Activist investors attempting to take control of Kohl chain's board: WSJ

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A group of activist investors has a big stake in Kohl’s Corp. and is attempting to take control of the department-store chain’s board, according to people familiar with the matter.

Ticker Security Last Change Change %
KSS KOHL’S CORP. 52.70 +4.12 +8.48%
BBBY BED BATH & BEYOND INC. 26.47 +0.18 +0.68%
SBUX STARBUCKS CORPORATION 103.37 -1.60 -1.52%
AMZN AMAZON.COM INC. 3,249.90 -78.33 -2.35%
M MACY’S INC. 14.97 +0.65 +4.54%
BIG BIG LOTS INC. 64.09 +1.90 +3.06%
FWRD FORWARD AIR 86.23 +1.27 +1.49%

A group that includes activists Macellum Advisors GP LLC, Ancora Holdings Inc. and Legion Partners Asset Management LLC, as well as 4010 Capital LLC, controls a combined 9.5% stake in Kohl’s and earlier this year nominated nine people to its now-12-person board, the people said.

Neither the size of the stake nor the board bid previously has been revealed.

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The trio of activists, which previously teamed up on a campaign that remade the board of housewares retailer Bed Bath & Beyond Inc., BBBY 0.68% thinks Kohl’s isn’t moving fast enough to address stagnant sales and declining operating margin, issues that predate the pandemic, the people said. The company’s operating margin fell to 6.1% in 2019 from 11.5% in 2011, while its sales were little changed. Then the coronavirus pandemic hit, and total revenue fell 25% to $9.8 billion in the nine months ended Oct. 31. Losses for the period totaled $506 million compared with a profit of $426 million a year before.

Kohl’s is set to report its fourth-quarter and full-year 2020 results March 2.

A group of activist investors has a big stake in Kohl’s Corp. KSS 8.48% and is attempting to take control of the department-store chain’s board (Photographer: Daniel Acker/Bloomberg via Getty Images)

The activists are calling for Kohl’s to take a range of actions, including adding directors with retail experience who can work with Kohl’s Chief Executive Officer Michelle Gass and considering a sale-leaseback of some of its more than $7 billion in noncore real estate, according to the people and a letter, viewed by The Wall Street Journal, that the group plans to send to other shareholders. The group also is calling on Kohl’s to reduce inventory levels while improving offerings and make discounts and promotions easier for customers to follow.

Kohl’s said in a statement it has been in discussions with the group since early December and remains open to new ideas. It said it is confident its new strategy published in October 2020 will accelerate growth and profitability. It also noted that since the plan was unveiled, Kohl’s has received seven upgrades from equity analysts and its stock price has appreciated 150%.

Menomonee Falls, Wis.-based Kohl’s has a market value of around $8.3 billion. Its shares have risen roughly 18% over the past year, trailing a 73% jump for an index tracking the retail sector as a whole.

While amassing enough shareholder support to take control of a company the size of Kohl’s can be a tall order, and activists often settle for fewer seats than they initially seek, there is some precedent for a bid like this to succeed. The majority of Bed Bath & Beyond’s directors were replaced in connection with the activists’ 2019 campaign: five by the company and four as part of a settlement.

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The group has held off and on talks with Kohl’s, but the two sides have so far failed to reach an agreement that would avert a full-fledged proxy fight at the company’s annual meeting this spring.

The group’s slate of nominees include Macellum Chief Executive Officer Jonathan Duskin and former Burlington Stores Inc. CEO Thomas Kingsbury.

Business at Kohl’s slowed in 2019, well before the pandemic hobbled nonessential retailers. As Covid-19 forced retailers to temporarily close their stores and people to shelter at home, Kohl’s suffered along with other chains that sell mainly apparel.

Since becoming CEO in 2018, Ms. Gass has been lauded for her willingness to experiment and try new ideas. The former Starbucks executive joined with Amazon.com Inc. AMZN -2.35% to accept returns of items shoppers bought on the e-commerce giant’s website, helping to boost foot traffic at Kohl’s stores. They aren’t located in enclosed malls, which has helped it escape the fate of other department stores such as Macy’s Inc. and J.C. Penney Co. that have closed hundreds of stores.

Kohl’s last week added retail consultant Robbin Mitchell to its board in what could be a move to quell the activists. The retailer has already been culling its offerings and has said shoppers are returning to its physical locations. It also has plans to open hundreds of Sephora beauty and makeup shops inside its stores.CLICK HERE TO READ MORE ON FOX BUSINESS

New York-based Macellum is known for campaigns at retailers including Big Lots Inc.,  where it teamed up with Ancora, and Citi Trends Inc. Ohio-based Ancora, which typically takes activist positions in small-cap companies, launched a proxy fight at trucking company Forward Air Corp.  earlier this month. California-based Legion previously urged Perry Ellis International Inc. to sell itself.

—Suzanne Kapner contributed to this article.