Activist investor targets US department store Kohl over board changes
An activist investor who has long targeted Kohl’s is upping the ante, calling on the department store chain to make changes to its board of directors or face another proxy battle.
Macellum Advisors, which has a roughly 5% stake in Kohl’s, is urging the company to replace at least three longtime directors, including its chairman, after sales talks collapsed earlier this year and as the stock price plummets, people familiar with the matter said.
Shares of Kohl’s have nearly halved this year as consumers tighten their wallets, which has weighed on sales at retailers such as Kohl’s that sell clothing and other discretionary items. The Menomonee Falls company now has a market value of around $3 billion.
The New York-based hedge fund has had fruitless discussions with Kohl’s over the past few months to try to reach an agreement to make changes to the board, the people said. The fund did not insist on further commitments.
Macellum told the company it would stage another proxy battle next year if no settlement was reached, the sources said.
“We believe there is an urgent need for change now, rather than waiting another eight months for another contested election at the 2023 annual meeting,” Macellum chief executive Jonathan Duskin wrote in a draft open letter to send to Kohl shareholders. seen by The Wall Street Journal.
Duskin wrote in the letter that Kohl Chairman Peter Boneparth, who assumed the role earlier this year after serving on the board since 2008, appears to be “a root cause of poor oversight and insular thinking. from the administration board”. He also criticized other longtime board members for having no retail experience.
Kohl’s said he was disappointed with Macellum’s latest decision. “The Board of Directors and management of Kohl have spoken regularly with Macellum over the past two years, including numerous times since the annual meeting of shareholders and several times this quarter, to hear their views. “, the company said in a statement. “These engagements have been unproductive and a distraction from running the business in a challenging retail environment.”
The window for nominations for members of the Kohl’s Board of Directors is open from mid-January to mid-February. If Macellum goes ahead with a proxy fight, it would be the third straight year the fund has targeted the retailer.
Macellum, which focuses on retail, appointed nine directors early last year – including Duskin – along with three other campaigners. In an April 2021 settlement, Kohl’s agreed to add two directors from the activist list, as well as an independent director who received the blessing of the investor group.
Macellum then attempted to take full control of Kohl’s board earlier this year, appointing 10 directors and pushing for other changes such as selling off some of his real estate and leasing it out. The hedge fund also pushed for an outright sale of the company.
The company launched a strategic review and had attracted suitors including Sycamore Partners and Canada’s Hudson’s Bay Company when shareholders voted on the slates of board members in May. Shareholders re-elected all of the company’s 13 directors.
It then entered into exclusive talks to be sold to parent Vitamin Shoppe franchise group, but called it off in July amid rising interest rates and a choppy economy. Kohl’s said its management team will remain focused on its plan to boost sales by adding Sephora makeup stores to its locations and bolstering its loyalty program.
Franchise Group and Kohl’s had discussed a deal at around $60 per share; Kohl’s stock closed Oct. 12 at $26.41.
Kohl’s revenue for the quarter ended July 30 fell 8.1% year-over-year to $4.09 billion. The company’s net profit fell 63% to $143 million.
In late September, Ancora Holdings, another of the hedge funds that participated in the campaign to shake up Kohl’s board in 2021, called for the removal of chief executive Michelle Gass and Boneparth. Ancora holds a 2.5% stake in Kohl’s.
This article was published by The Wall Street Journal, part of the Dow Jones