Kohl's says it has no plans to sell more real estate and lease it back. Here's why

• Kohl's said it isn't planning for any further sales of its real estate to then lease it back, despite a group of activists pressuring the company to take this route to come up with cash.
• The group of investors has suggested Kohl's pursue a sale-leaseback program that could bring in more than $3 billion.
• But Kohl's said that doing more of these types of deals would likely negatively impact its investment-grade status and would increase rent expense.

Kohl's said Tuesday that it isn't planning to sell any of its real estate to then lease back, despite a group of activists pressuring the company to take this route to come up with cash.

The investors want Kohl's to pursue a sale-leaseback program, saying it could bring in more than $3 billion. The group consists of Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital, and it owns a 9.5% stake in Kohl's.

The activists have also proposed a slate of directors for Kohl's board, which has been rejected by the big-box retailer. Kohl's has said the group's suggestions would only disrupt the momentum that it has recently seen, as it projects growth in 2021.

On Tuesday, in an earnings presentation, Kohl's said it has employed sale-leaseback transactions in the past, "when it was a clear efficient cost of capital," including in May of last year.

Doing more sale-leaseback deals, though, would likely hurt Kohl's investment-grade status, and would increase rent expenses on its balance sheet, the company said. It further explained it must have a certain amount of assets, in order to be in compliance with its debt agreements.

Big-box retailers Big Lots and Bed Bath & Beyond both completed sale-leaseback deals last year, bringing them both hundreds of millions of dollars, with an affiliate of the private-equity real estate firm Oak Street Real Estate Capital buying up some of their assets.

Macellum Chief Executive Jonathan Duskin, who is one of the activists targeting Kohl's, told CNBC in an interview late last month that Oak Street would be a likely suitor for Kohl's real estate, too.

Kohl's shares were up more than 1% midday Tuesday. The stock is up more than 50% over the past 12 months. Kohl's has a market cap of $9.13 billion, which is bigger than Nordstrom's and Macy's.

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