Delivering on Transformative Strategy
Kohl’s is continuing a significant transformation of its business model to be the retailer of choice for the active and casual lifestyle. The Company has laid the strategic foundation and is implementing key initiatives that will scale and enhance growth in the years ahead. This includes building on compelling partnerships such as Sephora at Kohl’s, which will expand to more than 850 stores by the end of 2023, on a path to $2 billion in annual omnichannel sales by 2025. We also plan to open more than 100 smaller format stores over the next four years, estimated to drive a more than $500 million annual sales opportunity. Introducing these smaller format stores provides Kohl’s the flexibility to enter new communities, creating a localized experience to meet customer needs. We plan to continue to grow our digital business, with 40% of digital orders currently fulfilled in stores. We are rolling out Self-Serve Buy Online, Pick Up In-Store to all stores in 2022, and are continuing to test self-serve returns and check-out, delivering a heightened level of customer convenience.
Overview of Strategic Review Process
The Kohl’s Board thoroughly evaluated Kohl’s standalone strategic plan against potential alternatives and designated its Finance Committee to lead the review of previous expressions of interest. The Board engaged Goldman Sachs to conduct a broad process to explore strategic alternatives. Goldman Sachs engaged with more than 25 parties. Select bidders were invited to a data room containing over 550,000 pages across over 55,000 documents, and engaged in dozens of meetings with management and functional leaders. More than 20 NDAs were signed with potential bidders and financing partners as part of the process. After receiving unfinanced proposals to acquire the Company with denominated value from five parties, the Finance Committee, management, and Goldman Sachs engaged with four of the parties, and ultimately engaged exclusively with FRG, whose $60 proposal significantly exceeded the other then available bid. Ultimately, reflecting the current financing and retail environment, FRG submitted a revised proposal at $53 per share without definitive financing arrangements to consummate a transaction, and the parties faced significant obstacles reaching a fully executable agreement.
In light of the current financing and retail environment, which has significantly deteriorated since the beginning of the process, the Board unanimously determined that it was no longer prudent to continue its process and that it is in the best interest of shareholders for management to continue to execute the Company’s strategic plan on a standalone basis. The Board nonetheless remains open to any opportunities to maximize shareholder value.
Additional detail describing the Board’s process to review strategic alternatives is separately filed today with the Securities and Exchange Commission on a current report on Form 8-K.
Cautionary Statement Regarding Forward-Looking Information
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements, including statements regarding business and financial trends for the Company’s second quarter, future performance, business conditions or results of operations, the timing and amount of any share repurchases pursuant to the Company’s share repurchase program and other information are subject to certain risks and uncertainties, which could cause the Company’s actual results to differ materially from those anticipated by the forward-looking statements. There can be no guarantee regarding such trends and performance, that the Company will be able to execute share repurchases, the timing or number of shares of any such repurchases, or that share repurchases or other future actions by the Company intended to create shareholder value will have such an effect. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company’s Annual Report on Form 10-K and Item 1A of Part II of the Company’s Quarterly Report on Form 10-Q for the first quarter of fiscal 2022, which are expressly incorporated herein by reference, and other factors as may periodically be described in the Company’s filings with the SEC. Forward-looking statements relate to the date initially made, and Kohl’s undertakes no obligation to update them.
