Is Kohl’s Going To File For Bankruptcy?

If you asked a Magic 8 Ball whether Kohl’s is going to go bankrupt, it would probably say “Reply hazy, try again.” Nobody can divine if the Wisconsin-based retailer is headed toward bankruptcy, or will find some other way to survive in a challenging market. As Milwaukee area bankruptcy attorneys who do a lot of work for businesses and commercial lenders, the Hanson & Payne team is keeping a close eye on what happens at Kohl’s. 

Cannot Predict Now

The company that grew into what is now the largest department store chain in America, was founded in Milwaukee in 1927. Polish immigrant Maxwell Kohl opened a small grocery store, and when it proved successful, expanded until Kohl’s Food Stores was the largest supermarket chain in the Milwaukee area. The first department store run by the chain was opened in Brookfield in 1962, and the company went public in 1992. 

The chain, which is now headquartered in Menomonee Falls, is the largest department store chain in the nation. It has locations in every state except Hawaii and continues to grow. However, it is growing at a much slower rate than in the past and has been losing market share to competitors. Activist investors are pressuring company leadership to make some changes to increase the company’s value. 

Concentrate And Ask Again

Last year, the company added new members to its board of directors. 

In March, Kohl’s announced plans to add Sephora mini-shops to roughly 75% of its 1,100 US stores, open 100 new locations at half the size of its traditional outlets in the next four years and increase its popular Kohl’s Cash rewards program to 7.5% on purchases, up from 5%.

“Kohl’s is undergoing a significant transformation of our business model and brand to be the retailer of choice for the Active and Casual lifestyle. We have fundamentally restructured our business to drive sustainable and profitable growth while providing a strong return to shareholders,” said Michelle Gass, Kohl’s chief executive officer.

Now, it is being reported that over 25 other companies are vying to buy Kohl’s outright, including arch-rival JCPenney. JCPenney’s offer values Kohl’s at $8.6 billion.

Better Not Tell You Now

It is interesting that Kohl’s is planning on making some big changes, and does not appear to want to file for bankruptcy in order to do so. Filing for bankruptcy is a common tactic retailers resort to when it is time for them to re-tool. 

Filing for bankruptcy under Chapter 11 means a business can:

  • Reject and renegotiate the unfavorable lease and other contract terms
  • Renegotiate terms of secured financing, including interest rates
  • Negotiate new credit terms with critical trade creditors and suppliers while repaying old payables over an extended period of time
  • And even put a pause on litigation

It is a way to get flexibility and make major changes without going out of business. 

Ask Again Later

At Hanson & Payne, LLC, we help Milwaukee area businesses and commercial lenders navigate the bankruptcy process. We work hard to ensure that our clients’ interests are protected because we believe bankruptcy is a tool and not a torment. Please contact us today if we can be of assistance.