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Kohl's operates more than 1,100 stores across the United States and has annual sales of about $19 billion. (PHOTO: Joe Seer/Shutterstock.com)

Will Kohl's be bought out?


The common stock shares for Kohl's Corp. rose 56 cents Thursday amid growing Wall Street speculation that the Menomonee Falls-based retailer could be a prime target to be acquired by a private equity firm in 2013.

Kohl's fell in January to its lowest valuation relative to revenue in more than four years after the retailer cut its profit forecasts because of disappointing holiday sales and steeper-than-planned price reductions, according to a report by Bloomberg.

Kohl's stock is trading at only 0.58 times its sales and at a cheaper multiple to profit than any other North American department-store chain, Bloomberg reported.

Stock analysts at Edward Jones & Co., Morningstar Inc., Aston Hill Financial Inc. and Delafield-based Arnold Investment Counsel each speculated with Bloomberg that Kohl's could be prime for a takeover.

Kohl's, with exclusive brands such as Jennifer Lopez and Vera Wang that help attract repeat customers, may be attractive to a company because of its extensive real estate holdings, including many stores that have been equipped with solar panels, the analysts said.

"It's a good, sound retailer," Brian Yarbrough, an analyst for Edward Jones in St. Louis, told Bloomberg. "There's been more talk of it being a private equity play because it's cheap and it's not like the model's broken or it's a bad business. The earnings power is there."

U.S. private equity funds have $360 billion of committed unspent capital dedicated to buyout funds in the global market, according to data from research firm Preqin Ltd.

Barry Arnold, a fund manager at Arnold Investment Counsel, which owns Kohl's shares, said, "There's plenty of cash sloshing around, so that's not a big problem...It's an attractive company."

Kohl's operates more than 1,100 stores across the United States and has annual sales of about $19 billion.

A spokeswoman for Kohl's did not respond to a phone call or e-mail seeking comment on the Bloomberg report.

If Kohl's is acquired by a private equity firm, it remains unclear whether that transaction would have an impact on the retailer's decision to build its new headquarters in Menomonee Falls, rather than downtown Milwaukee.

Sheer speculation here, but I've got to believe that an independent, fresh set of eyes from the outside would second-guess that decision and would come to the conclusion that the company's ability to recruit top talent in the future would be more enhanced with a downtown Milwaukee headquarters in the hub of it all, rather than an isolated campus in the suburbs.

Steve Jagler is executive editor of BizTimes Milwaukee.

Talkbacks

Doug_B | Feb. 4, 2013 at 10:08 a.m. (report)

perhaps Kohls is staying away from the City of Milwaukee as they "The City literally threw the kitchen sink at them the last time". I know that would keep me away.

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Doug_B | Feb. 4, 2013 at 8:53 a.m. (report)

If Milwaukee really did literally throw the kitchen sink at Kohls then I can understand why Menomonee Falls was selected.

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mikeb | Feb. 2, 2013 at 7:45 a.m. (report)

I'm not sure what Kohl's decision to stay in Menomonee Falls has to do with this article. The trouble with the business coverage in Milwaukee is that it seems the editors want to write on how they think business should be run and are preoccupied with trying to hang out with the cool kids rather than ask interesting questions or report news. One great question to ask in the Kohl's story is why doesn't Kohl's, or for that matter any other company, want to locate in the Park East Area? Instead they go with the Jeff Sherman-esque "Target should come to the Grand Avenue" types of articles without exploring why no one wants to locate there. The wanting to hang out with the cool kids thing is huge as well. Witness Mr. Jagler's valentine on OMC looking for new investors. It read like a promo rather than asking some interesting questions like "after 15 years why do you still need investors after we spent the whole article talking about how successful you are" If you're a green company, a fresh water company or a creative, you'll get coverage. Maybe there's an interesting article there about the challenges and opportunities in digital media. I suspect if Kohl's thought they needed to be downtown to attract the talent they needed, they would be downtown. Given that Mr. Jagler does not own a large company he might not realize that the twenty-something creatives aren't the main targets of most businesses. Rather they are usually looking for people a little bit older. Those people will be more likely to have kids and want to live in the suburbs. When I started my career in 1997 downtown was the place to be. Gradually we've seen a shift to firms moving out west. When I first went off on my own I located in the third ward and had a decent experience, but it was clear that clients did not like coming down there for a variety of reasons. So we picked up and moved West. There are some great stories to tell about Milwaukee's declining downtown and what can be done to reverse it, but I guess it's easier to simply report on what you'd like companies to do.

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Photodavie | Feb. 1, 2013 at 4:35 p.m. (report)

7,000 employees work at existing Kohls corperate. Most of them bought homes/condos in the area (especially the higher-ups). None of them (especially the ones that make the decisions) want to drive through rush-hour twice a day and pay $100/month for parking downtown. Never gonna happen. They only leaked the downtown option to get a better deal from Menomonee Falls. They should just turn the Park East into a park or a nature preserve.

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pfan | Feb. 1, 2013 at 4:09 p.m. (report)

Northwestern Mutual is investing $350,000 in their downtown Milwaukee headquarters. I think Kohls can probably figure out parking... And the cost of doing business in downtown would undoubtably be subsidized by a large TIF. The City literally threw the kitchen sink at them the last time. No doubt they'd be much more attractive to the young talent they try and court from the Coasts in a dense cultural center rather than in the middle of nowhere suburbia (sorry Falls, but it's true).

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