Why Franchise Group wants to buy Kohl’s and what could happen next

A little-known conglomerate of companies including the Vitamin Shoppe, Pet Supplies Plus and a home furnishing chain called Buddy’s is suddenly the talk of the retail industry.

Franchise Group, a publicly traded business with a market capitalization of about $1.6 billion, has entered into exclusive sale talks with Kohl’s. It proposed a bid of $60 per share to acquire the retailer at a roughly $8 billion valuation. Franchise Group and Kohl’s are in a three-week window during which the two businesses can finalize any due diligence and final financing arrangements.

Questions have since been swirling about what this will all mean for Kohl’s, should a deal go through: What will happen to the Sephora beauty shop-in-shops within Kohl’s, or the retailer’s returns partnership with Amazon? Will Kohl’s CEO Michelle Gass stay on with the company? Are store closings inevitable?

Also, why would Franchise Group want to own Kohl’s in the first place, as retailers including Kohl’s confront inventory challenges and inflation? Just a few weeks ago, Kohl’s slashed its financial forecast for the full fiscal year as more Americans pull back on discretionary spending. Meanwhile, investors are wrangling with rate hikes from the Federal Reserve and the potential for a recession in the near term.

The deal is still in flux, so those questions don’t have firm answers at this point. Instead, analysts and experts point to Franchise Group’s past track record and its recent acquisitions for a better sense of what Kohl’s future could hold.

Spokespeople from Franchise Group, Sephora and Amazon didn’t immediately respond to requests for comment on this story. Kohl’s declined to comment.