Kohl's Urged By Activist Investor To Explore Sale Of E-Commerce Business: Report

An activist investor has urged department store chain Kohl’s Corp. KSS to consider a sale of the company or a separation of its e-commerce business, the Wall Street Journal reported.

What Happened: New York-based hedge fund Engine Capital LP sent a letter to Kohl’s board on Sunday and asked the company to examine the two alternatives to boost its lagging stock price, as per the report.

Engine Capital, which owns a nearly 1% stake in Kohl’s, noted that the retailer’s digital business alone would be worth $12.4 billion, assuming online sales revenue of about $6.2 billion.

Engine Capital also said it believes there are private-equity firms that would pay at least $75 a share for the company.

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Why It Matters: Engine Capital’s move comes after department store chain Saks Fifth Avenue’s e-commerce business, Saks.com, was split off into a separate entity earlier this year. Insight Partners made a $500 million minority equity investment in Saks.com, valuing the business at $2 billion.

The Saks unit aims to go public in the first half of 2022 with a target valuation of roughly $6 billion -- three times its valuation earlier this year.

It was reported in October that retailer Macy’s Inc. M was also urged by activist investment firm Jana Partners LLC to spin off its e-commerce business.

Last month, Kohl’s reported better-than-expected earnings results for the third quarter and raised its fiscal 2021 outlook. The company has also formed a partnership with Sephora to lure in customers to its stores.

The company’s year-to-date returns are 26.6%.

Price Action: Kohl’s stock closed almost 2.9% lower in Friday’s regular trading session at $48.45, but rose 0.1% in the after-hours session to $48.50.

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