Kohl’s faces activist group seeking control of board
Kohl’s Corp. is under pressure from a group of activists who want to name nine directors to control its board and are pressing the retailer to reduce inventory and end its “dizzying array of promotional gimmicks.”
The investors, which hold a combined stake of about 9.5%, called out the board’s lack of retail experience and limited ownership of Kohl’s shares in a statement Monday. The group includes Macellum Advisors GP LLC, Ancora Holdings Inc., Legion Partners Asset Management LLC and 4010 Capital LLC.
“Poor retail execution and strategy have led to stagnant sales and declining operating margins,” the group said. “The board has overseen a long list of sales and margin-driving initiatives which have created no meaningful value for shareholders.”
Its slate of nominees includes Marjorie Bowen, who had a nearly 20-year career in investment banking at Houlihan Lokey; David Duplantis, a former executive at Coach; and Thomas Kingsbury, who serves on several other retailer boards.
The investors earlier this year nominated the potential directors to join Kohl’s 12-person board, according to a person who asked not to be identified. The board effort and the size of the stake were first reported Sunday by the Wall Street Journal.
“The Kohl’s board and management team have been engaged in discussions with the investor group since early December and we remain open to hearing new ideas,” Jen Johnson, a spokeswoman for Menomonee Falls, Wisconsin-based Kohl’s, said in an emailed statement on Sunday night.
Like other major U.S. retailers, Kohl’s struggled as the pandemic took hold in early 2020 and continued to hurt back-to-school sales in an era when many students are homebound. The company’s shares have rebounded since its disappointing third-quarter earnings report, rising about 80% since mid-November to $52.70.
The activists are looking to place experienced retailers on the board to work with Chief Executive Officer Michelle Gass. With the right team and strategic plan, Kohl’s could generate more than $10 a share in earnings within a few years, the group said. That would be roughly double its performance in fiscal 2020.
The investors also want the company to consider a sale-leaseback of some noncore real estate. Kohl’s could unlock as much as $8 billion of value through real estate transactions, the group said.
Even before the pandemic, the retailer had faced some struggles. It logged about a 1.3% drop in total revenue in the year ended February 2020 — right before covid-19 hurt foot traffic at U.S. stores. As Kohl’s raced to roll out socially distant services like curbside pickup, shoppers last year increasingly shifted their dollars away from department stores to internet giants like Walmart Inc. and Amazon Inc.
In the critical holiday period, Kohl’s total revenue dropped 10%, preliminary results show — though that’s better than the chain’s performance at the height of the pandemic. It will report results for the most recent 12-month period in early March.
In a bid to differentiate Kohl’s from its peers, many of which are based in traditional malls, Gass has tried several out-of-the-box ideas, including becoming a drop-off point for Amazon returns. In December, it announced a plan to open Sephora shops inside at least 850 Kohl’s locations by 2023 to attract more customers.