Kohl’s Affirms Plans for Accelerated Share Repurchase Program After Ending Buyout Talks with Franchise Group

Phoenix, United States- August 25, 2011:  Kohl's  department stores offer clothing and household merchandise across the United States.
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Kohl’s confirmed that it is ending talks to sell its business to The Franchise Group and will launch an accelerated share repurchase program to boost its struggling stock price, but shares fell sharply in early trading Friday amid doubts about the retailer’s near-term growth prospects.

The deal between Kohl’s and The Franchise Group, owner of The Vitamin Shoppe, fell apart mainly because of a deteriorating retail environment, company officials said.

“Despite a concerted effort on both sides, the current financing and retail environment created significant obstacles to reaching an acceptable and fully executable agreement,” Kohl’s Chairman Peter Boneparth said in a Friday press release. “Given the environment and market volatility, the Board determined that it simply was not prudent to continue pursuing a deal.”

He added that Kohl’s will continue to look for ways to “maximize value for shareholders” — and proceeded to do just that by executing a $500 million Accelerated Share Repurchase program that will begin immediately following the company’s Q2 earnings results on Aug. 18, 2022. That announcement was part of Kohl’s previously announced $3 billion share repurchase authorization.

Kohl’s shares were down more than 6% early Friday after finishing slightly lower the previous session. The stock has shed nearly one-quarter of its value over the last three weeks.

Many investors were likely spooked by Kohl’s updated outlook for its fiscal second quarter, which includes a lower sales forecast. The retailer now expects year-over-year sales to fall in the high-single digits vs. its previous forecast of a low-single-digit decline.

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“As inflationary pressures on the consumer continue, the Company is seeing a softening in consumer spending,” Kohl’s said in the press release.

Kohl’s decision to end its buyout talks comes amid an extended period of disappointing sales and shareholder turmoil. The retailer has faced months of pressure from activist investors to sell the business and change its board of directors, CNBC reported. Earlier this year, Kohl’s rejected a different offer of $64 a share, which it considered too low. The stock price has since been on a steady decline and dipped below $30 Friday morning.

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