Activist Investor Urges Kohl’s to Replace Board Members
Hedge fund Macellum targets chairman, other long-serving directors at department-store chain
An activist investor that has long targeted Kohl’s Corp. KSS -2.26% is ratcheting up the pressure, calling on the department-store chain to make changes to its board or face another proxy fight.
Macellum Advisors GP LLC, which has a roughly 5% stake in Kohl’s, is urging the company to replace three or more long-tenured directors, including its chairman, after sale talks collapsed earlier this year and as the share price sags, people familiar with the matter said.
Kohl’s shares are down by nearly half this year as consumers tighten their wallets, denting sales at retailers such as Kohl’s that sell apparel and other discretionary items. The Menomonee Falls, Wis., company now has a market value of about $3 billion.
The New York hedge fund held unsuccessful talks with Kohl’s over the past few months to try to come to an agreement to make board changes, the people said. The fund didn’t press for other commitments.
Macellum has told the company it will run another proxy fight next year if no settlement is reached, the people 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 of an open letter to be sent to Kohl’s shareholders that was viewed by The Wall Street Journal.
Mr. Duskin wrote in the letter that Kohl’s Chairman Peter Boneparth, who took on the role earlier this year after having served on the board since 2008, appears to be “a root cause of the board’s poor oversight and insular thinking.” He also criticized other long-serving members of the board for having no retail experience.
Kohl’s said it was disappointed by Macellum’s latest move. “Kohl’s board and management have regularly engaged with Macellum during the last two years, including numerous occasions since the annual shareholders meeting and several times this quarter, to hear their perspective,” the company said in a statement. “These engagements have been unproductive and a distraction from running the business during a challenging retail environment.”
The window to nominate board members at Kohl’s is open from mid-January to mid-February. Should Macellum move forward with a proxy fight, it would be the third year in a row the fund has targeted the retailer.
Macellum, which has a focus on retail, nominated nine directors early last year—including Mr. Duskin—along with three other activists. In a settlement in April 2021, Kohl’s agreed to add two directors from the activists’ slate, along with an independent director who received the blessing of the investor group.
Macellum then attempted to take full control of the Kohl’s board early this year, nominating 10 directors, and pushed for other changes such as selling some of its real estate and leasing it back. The hedge fund also pushed for a sale of the company outright.
The company launched a strategic review and had attracted suitors including Sycamore Partners and Canada’s Hudson’s Bay Co. when shareholders voted on the competing board slates in May. Shareholders re-elected all of the company’s 13 directors.
It later entered exclusive talks to be sold to Vitamin Shoppe parent Franchise Group Inc. but called them off in July amid rising interest rates and a choppy economic backdrop. Kohl’s said its management team would stay focused on its plan to boost sales by adding Sephora makeup shops to its locations and beefing up its loyalty program.
Franchise Group and Kohl’s had been discussing a deal at roughly $60 a share; Kohl’s stock closed Wednesday at $26.41.
Revenue at Kohl’s for the quarter ended July 30 dropped 8.1% year-over-year to $4.09 billion. The company’s net income fell 63% to $143 million.
In late September, Ancora Holdings, another of the hedge funds that participated in the push to shake up the Kohl’s board in 2021, sought the removal of Chief Executive Michelle Gass and Mr. Boneparth. Ancora holds a 2.5% stake in Kohl’s.
Corrections & Amplifications
Macellum Advisors GPLLC was identified incorrectly as Marcellum in a subheadline that accompanied an earlier version of this article. (Corrected on Oct. 12)