Kohl’s goes back on the shelf

NEW YORK, July 1 (Reuters Breakingviews) - Kohl’s (KSS.N) is going it alone. The U.S. retailer said on Friday it had ended talks over a takeover by Franchise Group (FRG.O) after the bidder revised its offer down and didn’t come up with “definitive financing arrangements.” The market’s reaction gives a hint at the lonely road ahead.

Kohl’s shares dropped 19% to $28.90 early on Friday. That leaves the company with a $3.7 billion market value. Over the past 15 years, Kohl’s has tended to be valued at around 11.5 times its forecast earnings, according to Refinitiv. So one way of reading the current share price is to say that investors think earnings could be around $320 million over the next year.

That’s dismal, by any measure. It would be the lowest Kohl’s has produced in at least 20 years, excluding its loss in 2020, the year Covid-19 hit. Analysts are still predicting more than twice that amount for this year.

The onus is now on Kohl’s to beat that low bar. It owns lots of real estate, which gives it some options. But if a recessionary storm is coming, a stand-alone Kohl’s is right in its path. (By Amanda Gomez)

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