Skip to main content

Goldman Has Talked to More Than 20 Companies About Kohl’s

Kohl’s investor day meeting on Monday rehashed much of what the retailer has talked about doing over the past 18 months, though a new filing indicates the company is entertaining a number of potential suitors amid a protracted activist battle.

Goldman Sachs has engaged with “over 20 parties” since January on behalf of Kohl’s, including strategic investors, financial sponsors and real estate-focused investors, according to the retailer’s proxy filing Monday with the Securities and Exchange Commission. The news comes as the Menomonee Falls, Wisc.-based company has been under pressure from Macellum Capital Management to change up its board, despite the New York investment fund successfully installing two of its candidates on Kohl’s board last year.

Kohl’s adopted a poison pill, a tactic companies employ to stave off predatory takeovers, after Macellum recently renewed its attacks by proposing 10 directors standing for election to the chain’s board at its upcoming shareholders meeting.

In dismissing Macellum’s “unjustified and counterproductive” attempts to seize control of its board, Kohl’s said there’s “little evidence” that the investor’s involvement with other retail peers has borne fruit. The stock price at urban apparel retailer Citi Trends, where Macellum founder Jonathan Duskin is a board chairperson, is down 36 percent in the past 12 months and 52 percent since Jan. 1, Kohl’s pointed out, while Big Lots’ stock price plunged 44 percent and 18 percent over the same time frames.

Related Stories

CEO Michelle Gass, whose compensation rose to $12.92 million last year, told investors that the retailer’s “strong, diverse and experienced” board “has the right skill set to help guide this company into the future.” The board includes Eyemart Express president and CEO Michael J. Bender; former Jones Apparel Group CEO and former Blackstone Group divisional advisor Peter Boneparth, The Kroger Group’s senior vice president and chief information officer Yael Cosset, Hyatt Hotels Corp.’s global president of operations H. Charles Floyd, Boston Consulting Group senior advisor Robbin Mitchell, Manpower Group chair and CEO Jonas Prising, The Northwestern Mutual Life Insurance Co.’s chair and CEO John E. Schlifske, managing director of private equity firm Eurazeo Brands and former Goldman Sachs broadlines retail analyst Adrianne Shapira, former Libbey Inc. CEO Stephanie A. Streeter, Macellum’s picks Margaret Jenkins and Thomas Kingsbury, and former Lululemon CEO Christine Day.

Meanwhile, Kohl’s investor event offered little by way of new ideas, suggesting that the company might be playing catch-up in some respects. Chief technology and supply chain officer Paul Gaffney said all of the retailer’s stores will offer self-service pickup by the end of the year, similar to what British chain Marks & Spencer is testing. “You don’t see a lot of self-service checkout in general merchandise and apparel,” Gaffney added. “We’ll be testing that throughout the course of this year, and hope to have more to say about that in the future.” The company is also fine-tuning a streamlined self-service return option that’s live in 100 stores.

Kohl’s is leveraging data science to sell more with less inventory, Gaffney said. “We expect hyper localization to positively impact our results in the fall of 2022, and starting in spring of 2023 and through the balance of 2023, we expect to have applied hyper-localization to our entire assortment,” he added.

The company is also tweaking its supply chain with speed in mind. Beyond investing in faster ocean freight options, Kohl’s has started nearshoring more product and shifted shipments away from overburdened Los Angeles and Long Beach ports to less-congested U.S. gateways, Gaffney said.

“We’re now able to treat all of our inventory as omni-inventory, and we’ve been able to dynamically reallocate using intelligent machine learning based allocation algorithms to move product between channels and react to dynamically changing customer needs,” Gaffney said. “We’ve added capabilities to direct product where we need it right up until the last minute. And we’re beginning to apply our paradigm of better data and better science to the forecasts we use to plan and allocate inventory, allowing us to improve what we’ve already demonstrated is a very economically robust approach to inventory.”

Gass insisted Kohl’s can “own” the active lifestyle space as the retailer reinvents itself as more than a department store. Research shows that 86 percent of people now regularly wear athleisure to work, she pointed out. “For Kohl’s, standing for active and casual means we will offer lots of solutions from active, athleisure, denim and fashion to fulfill the needs of today and tomorrow. And this creates big opportunities for Kohl’s. We expect these trends will live on well into the future, we’ll work with a big national brand partners like Levi’s and Nike, to ensure that we’re bringing the best most relevant trends and styles to meet our customer needs,” she said.

Chief merchandising officer Doug Howe said active accounts for about 20 percent of Kohl’s business, and topped $4 billion in sales last year.

Kohl’s partnerships with bold-face names like Sephora, Amazon, Levi Strauss, Lands’ End, Eddie Bauer and Draper James are “bringing in millions of new customers,” Gass noted. The chain plans to launch 100 smaller-format stores in the next four years and has a “pipeline of initiatives to drive discovery and newness to appeal to even more new customers,” beyond its 65 million active shoppers, she added.

The shrinking store footprint follows other retailers’ approach in recent years, from Macy’s to Nordstrom. Gass said Kohl’s hyperlocal focus would emphasize outdoor apparel in a 35,000-square-foot Seattle test store, while a location in the South would stock more warm-weather fashion and a year-round swimwear and sandals assortment.

Howe said Kohl’s flagship Sonoma brand, which generates “well in excess of a billion dollars in sales across multiple categories,” will be 100 percent sustainably sourced going forward, but didn’t offer details on what exactly that means.

Chief financial officer Jill Timm said Kohl’s has an “incredibly healthy and profitable store base,” with 99 percent “four-wall profitable.” Another 95 percent “generated more than $1 million in four-wall cashflow,” she added. The 100 new stores in the pipeline are expected to add $500 million in sales with a 15 percent return on investment.