On July 1, shares of Kohl's (NYSE:KSS) fell heavily (at one point they were down more than 20%) and hit
new 52-week lows on the day. The reaction followed a press release in which Kohl's announced that it
had concluded a strategic review process. Investors were bullish of a potential deal involving Kohl's, but
management poured cold water on that with its announcement.
"Given the environment and market volatility, the Board determined that it simply was not prudent to
continue pursuing a deal." Months earlier, the company had mentioned it had been receiving takeover
offers but that they undervalued its business, suggesting that Kohl's was holding out for better offers.
And with the markets struggling heavily since then, it may not be much of a surprise that the offers for
Kohl's didn't get better, or at least they weren't high enough to the point where management was
willing to take a deal.
Without a possible deal or acquisition, shareholders are now left with the reality of holding a troubled
retail stock and where growth may be hard to come by. When the company last released earnings in
May, it reported that its sales for the period ending April 30 totaled $3.7 billion and were down 4.4%
year over year. Net income was unchanged, and there was little for investors to get excited about –
besides a possible acquisition. For 2022, the company is only expecting nominal sales growth of no more
than 1%.
The latest decline has sent Kohl's stock to levels not seen since late 2020. It could make for a good
contrarian buy, but given the heavy reaction to Friday's news, investors may want to wait before buying
the stock as it may sink even lower.
