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Sycamore, Franchise Group submit bids for Kohl's

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Yahoo Finance Live anchors discuss Sycamore and Franchise Group becoming the latest to submit bids for Kohl’s.

Video transcript

[MUSIC PLAYING]

BRAD SMITH: Welcome back to Yahoo Finance Live, everyone. More takeover bids for Kohl's. The company received bids from private equity firm, Sycamore Partners, and retail holding company, Franchise Group, according to the Wall Street Journal. Brian Sozzi has been following this one, so that's where we find his take today in the retail department store. Sozzi, is this ever going to happen?

BRIAN SOZZI: Yeah, Just following it right into the toilet. This whole story has been abysmal. This company had, over the past two years, I would say, multiple opportunities to sell itself above $60 a share. To see reported bids coming in for Kohl's around $50, maybe even low 50s, is just terrible.

And one name we were talking about in break that's not even up there, it's Amazon. Amazon has long been viewed as a potential buyer of Kohl's here. They operate those horribly run shops inside of Kohl's that nobody really goes to because they still return their packages over at the post office. They're not even involved in this. So I think it's quite telling a lot more-- not a lot more bidders have stepped up here and offered to take Kohl's private, and at a price that is below the highs over the past year and a half.

Now, why is that happening? In effect, you had Kohl's come out about a month ago and issue a major profit warning, and the stock went right down. Now, I was talking to one Kohl's investor this morning, and he really just-- at this point, it would be happy to take whatever price Kohl's could get because if they do not take one of these offers, this investor was telling me that Kohl's shares could hit $30 or even less. They are in that bad of fundamental shape. And also, the investor really went on to attack how the whole sale process has been going on at Kohl's. They have done a terrible, terrible job.

BRAD SMITH: I mean, you look at the model that Kohl's had been built up with, and it was one of the department stores, high square footage, high overhead. And you were reliant on the partnerships that are now going more direct to consumer. And so, with that, you're facing inventory issues. You're trying to prop up store within a store in a beauty category. And sure, that might be working out well for them. But if you are an acquirer, do you really want the job of having to go in and revamp that entire model of how they had looked at the store historically?

BRIAN SOZZI: Well, Kohl's has no soul. You at least walk into Target, and you know what you're getting. You're getting food. You're getting a great shopping experience. And here's my take, first and foremost. Let's run through some of these. Horribly managed sales process by Kohl's. This is one of the worst sales processes I've ever seen. And I've been covering for retail for close to 20 years, about 12 years as an analyst. I mean, what Kohl's has done here is just abysmal. That whole entire management team and that board should be really ashamed of themselves.

Next here, Kohl's must sell itself before a potential recessionary holiday season. If Kohl's executives, who have been really slow in taking bids and exploring a sale, if they think they can carry this out to the Black Friday shopping season, they have another thing coming, because by then, the economy can be sharply slowed, and you could have Kohl's shares down 30 bucks.

And last, but not least, whether it's Sycamore, Franchise Group, or even-- who knows-- maybe a Leonard Green pops out of the blue and offers something for the company, this entire leadership at Kohl's must be gutted from the top to the bottom, because the class of folks running Kohl's compared to the class of folks running Target or Walmart, which is their competitors, is night and day.

BRAD SMITH: Well, and we should remind folks, Leonard Green a company that has been very much prominent in either takeover bids. Most recently, the large one that they had gone after was Nordstrom, but then even prior to that, we had seen J.Crew. We had seen, I think, a company that was eventually supposed to be spun out and go public in Madewell as well. And so the fact that we haven't seen more entrants throw their hat into the ring for the bidding in Kohl's, that says everything, as you were mentioning earlier.

BRIAN SOZZI: Yeah, and if you're a buyer here right now, look, what are you getting? You're getting an asset that has been struggling for about 2 and 1/2, 3 years. You're getting an asset that might be buying before a potential recession. And you might have more inventory markdowns. You might need to close more stores. It could be a flat out disaster.

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