Kohl's Should Ignore Activist's E-Commerce Spinoff Proposal
Five years ago, monetizing real estate was a popular move recommended by activist investors trying to "unlock" value from struggling department store operators. Since then, plunging retail real estate values, caused by an imbalance of supply and demand, forced activists to abandon this strategy. But with e-commerce valuations soaring, they have a new favorite scheme, proposing that department stores separate their e-commerce and brick-and-mortar operations.
Over the weekend, Engine Capital launched the latest campaign along these lines. The hedge fund criticized Kohl's (NYSE: KSS) for its poor share price performance over the past decade. It wants Kohl's to fix that either by spinning off its e-commerce operations or selling the whole company. Management should ignore both suggestions.
In an open letter released on Monday morning, Engine Capital highlighted how Kohl's stock has lagged the S&P 500 by huge margins over the past three, five, and 10 years. The stock's performance has also trailed that of its closest peers over the past few years.
Source Fool.com
