Activist firm Engine Capital reportedly pressures Kohl’s to consider sale of online biz

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  • The Wall Street Journal reported that an activist is reportedly pressuring Kohl’s to consider selling or liquidating its online business.
  • The WSJ said New York-based hedge fund Engine Capital reportedly wants Kohl’s to explore two options to boost its stock price.
  • It follows a similar move at Saks Fifth Avenue and is in the midst of ongoing talks between Macy’s and activist firm Jana Partners.

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A worker is reportedly considering selling or divesting his online business at Kohl’s, following a similar move by department store chain Saks Fifth Avenue, according to the Wall Street Journal.

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The WSJ said New York-based hedge fund Engine Capital reportedly wants Kohl’s to explore two options to boost its stock price. The report said the activist group sent a letter to Kohl’s board on Sunday. Engine Capital holds about 1% stake in Kohl’s.

Kohl’s shares closed Friday at $48.45, roughly where they were trading a decade ago, giving Kohl’s market value of about $7.3 billion — less than Macy’s but higher than Nordstrom’s. Kohl’s stock is up about 19% to date, underperforming against the S&P 500.

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According to the WSJ, Engine Capital said in its letter that Kohl’s digital business alone would be worth $12.4 billion, assuming an increase of about $6.2 billion in online sales revenue from Kohl’s.

Engine Capital also said it believes there are private equity firms that will pay at least $75 per share, the report said. And the group of investors said talks with potential buyers suggest they can further monetize Kohl’s real estate, the WSJ reported.

Representatives for Kohl’s and Engine Capital did not immediately respond to CNBC’s request for comment.

These conversations are happening because investors see the appeal of owning a piece of a rapidly growing e-commerce division with more tech-savvy operations. Saks’ digital arm is now reportedly aiming to go public With a valuation of $6 billion, or about six times revenue. It had a $2 billion valuation as recently as March.

Meanwhile, Macy’s has been urged by active group Jana Partners to spin off its e-commerce operations from its stores, which is expected to garner higher valuations. Macy’s has since hired the consulting firm AlixPartners to review its business structure.

“We also recognize the significant value that the market is delivering to pure e-commerce businesses,” Macy’s CEO Jeff Gennett said on a recent earnings call. “And as we look at today’s landscape, we are conducting additional analysis that could help inform our long-term strategy to further unlock value for Macy’s.”

Kohl’s recently had another conflict with active investors, who cast doubt on the company’s direction and tried to control its board. The group — McCallum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital — entered into an agreement with the retailer in April and added a few investor-backed independent directors to its board.

In 2014, Engine Capital pressured Ann to sell itself, which owned the Ann Taylor and Loft fashion brands. The company did so the next year.

Read the full Wall Street Journal report Here.


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