Kohl’s Corp. is flat out rejecting renewed demands from activist investor Macellum Advisors for a shake-up of the retailer’s board.
On Thursday, Macellum, which owns nearly 5 percent of Kohl’s shares, issued another letter to stockholders, this time seeking an “immediate refresh” of the board, as opposed to waiting for a vote at next year’s annual shareholders’ meeting.
Macellum contended in its letter that the Kohl’s board, which is led by chairman Peter Boneparth, has been “ineffective,” and that “despite a challenging macroeconomic backdrop, Kohl’s results are the worst among its direct peers.”
Back in 2021, Macellum negotiated a settlement with Kohl’s involving adding three new directors to the board, yet it hasn’t let up on pressuring Kohl’s for change, issuing a barrage of criticisms this week, among them that Kohl’s undertook a “deeply flawed” sales process that led to the retailer rejecting bids to buy the business earlier this year, and that Kohl’s executive committee has been acting like a “shadow board,” exerting influence on the actual board.
“We believe chairman Boneparth and the executive committee have demonstrated an inability to effectively address the company’s problems and seize on its opportunities,” Jonathan Duskin, managing partner, Macellum Capital Management LLC, wrote in the letter. He contended that Kohl’s was losing market share due to “poor assortment, confusing promotions and weak marketing and uncompetitive in-store experience,” and that Macellum has a “comprehensive operating plan designed to improve the retailer’s results over the long term.”
Kohl’s quickly and forcibly responded to the letter, stating: “We are disappointed that Macellum, only five months after Kohl’s shareholders reelected our entire slate of directors, and resoundingly opposed Jonathan Duskin’s election, has launched a disruptive public campaign for the third time. Kohl’s board and management have regularly engaged with Macellum during the last two years, including numerous occasions since the annual shareholders meeting and several times this quarter, to hear their perspective. These engagements have been unproductive and a distraction from running the business during a challenging retail environment. The board and management remain committed to maximizing value and acting in the interests of all our shareholders by staying focused on running the business.”
Boneparth and chief executive officer Michelle Gass have stated that the company underwent an exhaustive strategic review process, including exclusive negotiations with The Franchise Group which led to no deal.
Gass has also said that its strategies, in particular the rollout of in-store Sephora shops, bolstering active and casual offerings, and adding new services and conveniences, are attracting more customers, though like other retailers, Kohl’s has been battling softening consumer spending due to inflation and economic worries. With selling the company off the table now, Kohl’s is hoping to raise shareholder value by other means, including possibly monetizing real estate and improving its performance.
Kohl’s stock closed on Thursday at $27.04, up 63 cents, and well below the 52-week high of $64.38.
Macellum did not identify individuals it would like to see replacing existing Kohl’s board members. However, it’s likely Macellum’s preferences would include some of the same individuals proposed last May that shareholders voted down, including former Macy’s chief merchandising officer Jeff Kantor; former L Brands Inc. chief financial officer Pamela Edwards, as well as Duskin.