An activist is reportedly pressuring Kohl’s to consider either a sale or a separation of its online business, following a similar move by the department store chain Saks Fifth Avenue, according to The Wall Street Journal.
The New York-based hedge fund Engine Capital reportedly wants Kohl’s to explore the two alternatives to try to boost its stock price, WSJ said. The activist group sent a letter to Kohl’s board on Sunday, the report said. Engine Capital owns a roughly 1% stake in Kohl’s.
Kohl’s shares closed Friday at $48.45, roughly where they were trading a decade ago, giving Kohl’s a market value of about $7.3 billion — less than that of Macy’s but more than Nordstrom‘s. Kohl’s stock is up about 19% year to date, underperforming the S&P 500.
According to WSJ, Engine Capital said in its letter that assuming Kohl’s brings in online sales revenue of about $6.2 billion, Kohl’s digital business alone would be worth $12.4 billion.
Engine Capital also said it believes that there are private equity firms that would pay at least $75 per share, the report said. And the group of investors said that talks with potential buyers suggest they could further monetize Kohl’s real estate, WSJ reported.
Representatives from Kohl’s and Engine Capital didn’t immediately respond to CNBC’s request for comment.
These talks are arising as investors see the appeal of owning a piece of a faster-growing e-commerce division with more tech savvy operations. Saks’ digital arm is now reportedly aiming to go public with a valuation of $6 billion, or roughly six-times revenue. It had a $2 billion valuation as recent as March.
Meantime, Macy’s has been urged by activist group Jana Partners to spin off its e-commerce operations from its stores, hoping to fetch a greater valuation. Macy’s has since hired consulting firm AlixPartners to review its business structure.
“We also recognize the significant value the market is assigning to pure e-commerce businesses,” Macy’s CEO Jeff Gennette said on a recent earnings call. “And as we look at the landscape today, we are undertaking additional analysis that could help inform our long-term strategy to further unlock value for Macy’s.”
Kohl’s had another recent clash with activist investors who raised doubts about the company’s direction and tried to take control of its board. The group — Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital — came to an agreement with the retailer in April and added a few investor-backed independent directors to its board.
In 2014, Engine Capital pressured Ann, which owned the Ann Taylor and Loft fashion brands, to sell itself. The company did so the following year.
Read the full report from the Wall Street Journal here.