Activists Reduce Proposed Kohl's Board Members, Relinquish Bid for Control
Activist Investors Press for Change at Kohl's
In a move aimed at shaking up the retail giant, a group of activist investors has nominated five new members to the Kohl's board and is pushing for change in various aspects of the company's operations.
The group, which includes Macellum Advisors, Ancora Holdings, Legion Partners Asset Management, and 4010 Capital, collectively holds a 9.5% stake in Kohl's. They have expressed their dissatisfaction with the company's performance and its strategy, particularly in the wake of the pandemic.
The activists' latest press release, published on Thursday, expresses disappointment with Kohl's lack of engagement and the language used in its responses. They question the necessity of Kohl's borrowing cash during the pandemic, as the company had significant additional sources of liquidity at the time.
The investors have also criticized Kohl's for taking on $600 million in unsecured debt due in 2025, at a high interest rate of 9.5%. They view this debt as "ill-conceived" and "poorly negotiated."
Kohl's latest earnings report showed sales and margin declines in the fourth quarter and full year, with a $262 million operating loss for the year. The activists have criticized the company's performance, stating that it is performing just slightly better than the worst companies in retail.
In response, Kohl's has defended its board as adequately refreshed and more experienced in retail than the activists' recommendations. The company has also detailed meetings between its CEO and other board members and representatives of the activist group.
The activist group's key issues and proposals focus on demanding more influence in corporate governance and strategic decision-making. They have negotiated a long-term cooperation and standstill agreement with Kohl's that includes the right for regular dialogue and oversight, voting commitments, and a standstill condition preventing any proposals related to significant transactions during the agreement's term.
The agreement ends 18 months after the CEO (then John Kingsbury) leaves, indicating a timeframe for potential shifts in control or strategy post his tenure. This indicates the activist group's focus on active engagement with management and the board to drive change internally, while temporarily restricting more aggressive tactics.
The activist group is recommending changes in merchandising, inventory management, customer engagement, and expense rationalization at Kohl's. They view five of Kohl's current directors as least qualified to continue serving on the board.
The group believes that Kohl's is well-positioned with off-mall locations but competes against thriving off-mall players like TJX Companies, Ross Stores, Target, Old Navy, and Burlington. They suggest unlocking $7-8 billion of real estate value trapped on Kohl's balance sheet through sale leaseback transactions.
The activist group continues to seek an agreed resolution of these matters with Kohl's. They have filed a revised proxy statement with the Securities and Exchange Commission and are hoping for a collaborative approach to drive change at the retail giant.
- The pandemic has added fuel to the activists' criticisms of Kohl's strategies and performance.
- The group's investment in Kohl's extends beyond just the financial aspects to include shaping the company's policies and strategic decisions.
- Despite the ongoing tension, there are signs of negotiation and potential collaboration between the activist group and Kohl's, as evidenced by the long-term cooperation agreement.
- The AI-driven fashion industry is watching closely as the battle between Kohl's and the activist investors unfolds, with potential implications for other retail businesses.
- In the broader context of policy-and-legislation and politics, this activist intervention at Kohl's could set a precedent for similar investor challenges in other businesses.
- The personal-finance community is keeping a close eye on the developments at Kohl's, as they could impact the stock market and general news reporting.
- Wealth-management firms are discussing the impact of this activist push on Kohl's investments, with some suggesting potential adjustments to their strategies.
- In the realm of finance and investing, the success or failure of the activist group's endeavors at Kohl's could send strong messages to other retail businesses and the investment community.
