U.S. hedge fund Engine Capital LP is pressuring department store chain, Kohl’s Corp, to spin off its eCommerce business in an effort to improve its lagging stock price. The hedge fund owns a 1% stake in the company.
Engine Capital argues that the retailer has underperformed the S&P 500 index as well as other players in the space, even though it maintains a large footprint and various real estate holdings.
While Kohl’s has seen its stock value climb by nearly 19% this year, others like Macy’s have seen their stock value more than double. Meanwhile, the S&P 500 index is up 21% this year, Reuters reported.
The hedge fund is asking the company to perform a strategic review of its entire business, including a sale, as it believes the company could get a 50 percent premium on its stock value, translating to about $75 per stock unit. It estimates Kohl’s eCommerce business alone to be worth $12.4 billion or more.
If Kohl’s were to spin off its online business, it would join other key retailers that are also pursuing similar moves, following pressure from activist investors.
In October, Jana Partners called on Macy’s to spin off its eCommerce business, a move that couple potentially help Macy’s raise the valuation of its digital business to $14 billion. And in March this year, Saks Fifth Avenue’s parent company HBC separated the retailer’s online and brick and mortar business.