Retailer Kohl’s (KSS) is one of the biggest names around in department store retail. It draws shoppers from across the economic spectrum and has managed to stay alive even during the worst of the pandemic.
Now, other investors are taking notice, and word of a buyout is rapidly growing in volume. Regardless of the buyout possibilities — which are surprisingly likely — I’m bullish on Kohl’s. It was a retailer that survived when many others were shutting down.
Kohl’s year in share prices so far has been somewhat erratic, though within a fairly tight range. The company led off the last 12 months with a dip from just over $46 to just over $42 in late January.
However, that kicked off a substantial run-up that took the company from about $42 to nearly $62 by mid-March. The company struggled valiantly to hold that valuation — and even managed to top it in mid-May — but by mid-July, the company was threatening the $45 mark once again.
Another recovery kicked in to threaten $60 per share by late August, but by mid-October, the company tumbled once again, breaching the $45 mark to close at $44.67 on October 11. Another recovery followed, leading Kohl’s almost to new highs, but the company slipped once more, bringing us to today.
The latest news may fuel new interest in the company, however; it’s seen buyout offers from two different sources in the last few weeks. Acacia Research Corp., overseen by a hedge fund known as Starboard Value LP, put out an offer for $64 per share in cash.
That’s not only a significant premium over Friday’s close of $46.84, but it would also be the highest valuation the company’s seen in the last 12 months. Following Acacia’s offer, word emerged that Sycamore Partners was also set to launch a bid of its own.
Wall Street’s Take
Turning to Wall Street, Kohl’s has a Hold consensus rating. That’s based on five Buys, four Holds, and three Sells assigned in the past three months. The average Kohl’s price target of $64.67 implies 3.8% upside potential.
Analyst price targets range from a low of $38 per share to a high of $86 per share.
Promising Without Buyout
Acacia’s interest in buying Kohl’s automatically improves Kohl’s value. Should Acacia’s buyout offer go through, then the gains we’ve seen so far will hold.
Likewise, Sycamore Partners’ interest suggests a bidding war possibly in the making. That means the sky is effectively the limit on price. Or at least the limit of either company’s war chest.
That alone makes it worth being bullish on Kohl’s. Let’s leave the “buyout” concept aside for a minute and consider the company underneath. It managed to survive some of the toughest economic times for a retailer: COVID-19 and the government response therein.
Plus, Kohl’s managed to chip out its own niche. It partnered with Amazon (AMZN) to accept Amazon returns in-store.
Kohl’s has proven itself a resilient competitor in the online retail space, and it’s small wonder that investment firms and hedge funds are looking to buy in. Kohl’s dividend history has proven mixed, however.
The company has offered a steady dividend for some time now. However, the amount has dropped somewhat in recent months. There was no dividend between March 2020 and March 2021, but with March 2021’s arrival, the company restarted payments.
Concluding Views
Kohl’s by itself would be worth a closer look. Kohl’s worked hard to build — and keep — a customer base. Even through some of the worst conditions for retailers ever seen, it’s still fighting hard.
With that in mind it’s no surprise some are looking to buy the company out. Kohl’s has held up well, and it’s likely to continue doing so.
With the buyout, however, Kohl’s becomes even more attractive. Acacia’s bid is pretty much priced in. However, a bidding war between it and Sycamore should only improve things.
Kohl’s is valuable by itself. Kohl’s in a bidding war will likely only get better, and that’s all the reason anyone really needs to be bullish.
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