The large retailer, Kohl’s, just announced that they might be selling their business after all, but might opt to sell some of its real estate. Kohl’s has been in talks with The Vitamin Shoppe owner, Franchise Group, but announced that it terminated this deal. Kohl’s was pressured by activist firms including Macellum advisors to consider a sale of the company, mostly in part to unlock the value of Kohl’s real estate. Macellum proposed that Kohl’s should sell some of its real estate and lease it back as a way to unlock tied up money. Kohl’s has been resistant to this sale, at least at such a large scale.
The company completed a small scale sale-leaseback earlier on during the pandemic gaining the company $127 million by selling and leasing back its San Bernardino e-commerce fulfillment and distribution centers. However, senior management said that it was analyzing other ways to monetize its real estate.
Proponents of a sale-leaseback agreement argue that it is a convenient way for companies to come up with funds to put toward future growth, but there must be a buyer. However, this also leaves the seller with having to meet lease obligations since they would be renting the property they just sold. In 2020, Big Lots reached a deal with a private-equity firm to raise $725 million from selling four company-owned distribution centers and leasing them back, giving them increased liquidity during the pandemic. Private-equity firm Oak Street had been planning to offer financing to Franchise Group in a Kohl’s deal. Kohl’s on Friday reaffirmed its plan to conduct a $500 million accelerated stock buyback later this year.
Kohl’s shares ended last Friday trading down almost 20% and touched a 52-week low of $27.65.