Kohl’s investors push for change
Company says activists focus only on short term
Kohl’s Corp. has settled for being “just slightly better” than “troubled mall-based department stores,” the activist investors aiming to take over Kohl’s Corp.’s board of directors said in a letter to shareholders Friday.
The group said that the Menomonee Falls-based retailer’s fourth-quarter sales and guidance for 2021 “substantiate the immediate need for change on the board.”
The letter comes in response to Kohl’s reporting Tuesday that its sales were down 20% in the last fiscal year. Kohl’s sales were down 10.1% in the fourth quarter — making it the company’s best comparable performance since the pandemic began.
The retail industry has been separated into two sectors during the coronavirus pandemic — those deemed essential during shutdowns last spring like Target and then the rest, which like Kohl’s, closed stores for weeks.
A preliminary proxy has been filed by the investor group to nominate its selection of candidates for the board of directors. On Friday, the group appealed directly to other shareholders and launched more pointed criticism of the company’s leadership.
“The Board seems to be content performing just slightly better than the worst companies in retail,” the investor group wrote. “‘Best of the worst’ is not a viable strategy, nor does it satisfy shareholders like us seeking long-term superior performance.”
Kohl’s responded on Friday by defending the company’s performance and strategic plan.
“We reject the activists’ short-termism and their attempt to disrupt our momentum at this critical time,” Kohl’s said in a statement. “We remain open and interested in new ideas that can help us increase value for our company and our shareholders.”
The shareholder groups’ letter hit similar points from its previous statements like sales underperformance, and recommended that Kohl’s sell its real estate and lease back stores. The investors are skeptical about the benefits of Kohl’s partnership with Amazon, which the company said brought in 2 million new customers last year. The group also said a new board of directors is necessary.
The group called management’s 2021 sales guidance “highly disappointing,” saying the goals raise questions about “board oversight and lack of urgency.”
The group has become the largest shareholder in Kohl’s, controlling around 9.5% of the company’s stock.
They own about 14.9 million shares of Kohl’s stock, meaning the group has more than $800 million tied up in the company right now based on the current stock price.
Kohl’s shares closed up 77 cents Friday at $55.58.
“The Board claims our efforts to refresh the Board will disrupt their momentum,” the investors wrote. “However, based on the Company’s historical underperformance, we fear history will repeat itself in a series of failed initiatives and result in Kohl’s continuing to miss the mark with its customers, culminating with shareholders continuing to suffer subpar long-term returns.”