FROM THE DESK OF DEBORAH WEINSWIG

Which Suitor Will Kohl’s Choose (If Any)?

For better or worse, Kohl’s is in play.

The company reported “expressions of interest” in early February this year and announced on March 21 that it had hired investment bank Goldman Sachs to coordinate with the multiple parties submitting non-binding preliminary indications of interest. Bids were due on Wednesday, March 16 according to the Wall Street Journal, with bidders including private equity firm Sycamore Partners and retailer Hudson’s Bay Company (HBC).

How did this bidding frenzy come to pass?

Kohl’s has received interest from several investors over the past few months. In December 2021, investor Engine Capital sent a letter to the Kohl’s board recommending that its e-commerce business be separated from its brick-and-mortar business and that investors would be willing to pay at least $75 per share for the company. Then in January 2022, Macellum Capital Management sent a letter to the board claiming that the company and its stock had underperformed, and wanting to install new directors, estimating that the company owns $7–8 billion in real estate assets and that with operational improvements, its stock could be worth $100 per share. Also in January, a consortium backed by hedge fund Starboard Value LP offered $9 billion, or $64 per share, in cash to buy Kohl’s, according to the Wall Street Journal. (At the time of this letter’s writing, Kohl’s stock trades at $60.57 per share with a market capitalization of $8.0 billion, according to S&P Capital IQ.)

Despite the claims of underperformance, Kohl’s is a leader in its sector in terms of innovation. First, through its partnership with Amazon it accepts returns in its stores, which drives traffic. Secondly, the company has opened 200 Sephora beauty shop-in-shop locations in its stores, lifting store sales (and acquiring new customers). It is working toward a goal of opening 850 shop-in-shop spaces by 2023 and generating $2 billion in revenue from Sephora sales.

Which bid would Kohl’s pick, if any?

The landscape of Kohl’s suitors and bidders comprises retail operators, targeted investors and financial investors.

In contrast to other private equity firms, Sycamore Partners specializes in consumer, distribution and retail-related investments. These include Aeropostale, Belk, Lane Bryant, Loft Ann Taylor, Nine West Staples and Stuart Weitzman.

HBC, founded in 1670, is the retail, technology and real estate holding company that owns Saks, Saks OFF 5TH, Hudson’s Bay and other retail chains, which went private in 2020. The company operates 141 Saks Fifth Avenue and Saks OFF 5TH stores in North America and 85 Hudson’s Bay stores in Canada.

One of the decisions the Kohl’s board faces is whether to proceed with a bidder possessing retail operating experience or with a financial investor. HBC currently operates retail stores, and the combination of Saks and Hudson’s Bay store fleet could bring Kohl’s to Canada and give it exposure to the attractive value department store segment in the US. One interesting detail is that Kohl’s has retained its e-commerce business, defying activist investors, whereas Saks spun off its online business to apparently positive results, citing 80% revenue growth on Saks.com in its second quarter of fiscal 2022.

While Sycamore Partners is an investor, rather than an operator, its portfolio contains well-known brands and retailers, and its accumulated expertise makes it “smart money” in the sector, rather than being a disinterested party only seeking to use financial engineering to generate a return for its investors.

Ultimately, Kohl’s will most likely have to select the highest bid due to its fiduciary duty that obligates it to get the best deal for its shareholders. The board will have performed an internal valuation of the company that provides an estimate of the future share price, which the company will compare to the offers received. The board is obligated to proceed with reasonable offers that are higher than this figure.

It is possible that Kohl’s will reject all of the recent bids if they fall below its internal valuation and are a bad fit with the company’s strategy. Its suitors, though, are several in number and appear to be motivated to place the winning bid.

US RETAIL AND TECH HEADLINES

Giant Eagle Extends Partnership with Digi International To Ramp Up Food Safety

(March 22) BusinessWire.com

• US grocery retailer Giant Eagle has expanded its partnership with Digi International, a provider of IoT connectivity solutions, aiming to strengthen its commitment to food quality and safety. Digi SmartSense temperature monitoring devices will enable the retailer to check its food products remotely and continuously.
• Giant Eagle will install the Digi SmartSense system in walk-ins, chillers and refrigerators across all applicable supermarkets. The technology uses wireless sensors, food probes, digital checklists, remote monitoring software and analytics tools to ensure food remains fresh.

