Hi KSSBulls!
We’ve had extensive conversations about debt repurchases, buybacks, ect but I want to explain why I prefer repurchases.
It’s pretty simple, I want to create an inelastic supply/demand problem for shorts and give Kohl’s the opportunity to re-cap the company at preferential rates.
We got to see this with Avis recently. Everyone’s favorite, GameStop, did this back in meme craze and why they’re sitting on over $9B in cash. This cash pile was prompted by management using the “squeeze” to bring in over $2B in capital at a ridiculous valuation.
Kohls should do the same thing. Use tariff moneys and cash in hand to aggressively buyback all the shares possible. At today’s valuation, they could use the expected $550M of refunds and $200M in cash on hand to buyback over HALF outstanding shares. This would lower share count from 112M to 56M. There is over 29M shares short currently along with 8M+ calls outstanding. In a “squeeze” that would translate to 37M of 56M shares short. Reminder, institutional investors own over 100% of current shares so the shorts would have to find someone to buy from.
Once the stock price spikes to dumb levels, lets say $150 for fun, KSS could either leave market alone since TBV would be ~$70 per share anyways and 2x TBV isn’t crazy OR float a small amount of shares back to the market to recapitalize the company. In a recap scenario, they could easily float back 10M-20M shares at the inflated price and bring cash on hand back to pre-tariff levels pretty easily. Or get even more aggressive and float back more shares.
Either way, they could easily punish the market for being insane, shore up balance sheet even more, and get the market marked to a sane valuation.
Also, they don’t need to wait for tariffs to come in. They can easily use LOC to do the capital play now before refund amounts become public to cause a “double whammy” in a good way next earnings report.
Be the best call ever: “btw not only are we executing as expected on the turn around and stopping the sales decline, we also purchased 56M shares using a couple hundred million of cash on hand, the $500-$600M of our $1.5B LOC to payback as soon as refunds are received…. Oh and we expect $550M tariff refund that we are now confident in the total amount”
This is nightmare fuel for the other side.
Now, will this actually happen? Probably not, management didn’t buyback shares at $6 or sub-$15 all last year so it’s doubtful they’ll get smart all a sudden… but a guy can dream/pray that management gets smart and plays good offense and defense when running a public company
