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Activist Investors Seek To Pack Kohl's Board Of Directors

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Activist Investors Seek To Pack Kohl's Board Of Directors

A group of activist investors is seeking to take control of the board of directors at Kohl’s Corporation (NYSE: KSS).

What Happened: The group includes Macellum Advisors GP LLC, Ancora Holdings Inc., Legion Partners Asset Management LLC and 4010 Capital LLC, which control a combined 9.5% stake in the retailer. They have nominated nine people to Kohl’s 12-person board, including Macellum CEO Jonathan Duskin, former Burlington Stores CEO Thomas Kingsbury and former Denny's chief marketing officer Margaret Jenkins.

To drive the point home, the group launched the website Create Value at Kohl’s and published a 27-page Letter to Stockholders deriding what they viewed as a dismal retail strategy that resulted in evaporating profits and flaccid stock performance.

Why It's Important: “Kohl’s generated $18.9 billion in net sales in 2019, approximately the same as the $18.8 billion reported for 2011, eight years earlier,” the letter said. “Over this same period the industry grew 17%. This is particularly troubling given the large number of competitive store closures and bankruptcies that the industry experienced during this time period.”

The letter also blamed the current board for the company’s woes, adding it was "deeply entrenched with insufficient retail expertise and sees directors’ lack of meaningful stock ownership as an impediment to serving shareholder interests."

What's Next: Kohl’s, which operates 1,100 stores, had been struggling prior to the COVID-19 pandemic, which exacerbated its problems. Total revenue in the nine months ending Oct. 31 was $9.8 billion, a 25% year-over-year decline, while losses during that period totaled $506 million, a stark contrast from the $426 million profit recorded one year earlier.

The activist group executed a similar strategy with Bed, Bath & Beyond (NASDAQ: BBBY) in 2019, which resulted in a new chief executive being named. In an email statement to CNBC Monday morning, a Kohl’s spokeswoman said the retailer and the investor group have been in discussions since early December.

“We remain open to hearing new ideas,” she said. “Kohl’s is deeply committed to enhancing shareholder value.”

Kohl's stock traded up 8% to $56.89 at publication time.

(Photo courtesy Kohl’s in Trumbull, Connecticut.)

 

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