DISCUSSION
Activist investors attempt takeover of Kohl’s board of directors
Written by George Anderson
Photo: Kohl’s
A group of activist investors that control 9.5 percent of Kohl’s stock want to see big changes from the retailer, beginning with its board of directors.
The group, which includes Macellum Advisors GP, Ancora Holdings, Legion Partners Asset Management and 4010 Capital, sent a letter to fellow shareholders claiming Kohl’s has “chronically underperformed against its peers” and that the board has failed “to help develop and oversee a strategic plan” to keep up with changes in the marketplace. The activist investors want to replace nine of Kohl’s 12 directors.
The letter pointed to a net decline of 0.6 percent in same-store sales for the years 2011 through 2019. The retailer is expected to report another decline for 2020. In an update earlier this month in advance of its fourth quarter announcement, Kohl’s said that sales comps fell 11 percent during the period, an improvement over the previous two quarters.
The activist investors also took issue with a decline in earnings at the chain, with operating profits steadily moving downward from 11.5 percent in 2011 to 6.1 percent in 2019. Last year’s number, which factored in the discounting of merchandise when Kohl’s was forced to close stores due to the pandemic, is expected to be underwhelming, as well.
Kohl’s did say that it was expecting to post “a significant” improvement in its earnings for the fourth quarter over preceding quarters, saying that it would “exceed company expectations.”
The investor group called out Kohl’s merchandising assortment that it says “has resulted in too many choices, too much overlap and little differentiation between the ‘good, better, best’ price schemes.”
It further claimed that new brand relationships and an increased emphasis on athletic/athleisure categories had failed to lift sales. The group also faulted Kohl’s private label efforts, which “have failed to connect with customers, leading to declining results and frequent exits.”
Kohl’s has rejected the attempt by the activist investors to gain control of its board. While it is open to input, Kohl’s said that it was already taking some of the actions proposed in the letter but rejecting others because they “would not be accretive to shareholder value.”