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Vitamin Shoppe owner in talks to buy Kohl’s for $8 billion

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Yahoo Finance Live anchors discuss reports that Franchise Group is looking to purchase Kohl’s for nearly $8 billion.

Video Transcript

BRIAN SOZZI: Kohl's is in advanced talks to be sold to retail holding company, the Franchise Group, in a deal worth nearly $8 billion. The company has recently been in the spotlight for fending off several activist bids. In a press release, Kohl's says the Franchise Group, owner of Vitamin Shoppe, is considering acquiring the company for $60 per share. And I'm sure Kohl's investors are happy about this deal potentially going through. You see shares up 8%.

But a little perspective-- Kohl's' enterprise value about six years ago was close to $16 billion. So there's been massive value destruction at Kohl's because of years of mismanagement, pressure profit margins, and really, increased competition from the likes of a Wayfair, of a Target, of course. But still, this saga looks to be nearing an end.

JULIE HYMAN: I mean, it's pretty amazing that the company is up for sale, and the stock is down year to date, right? It's quite an unusual situation.

BRIAN SOZZI: Well, big warning a couple of weeks ago. Another retailer that warned.

JULIE HYMAN: Yeah.

BRAD SMITH: Well, you were just saying, what, yesterday, whatever deal comes across, just take it.

BRIAN SOZZI: Just take it.

BRAD SMITH: And I mean, $60 a share, significant upside from this point. And then for a company in Kohl's, I would be interested in seeing what Franchise Group does differently about Kohl's. The square footage that they operate, to me, is insane for the number of categories that they still have to get inventory in the store for. And that overhead is perhaps the biggest thing that always just boggles my mind.

BRIAN SOZZI: One thing they need to do is just really clean house in terms of executive team. And within that Franchise Group business-- I mentioned Vitamin Shoppe-- there's a long-time retail CEO that has turned Vitamin Shoppe around. That's Sharon Leite. You know, I wouldn't mind seeing her taking over Kohl's, taking over that leadership team. She has changed the Vitamin Shoppe. She has brought that chain back to some form of relevance in a very competitive market. Here, I'm appointing the CEO of Kohl's right now, before the deal even closes.

BRAD SMITH: But they're still doing this in an environment where so many of the partners on the inventory side are going even more direct to consumer. And that's the landscape that they find themselves in right now, is when you have so many of these brands either pulling out or trimming the amount of inventory that they want to sell to some wholesalers, Kohl's included, then that is an immediate hit on what the customers are expecting when they even walk into that store experience.

BRIAN SOZZI: Well, I do like that Kohl's-- the Franchise Group, I should say, also owns Pet Supplies Plus. So maybe they'll bring dog grooming services into Kohl's. That could be traffic driving.

JULIE HYMAN: And vitamin-- I mean, you know, they've got Sephora in there, which has worked quite well for them, right?

BRIAN SOZZI: I'll bring Fido right into Kohl's.

JULIE HYMAN: Yeah.

BRIAN SOZZI: We'll go a little shopping there. We'll get a little groomy-groom-groom. And we'll do our thing.

JULIE HYMAN: I don't know. I mean, but the idea with things like that is that you want it to be an accretive experience, right? You want to go in and buy makeup so that you're buying clothing. If you're going to get your pet groomed, are you going to go shopping for the clothing?

BRIAN SOZZI: Drop the pet off in the back, I'll get my face cream, and I'm good to go.

JULIE HYMAN: I guess maybe, right?