Macellum bolsters criticism of Kohl’s board
Activist investor slams retailer’s 1Q performance
Activist investor Macellum Capital Management, fresh off a losing proxy fight for control of Kohl’s Corp., is intensifying criticism of the retailer for its handling of two executive departures and first quarter results that came in well below expectations.
The criticism comes as retailers in the U.S. say the nation’s high inflation and the resulting soaring costs are eating into profits. Retailers are also warning that households are being slammed by high prices for gasoline and food and are showing signs of cutting back on their discretionary spending.
Macellum said it is considering legal action against Kohl’s, claiming the company kept “material information from shareholders about the state of Kohl’s in the lead-up to this year’s pivotal annual meeting.”
Last week, Macellum lost its fight for control of Kohl’s board. Macellum has also been pushing for a sale of the company and wants Kohls to sell its store properties and then lease them back from a potential buyer, a strategy that Kohl’s has rejected.
Macellum is again criticizing Kohl’s board of directors and is continuing to push for a sale of the company. The continued activism is not a surprise.
“At this point, we believe the current board has forfeited its right to continue to oversee Kohl’s and review offers versus the company’s internal plan, and it should immediately commit to accepting the highest financed acquisition offer received at the conclusion of the sale process,” Macellum said.
Kohl’s disappointing earnings report came as Wall Street has been digesting earnings from retailers this week.
The sector is a key focus as investors try to measure how much damage inflation is inflicting on company operations and whether higher prices on everything from food to clothing is prompting consumers to tighten their spending.
Retail giants Target and Walmart both had warnings this week about inflation driving up costs and cutting into earnings. Shares of discount retailer Ross Stores plunged 22.2% on Friday after cutting its profit forecast and citing rising inflation as a factor.
Target shares lost 25% of their value after the retailer announced disappointing earnings on Wednesday.
Walmart, the nation’s largest retailer, said Tuesday its profit also took a hit from higher inflation-related costs.
Meanwhile, Kohl’s said first quarter net sales and comparable sales decreased 5.2%.
Kohl’s posted quarterly net earnings of $14 million or 11 cents per share. Those numbers were essentially flat compared with the same period a year ago.
Kohl’s also reduced its earnings outlook for the remainder of the year. Net sales are now expected to be in the range of unchanged to up 1% compared to the prior year. The company had been forecasting a net sales increase of 2% to 3%.
Kohl’s earnings per share are now expected to be in the range of $6.45 to $6.85. The company had previously been forecasting earnings in a range of $7 to $7.50 a share.
Macellum has seized on that performance as well as the departure of two executives from the company.
In a statement Friday, Macellum said shareholders should “feel betrayed and outraged by the fact that the quarter’s massive earnings miss, reduced guidance and the imminent departures of two senior executives, who presumably supported the development of Kohl’s’ three-year strategy released in March 2022, were not disclosed prior to last week’s annual meeting.”
Macellum, which owns roughly 5% of Kohl’s stock, attempted to take over the board launching a proxy fight but on May 11, shareholders voted to elect the company’s slate of directors.
The Milwaukee Journal Sentinel has reached out to Kohl’s for comment and has not yet received a response.