Wall Street is coming for Kohl's – the department store chain that was said to defy the retail apocalypse is now falling victim to the same challenges as its competitors
- An activist investor is putting pressure on Kohl's to make changes or sell the company.
- Kohl's has become the target of activist investors in recent years as sales have faltered.
Kohl's has become the target of activist investors, again.
In a public letter to shareholders on Tuesday, activist investor Macellum Advisors – which owns a 5% stake in the company – accused Kohl's executive team and board of directors of mismanagement and asked the company to make significant changes or sell up.
"We firmly believe that without significantly more change to the Board, the Company will fail to deliver acceptable value creation in the years to come. Absent more Board change, we believe the Board must pursue strategic alternatives," the letter said.
It continued: "Macellum suspects that there are a number of well-capitalized financial sponsors interested in Kohl's. We also have heard that the Board and its representatives have been approached and rebuffed overtures from credible buyers. This is unacceptable and, if true, would seem to constitute a meaningful breach of the Board's fiduciary responsibilities."
Later Tuesday, Reuters reported that the department store chain had held talks with Acacia Research – backed by Starboard Value – to discuss a potential bid, sources familiar with the matter said.
Kohl's was not immediately available to comment when contacted by Insider. In a statement to Reuters, a spokesperson said that the company does not comment on "rumors and speculation".
Kohl's, once considered to be one of the bright spots in the otherwise struggling department store segment, has come under pressure in more recent years and gained the attention of activist investors. Last year, Macellum teamed up with other investors to nominate nine directors for Kohl's 12-person board. Kohl's reached a deal with the group and added three new directors.
The chain had previously managed to avoid the grim fate of stores such as JCPenney and Sears, reporting stronger sales and announcing buzzy partnerships with e-commerce players such as Amazon. Experts say it was partly immune from the so-called retail apocalypse because the majority of its stores were located outside of malls.
But the pandemic took a major hit on sales and, though it made somewhat of a recovery in the latter part of 2021, increasingly, Kohl's has fallen victim to the same challenges as its competitors.
"In our view, the business is falling short of its potential," GlobalData managing director Neil Saunders wrote in a note to clients in August, commenting on Kohl's second-quarter results.
"One of the reasons for this is that there are too many stores which lack energy and excitement. They may be neater than the likes of Macy's and JCPenney, but they can still be dispiriting. Kohl's has some reasonable products...but strong footfall is required in order to drive sales and more inspiration is needed to convert browsers into buyers," he said.