American department store retail chain Kohl's is reportedly being pressured by an activist investor to sell or separate its e-commerce unit. The move is similar to those implemented by other department store chains, such as Saks Fifth Avenue.
Hedge fund Engine Capital has reportedly demanded that Kohl's consider selling off or separating its online business to boost its stock price. The activist investor, which owns around a 1% stake in the company, sent a letter to its board of directors on Sunday.
Engine Capital stated in its letter that if Kohl's generates $6.2 billion in online sales, Kohl's digital operation alone would be worth $12.4 billion. The New York-based hedge fund believes there are private equity groups willing to pay at least $75 per share for Kohl's e-commerce business.
The activist investor also stated that discussions with possible purchasers indicate that they may be able to monetize Kohl's assets further. Engine Capital also claimed that the move would be necessary given how the company has been underperforming in the S&P 500 and compared to other retailers.
Kohl's stock closed Friday at $48.45, approximately where it was a decade ago, giving the company a market valuation of $7.3 billion. Kohl's is currently valued lower than Macy's but higher than Nordstrom's. Kohl's stock is up roughly 19% year-to-date.
Activist firm Engine Capital reportedly pressures Kohl's to consider sale of online biz https://t.co/8HmPVxQTUc — CNBC (@CNBC) December 6, 2021
The push to split the company's e-commerce arm comes as investors are increasingly more interested in owning a portion of the faster-growing e-commerce sector. Saks Fifth Avenue is reportedly looking to list its digital subsidiary in a planned $6 billion IPO. It was valued at $2 billion as recently as March.
Meanwhile, activist investor Jana Partners has encouraged Macy's to separate its e-commerce business from its shops in order to get a higher valuation. Since then, Macy's has recruited AlixPartners to evaluate its corporate structure.
Macy's CEO, Jeff Gennette, said that they do recognize the benefit of assigning a pure e-commerce business. He added that they are currently conducting additional analysis to unlock value for the company further.
Kohl's recently had another run-in with activist investors who questioned the company's direction and attempted to take control of the board of directors. In April, the group of activist investors, which included Macellum Advisors, Ancora Holdings, Legion Partners Asset Management, and 4010 Capital, reached a deal with the store and added a few investor-backed independent directors to its board of directors.
