3 reasons why Amazon should spend billions to buy Kohl’s: analyst

And as such, struggling Kohl’s is one of the hottest commodities on Wall Street.

Guggenheim retail analyst Robert Drbul said in a new research note on Friday that Amazon may express interest in buying Kohl’s.

“Opportunities include 1) customers, 2) categories, and 3) locations,” Drbul said. “For customers, according to Numerator, ~ 62% of Kohl’s customers are Prime members now, so there may be an incremental Prime opportunity for Amazon. Numerator’s data also shows that Kohl’s customers spent ~ $ 100 billion at Walmart and Target in 2021 (ex-grocery), with $ 22 billion spent in a day of buying on Amazon, describing many satisfying offline sales.Kohl’s customers are older, with 63% of consumers> 45, which we believe is higher than Amazon today.From a category perspective, we believe Amazon remains focused on building its apparel business, as an example (est. ~ 10% of spending, based on our analysis of Numerator data), which is mostly Kohl’s business. ”

The analyst does not believe an offer from Amazon is imminent. He repeated a Buy rating on Kohl’s shares and offered a $ 75 target price.

Any interest in Amazon in Kohl’s wouldn’t be entirely far off.

Kohl signed a partnership to handle Amazon’s returns in 2017 in a bid to boost store traffic. The relationship has expanded since then to cover Amazon returns to all 1,150-plus Kohl’s stores. Meanwhile, Amazon is reportedly keen on opening high-tech clothing stores.

The deal chatter came when Kohl received a $ 9 billion private offer from Starboard Value last week, according to someone familiar with the matter. Retail investing powerhouse Sycamore Partners is also reportedly kicking the wheels at Kohl’s.

“Kohl’s Corporation today confirmed that it has received letters expressing interest in acquiring the company. Kohl’s Board of Directors will determine the course of action it believes is in the best interest of the Company and its shareholders. Shareholders are not required to take any action at this time, ”Kohl said in a press release on Jan. 24.

Kohl’s shares are up 21% higher at $ 60 year-to-date, giving the company a market cap of $ 8.3 billion.

Kohl’s fielding offers reflect its pressure from two prominent investor activists.

Investor activist Macelum — who attacked the company in 2021 and went ahead with the adjustment-said earlier this month that Kohl’s did nothing to drive up shareholder value.

SAN RAFAEL, CALIFORNIA - JANUARY 24: The Kohl logo is displayed outside a Kohl store on January 24, 2022 in San Rafael, California.  Kohl’s retailer received an unsolicited $ 9 billion acquisition offer from investor activist Starboard Value through Acacia Research Corp.  The offer is for $ 64 per share compared to the final closing price of $ 46.84 per share on Friday.  (Photo by Justin Sullivan/Getty Images)

The Kohl logo will be displayed outside the Kohl store on January 24, 2022 in San Rafael, California. Retailer Kohl’s received an unsolicited $ 9 billion acquisition offer from investor activist Starboard Value through Acacia Research Corp. The offer is for $ 64 per share compared to the final closing price of $ 46.84 per share on Friday. (Photo by Justin Sullivan/Getty Images)

The investor activist is pushing for a board refresh and for Kohl’s to pursue strategic alternatives such as rotating its e-commerce operations, selling the company or rotating billions of dollars of real estate. who owns it.

Macelum thinks Kohl’s could easily be worth $ 100 a share if it actually signs off on these value-creating steps.

Aside from Macelum, Engine Capital launched its own activist attack on Kohl’s a few weeks ago. In its own sharp-word letter, Engine Capital asks Kohl to consider its entirety or split its online business (similar to what investor activist Jana asks Macy to do).

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and in LinkedIn.

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