated its outlook for the second quarter, citing inflationary pressures and cutting its guidance. Kohl’s now expects year-over-year sales to be down high-single digits, after previously expecting a shortfall in the low-single digits. 

The secular headwind of e-commerce may have slowed, but shows no signs of abating. While a turnaround for the struggling retailer is certainly possible, there are no guarantees. That makes Kohl’s less of an investment and more of a gamble.

Danny Vena has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info