War of Words Heats Up Between Kohl’s and Activist Investors

Activist investors have intensified their campaign to unseat five members of the Kohl’s Corp. board.

On Tuesday, the activist investors Macellum Advisors GP LLC, Ancora Holdings Inc., Legion Partners Asset Management LLC, and 4010 Capital LLC sent a letter to shareholders slamming Kohl’s on several fronts.

The group contended that Kohl’s stock has consistently underperformed and that recent increases in the share price represent “in large part a function of how poorly the stock performed during the initial phases of the COVID-19 pandemic.”

The activists also said the recent stock gains had virtually nothing to do with the retailer’s new strategic plan revealed in October 2020 and more to do with how “a pathway out of the pandemic emerged.” The investor group owns a total 14,696,905 shares of Kohl’s, constituting 9.3 percent of the company’s outstanding common stock.

The activists also contend that Kohl’s missed on achieving performance goals set by its Greatness Agenda, launched in spring of 2014, and that new initiatives set forth last fall recycle many of the same ones from the Greatness Agenda.

In response, Kohl’s senior vice president of corporate communication, Jen Johnson, fired back, stating: “The activists’ letter once again demonstrates their fundamental lack of understanding of our company and the retail industry in which we compete. In an attempt to substantiate their own position, they draw comparisons to irrelevant retail companies to convey a misleading picture of performance.”

In the letter, the activists posted a chart indicating Kohl’s total shareholder returns including dividends for the pre-COVID-19 period through Jan. 31, 2021, as well as for different years indicating lower return rates compared to a retail peer group and other indexes. But the group includes some retailers that don’t compete directly against Kohl’s, such as The Container Store and Dick’s.

According to Johnson, “Kohl’s share price has significantly outperformed, for example, the department store peer set on the one-, three- and five-year time periods, even excluding the two direct peers (J.C. Penney and Sears) that have filed for bankruptcy amidst significant industry headwinds. Since our new strategy was unveiled in October, our share price has grown more than 200 percent, outperforming the S&P 500 by more than 185 percent — a clear reflection of our differentiated and strong momentum.”

Kohl’s stock is currently trading at around $60, and over the last 52 weeks has ranged from a low of $15.04 to as high as $64.16.

Kohl’s current strategy focuses on building up active, casual and beauty assortments, with such brands as Nike, Under Armour, Adidas, Champion, and Columbia as well as soon establishing in-store Sephora shops and selling Calvin Klein men’s underwear, women’s intimates and loungewear. Recently, Lands’ End was added to the brand lineup, among other changes.

The activist group has nominated Jonathan Duskin, Margaret L. Jenkins, Jeffrey A. Kantor, Thomas A. Kingsbury and Cynthia S. Murray for the board at Kohl’s. Shareholders will vote on the nominees at Kohl’s annual meeting scheduled for May 12.

The activist group is also advocating the sale and lease-back of Kohl’s real estate to generate shareholder value. Kohl’s board, including the retailer’s chief executive officer Michelle Gass, have firmly rejected the activists’ proposal for board changes and sale-leasebacks of real estate.

Macellum said it has waged successful proxy contests to effectuate meaningful change at The Children’s Place, Christopher & Banks, Citi Trends, Bed Bath and Beyond, and most recently Big Lots.




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