Home Coach outlet profit The acquisition of Kohl’s Corp. collapses in a fragile retail environment | Economic news

The acquisition of Kohl’s Corp. collapses in a fragile retail environment | Economic news

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MATT OTTAssociated Press

The potential sale of department store chain Kohl’s has collapsed in a fragile retail environment characterized by rising inflation and consumer anxiety.

Menomonee Falls-based Kohl’s Corp. last month entered exclusive talks with Franchise Group, which owns the Vitamin Shoppe and other outlets, for a deal potentially worth about $8 billion.

“Given the environment and the volatility of the market, the board of directors has determined that it is simply not prudent to pursue a deal,” Kohl Chairman Pete Boneparth said.

It was the second time this week that a major retailer pulled out of a potential sale due to deteriorating economic conditions. Walgreens said on Thursday it was giving up hopes of selling its Boots business in the UK.

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“Kohl’s decision to end acquisition negotiations with Franchise Group comes as no big surprise,” said Neil Saunders, chief executive of GlobalData. “Current market conditions are not conducive to business transactions, with issues with funding and raising debt and capital all acting as impediments to closing.”

Saunders said while Franchise Group was serious about the offer, it “probably found it increasingly difficult to do the math amid a deteriorating retail environment.”

Shares of Kohl’s Corp. fell more than 20% at the opening bell.

US data released two weeks ago showed inflation has begun to erode Americans’ willingness to shop as they once did, unable to travel much and overflowing with money from government stimulus checks. Economic growth in the United States is slowing and potential takeovers face increasingly strong headwinds from rising interest rates that make financing such deals much more expensive.

Kohl’s struggled with anemic sales before the pandemic. Sales and profits have rebounded in 2021, but the department store is now grappling with higher costs and a pullback from its price-conscious shoppers who are more cautious with their spending amid rising gas prices, food and just about everything else.

However, the drop in spending is broader than that. Just weeks after telling its investors what to expect for the year ahead, luxury furniture chain RH revised those expectations down on Thursday, citing deteriorating macroeconomic conditions and rising mortgage rates.

The day before, the CEO of Bed, Bath & Beyond had been ousted after another dismal quarter of sales.

Recalling the weak environment for some retailers, Kohl’s said on Friday it now expects sales to decline in the single digits in the current quarter compared to 2021. It had previously forecast sales to decline to a number at the bottom.

This comes less than two months after Kohl’s Corp. cut its forecast for full-year earnings and sales after a dismal first quarter. Sales at stores open for at least a year fell 5.2% from 2021.

Kohl’s has more than 1,100 stores in 49 states.