U.S. retailer Kohl’s has been targeted by four activists working together to seek as many as nine board seats at the company along with operational changes.
Macellum Advisors, Ancora Advisors, Legion Partners, and sometime activist 4010 Capital have teamed up to launch a board campaign at Kohl’s, owning a combined 9.5% stake.
In a Monday letter to Kohl’s shareholders, the group confirmed it will seek to add nine candidates to Kohl’s 12-person board. The slate includes former Stage Stores chief merchandising officer and founder of Stanmore Partners Cynthia Murray, Big Lots independent director Thomas Kingsbury, former Macy’s Chief Merchandising Officer Jeffrey Kantor, Citi Trends director Margaret Jenkins, Coach executive David Duplantis, Purple Mountain Capital Partners founder James Corcoran, former Talbots director Marjorie Bowen, and former Yahoo executive Margenett Moore-Roberts.
The slate also includes Macellum CEO Jonathan Duskin.
In a detailed response, Kohls’ management said “we reject the investor group’s attempt to seize control of our board and disrupt our momentum” and offered a multi-page explanation of progress made by the company.
But according to their letter, the investor group believes Kohl’s has “chronically underperformed” against its peers in recent years, claiming that total shareholder returns for the past three years is negative 23%, versus the 39% gains of the S&P 500 Index.
The group said that excessive executive compensation and prolonged destruction of shareholder value was largely down to a board that is “misaligned” to its investors. “It is easy to rubberstamp one failed growth strategy after the other, sign off on enormous capital expenditures and approve excessive operating expenses when you have no material exposure to the company’s share price,” the group said, adding that the board is “woefully misaligned and must lack conviction and confidence in Kohl’s.”
The investors said that its slate will push for reforms at Kohl’s including aligning compensation with performance, improving market strategy, launching a share buyback program, and launching a sales lease-back program. The group said that these measures could see Kohl’s generate $10 in annual earnings per share.
“The investor group agrees that Kohl’s has the potential to thrive in today’s evolving retail landscape; however, we feel strongly that substantial change to the board is required to turnaround the company,” the group said in closing.
In its repose, Kohls argued that implementation of a new growth strategy was already underway which included several initiatives proposed by the activists and that it had refreshed half its board since 2016. It also complained that todays announcement was the first time the activists had shares any of its ideas with the company.
Macellum, Ancora, and Legion have history working together. In March 2019, the trio targeted retailer Bed, Bath & Beyond for the replacement of a majority of the board but settled a few months later for four board seats. Since then, shares in Bed, Bath & Beyond have risen nearly 400%.
In March 2020, Macellum and Ancora together launched a board campaign at Big Lots and settled a month later for three board seats.
Kohl’s closed up 8% on Friday at $52.70 per share.