Kohl's Activist Investors Push for Control of the Board

A group of activist investors in Kohl's are not happy with the department-store retailer's direction and are seeking control of the board.
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Shares of Kohl's KSS were higher after activist investors Macellum Advisors, Ancora Holdings, Legion Partners and 4010 Capital said they were not happy with the department-store retailer's direction and were seeking control of the board.

The investors published a letter outlining the issues they have with the Menomonee Falls, Wis., retailer following its latest earnings report.

The group, which owns nearly 15 million, or 9.5%, of Kohl's shares, says the fiscal-fourth-quarter earnings and 2021 guidance evidence immediate need for change to the board. 

The investors have nominated nine independent candidates for election at the annual meeting, which traditionally takes place between mid-March and late April.

They say Kohl's recent results aren't indicative of a successful strategy. They say the directors lack relevant retail expertise. 

"The board seems to be content performing just slightly better than the worst companies in retail," the group said in the letter. "'Best of the worst' is not a viable strategy, nor does it satisfy shareholders like us seeking long-term superior performance." 

Kohl's currently has 12 board members

"We reject the activists’ short-termism and their attempt to disrupt our momentum at this critical time. We remain open and interested in new ideas that can help us increase value for our company and our shareholders," Kohl's said in an email statement Friday. 

The group says Kohl's is "enormously well positioned with off-mall locations." 

The activist investors named TJX,  (TJX) - Get Report, Ross Stores  (ROST) - Get Report, Target  (TGT) - Get Report, Old Navy  (GPS) - Get Report and Burlington  (BURL) - Get Report as Kohl's main off-mall competitors. 

Kohl's expects earnings in 2021 to fall 44% from 2019, the last pre-pandemic year while revenue declines 8.5%.

The group also says the fact that Kohl's was reinstating its dividend at $1 a share annually is disappointing. The company paid a pre-pandemic dividend of $2.81.

"The investor group is concerned that such a low dividend at Kohl’s may represent the board’s belief that the earnings power of Kohl’s has been impaired by the pandemic for the long-haul," the letter says. 

"Further, the reinstatement of the dividend at this level is at odds with the rosy comments made about Kohl’s future performance."  

At last check Kohl's stock was off 0.5% at $54.54. In 2021 through Thursday the stock had climbed 35%.