Kroger and Nvidia Partner on AI-Enabled Applications and Services

(March 22) Company press release

• US grocer Kroger and technology company Nvidia have announced a strategic collaboration involving artificial intelligence (AI)-powered applications and services. The two companies will build a state-of-the-art AI lab and demonstration center to expand Kroger’s freshness initiatives and improve shipping logistics.
• The new lab will be housed in Kroger’s Cincinnati headquarters. It will use Nvidia AI Enterprise software for retail, Omniverse Enterprise for digital twin simulations and cuOpt for logistics.

(March 22) Company press release

• Department store chain Macy’s has announced that it will open 37 new Backstage shop-in-shop locations nationwide, between April and June this year. Backstage stores typically span 11,000–16,000 square feet and offer a constantly changing assortment of trending products.
• Management stated that the company is shifting its store fleet to meet changing consumer behavior—it plans to open additional off-mall locations throughout 2022.

NIKE Reports 5% Growth in Global Revenue for 2022 Third Quarter

(March 21) Company press release

• US sportswear company NIKE has reported global revenue growth of 5% year over year, reaching $10.9 billion, for its third fiscal quarter (ended February 28, 2022). Growth was driven by strong sales in North America (up 9%) and double-digit growth (up 19%) in its digital business, according to the company.
• The company’s direct-to-consumer (DTC) business grew 15% year over year on a reported basis and accounted for 42% of total sales, which NIKE attributed to the return to normal traffic in owned retail stores; NIKE-owned store sales rose by 14%.

Walmart Teams Up with PCFWC To Extend Its Sustainability Efforts

(March 21) Company press release

• Walmart US has joined the PCFWC (Pacific Coast Food Waste Commitment), a public–private partnership that aims to reduce food waste along the West Coast by 50% by 2030. Walmart will provide data on food waste and loss in the region, which will be integrated with data from PCFWC’s other retail participants.
• Walmart’s participation builds on its other sustainability efforts, including its Project Gigaton initiative, which aims to reduce—or avoid introducing—one gigaton of greenhouse gas emissions from the global value chain by 2030.

EUROPE RETAIL AND TECH HEADLINES

ABC on Wheels Enters Podlaskie Province

(March 22) ESMMagazine.com

• Polish mobile grocery chain ABC on Wheels will open 20 new mobile stores in the Podlaskie region, serving areas surrounding the cities Białystok, Łomża and Suwałki. ABC on Wheels is currently available in seven Polish provinces: lskie, Lódzkie, Lubelskie, Maopolskie, Mazowieckie, Podkarpackie and Witokrzyskie.
• CEO Błażej Białczyk stated, “The mission of ABC on Wheels is to help customers from remote locations meet their everyday, basic shopping needs in a convenient and reliable way.” Following the expansion, ABC on Wheels will operate 130 mobile stores across the country.

(March 22) RetailWire.com

• Swedish apparel retailer H&M has opened its e-commerce site to third-party clothing brands in Germany and Sweden on a trial basis. If the marketplace model gains traction, the company will expand to other locations.
• Third-party brands currently available on the site include H&M sister brands & Other Stories, Arket, Monki and Weekday. Brands including Crocs, Fila, Lee and Wrangler are available as part of the trial.

Kaufland Launches Reusable Glass Jars for Groceries

(March 21) ESMMagazine.com

• German hypermarket chain Kaufland has introduced returnable glass jars for food items as part of its attempts to reduce plastic consumption. The company is offering around 90 items across 10 locations in Germany as part of the pilot—including almonds, cereal, couscous, dried fruits, flour, gummy bears, muesli, porridge, rice and sugar.
• Customers can drop off their empty jars at “empties” machines at its stores for the jars to be reused. Robert Pudelko, Head of Sustainability Purchasing at Kaufland, stated “With these returnable jars, we offer another innovative and practical solution to avoid packaging materials such as plastic, in addition to the unpackaged stations.”

