Kohl’s Extends Gains as Activist Group Seeks Board Control

Kohl’s trades higher as a group of activist investors continues to exert pressure on the department store chain to address stagnant sales and operating margins.
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Kohl’s  (KSS) - Get Report traded higher again Monday as a group of activist investors pressured the department store chain to nominate a slate of its directors to the board, saying it wasn't moving fast enough to address stagnant sales and operating margins.

Kohl's shares gained more than 10% on Monday after rallying more than 8% to a 52-week high on Friday as a group of activist investors including Macellum Advisors, Ancora Holdings and Legion Partners Asset Management said the company wasn't moving fast enough to streamline operations and turn itself around.

The group, which holds a roughly 9.5% stake in Menomonee Falls, Wisconsin-based Kohl’s, earlier this year nominated nine directors to join Kohl’s 12-person board. The activists are looking to place experienced retailers on the board to work with CEO Michelle Gass, and want her to consider a sale-leaseback of some non-core real estate, a person familiar with the matter told the Wall Street Journal.

In an updated statement released Monday, Kohl's acknowledged that it has been in ongoing discussions with the investor group, though noted that this was the first time it had been made aware that the group was looking to make changes to its board. 

Kohl's said it is "committed to maintaining constructive engagement with all shareholders regarding the company’s strategies and prospects," and that its board and management team "...remain open to new ideas that will improve our operating performance and capital allocation.

"However, we reject the investor group’s attempt to seize control of our board and disrupt our momentum, especially considering that we are well underway in implementing a strong growth strategy and accelerating our performance, and we have refreshed half our board with six new independent directors since 2016."

Like other major U.S. retailers, Kohl’s struggled as the pandemic took hold in early 2020, though the retailer had faced struggles before the pandemic shuttered its doors, logging about a 1.3% drop in total revenue in the year ended February 2020.

Its shares have rebounded since a disappointing third-quarter earnings report, rising about 80% since mid-November to $52.70, though the department store chain posted particularly poor preliminary holiday shopping season sales numbers.

Kohl’s will report its fourth-quarter and full-year earnings on March 2. Analysts polled by FactSet expect the retailer to post fourth-quarter per-share earnings of 97 cents on sales of $6 billion. Kohl's itself said earlier this month that it expects to post earnings of between $1 and $1.05 a share.

At last check, shares of Kohl's were up 7.99% at $56.91.