Dive Brief:
- A number of investment firms in recent days have disclosed significant investments in Kohl’s, according to filings with the Securities and Exchange Commission.
- On Friday, Dimensional Fund Advisors disclosed a 5.2% stake, and FMR LLC , affiliated with Fidelity Investments, disclosed a 7.484% stake. On Thursday, GIC Private Limited, an investment firm owned by the Singapore government, disclosed a stake of more than 5%.
- These follow a report from Reuters earlier this week that activist hedge fund Vision One had amassed a significant stake in Kohl’s, expressed concerns about the retailer’s future and pressed executives to consider a sale. Neither Vision One nor Kohl’s responded to Retail Dive’s requests for comment.
Dive Insight:
Kohl’s stock experienced a bump earlier this week following Reuters’ report, which cited unnamed sources, but shares were down again at press time. Later in the week, news that Singapore’s government-owned investment firm had acquired a significant stake also made headlines.
But it’s unlikely that such investments signal confidence in Kohl’s prospects as a retailer, according to Mark Cohen, director of retail studies at Columbia University’s Business School.
“In today’s day and age, I can’t imagine a sovereign wealth fund interested in anything but real estate if they are buying in to a retailer,” he said by email. “A hedge fund pushing Kohl’s to sell itself? Sounds like there’s ‘no there, there,’ to Kohl’s alleged ‘new’ strategy. My sense is that the former Burlington guy running it has no idea what to do to reposition the company for success.”
That would be Tom Kingsbury, who has been CEO for a little over a year, following previous rounds of investor activism that had Kohl’s shaking up its board more than once and putting itself up for sale. A proposed deal to be acquired by Vitamin Shoppe owner Franchise Group eventually went nowhere.
In November, Kingsbury said the department store was shifting its focus to its brick-and-mortar locations and overhauling aspects of its e-commerce, telling analysts that, “the digital business is really what’s bringing us down.”
But Morgan Stanley analysts led by Alex Straton on Friday warned that there’s “limited visibility” into such initiatives, and that the company will soon be fighting a new headwind if a proposal to limit credit card fees goes through. Last year, Kohl’s credit card revenues represented about 70% of its earnings before taxes and interest, per Morgan Stanley’s research.
“Further, a closer focus on the underlying business ex-credit cards ... could fuel the bear case that store sales continue the recent declining trajectory, & that Tom Kingsbury’s initiatives may not prove successful over time,” Straton also said.