THG Partners with Humm on “Buy Now Pay Later” Service

(March 22) FFNews.com

• British e-commerce platform THG has partnered with Australian “buy now, pay later” (BNPL) firm Humm, to offer a BNPL credit service. The payment option will be used by THG brands, including allsole, Coggles, ESPA, Glossybox, IWOOT, Lookfantastic, MyBag, Myprotein and TheHut.com.
• Humm is focused on growing its UK merchant base ahead of a full consumer launch in the latter half of 2022. It will integrate with THG’s end-to-end technology platform, THG Ingenuity, to offer the latter’s customers the option to pay for goods in five or 12 installments, offering up to £3,000 ($4,000) interest-free credit over a maximum of 12 months.

Zara To Open 48,800-Square-Foot London Store in Battersea Power Station

(March 22) TheIndustry.fashion

• Spanish apparel retailer Zara, owned by Inditex, has announced plans to open a store spanning 48,800 square feet in London during the second half of 2022—located in Battersea Power Station’s new Electric Boulevard development, making it the company’s first central London store situated south of the River Thames.
• The store will cover two floors and stock all the brand’s product ranges across homewear, kidswear, menswear and womenswear. The company has joined a long list of international brands set to open stores in Battersea Power Station, including Aēsop, Calvin Klein, The Kooples, Mango, Ralph Lauren, Ray-Ban and Tommy Hilfiger.

ASIA RETAIL AND TECH HEADLINES

Canada Goose Expands Its Japanese Business Through a Joint Venture with Sazaby League

(March 23) InsideRetail.asia

• Canadian outerwear company Canada Goose is expanding its business in Japan—including opening new stores—through a joint venture with Sazaby League, a Japan-based retailer of apparel, furniture, handbags and personal accessories. Canada Goose and Sazaby League will each hold a 50% stake in the joint venture.
• Canada Goose stated that the venture will significantly boost its total global revenues and gross profit in its fiscal 2023 (ending March 31, 2023). During the same year, the company expects Canada Goose Japan’s revenues to double to C$60.0–65.0 million ($47.7–51.7 million).

Korea Seven Receives Approval To Acquire Ministop

(March 23) InsideRetail.asia

• South Korea-based Korea Seven, owner of 7-Eleven convenience stores, has been approved to acquire convenience store chain Ministop by the South Korean regulatory authority, the Fair-Trade Commission (FTC). In January this year, Korea Seven’s affiliate Lotte entered into a deal to acquire a 100% ownership stake in Ministop Korea for ₩313.3 billion ($257 million).
• Through the acquisition, Korea Seven aims to cement its status as the third largest player in South Korea’s convenience store market, which is dominated by the 65% stake currently held by GS Group’s GS25 and BGF Retail’s CU.

Nitori Opens Its First Store in Singapore and Expands in Malaysia

(March 21) InsideRetail.asia

• Japanese home-furnishings company Nitori will open its first store in Singapore at The Heeren mall on March 31, as well as open a second store in Malaysia in its third quarter of 2022.
• The company plans to expand operations in both countries substantially over the next five years, opening 20 stores in Malaysia and 10 stores in Singapore.

(March 22) InsideRetail.asia

• Reliance Retail Ventures, a subsidiary of Indian multinational conglomerate Reliance Industries, has acquired an 89% stake in Purple Panda Fashions, the company behind DTC lingerie brand Clovia, for ₹9.5 billion ($125 million). The acquisition comes as part of Reliance Retail’s ongoing strategy to expand its presence in the fashion and lifestyle category.
• The move is its third recent innerwear acquisition, following its acquisition of Zivame in February 2021 and Amante, which it purchased in November 2021. 

X Diamond Opens Flagship Store in Singapore

(March 21) InsideRetail.asia

• X Diamond, a jewelry retailer focused on lab-grown diamonds, has opened a flagship store in the Ion Orchard shopping mall in Singapore.
• The new flagship store features an in-house customization station where customers can personalize their purchases. The company stated that the flagship store is designed to provide a fashionable and relaxed shopping space.