One of Kohl’s peskiest investors is back for a third bite at the apple.
After working with other activists to get the department store’s board to install three of its directors early last year, Macellum Advisors now says the retailer is in for a proxy fight if it fails to immediately overhaul its board.
The New York hedge fund took aim at the Kohl’s board and is pushing for a sale after a months-long saga fizzled over the summer without producing a deal from what Macellum CEO Jonathan Duskin called a “deeply flawed sale process.”
This after Macellum followed last year’s opening salvo with additional attempts to win Kohl’s over to its side. It renewed calls for a board refresh in December and then stepped up calls a month later for Kohl’s to reboot its board or sell itself. Duskin even nominated himself as one of the 10 candidates Macellum proposed to election at the retailer’s annual meeting in May. That effort failed as shareholders cast the majority of their ballots for Kohl’s board nominees.
But with Kohl’s market value plummeting, Macellum this time is hoping to amass shareholder support. Kohl’s share price is up nearly 2 percent in midday trading but 40 percent off from a year ago.
“Kohl’s is having one of the worst years in its long history,” Duskin wrote in Thursday’s letter to the shareholders. Putting aside inflation, a spending slowdown and other headwinds, the retailer’s performance still lag its rivals “across almost every relevant measure,” he pointed out.
Duskin went on to accuse Kohl’s board overseeing the “termination of what we argue was a deeply flawed sale process, the departures of three key executive officers and the downgrade of the Company’s long-term credit rating to ‘junk’ by S&P Global Ratings.” He was referring to the May exits of leaders including chief merchandising officer Doug Howe and chief marketing officer Greg Revelle.
Macellum, which holds about a 5 percent stake in Kohl’s, wants the company to oust board chairman Peter Boneparth in addition to long-standing “shadow board” members Stephanie Streeter, John Schlifske and Jonas Prising who’ve failed to “adequately support Kohl’s senior management,” Duskin said.
He added that little has changed since the hedge fund brought up the retailer’s “self-inflicted execution issues” two years ago.
Macellum isn’t the only thorn in Kohl’s side. Fellow investor Ancora Holdings last month called on the chain to dismiss CEO Michelle Gass in addition to Boneparth, citing their collective failure to secure a buyer and get the company back on track.
Kohl’s said it was “disappointed” by Macellum’s latest ultimatum.
“We are disappointed that Macellum, only five months after Kohl’s shareholders reelected our entire slate of directors, and resoundingly opposed Jonathan Duskin’s election, has launched a disruptive public campaign for the third time,” a spokeswoman for the retailer said in a statement Thursday.
The rep went on to say that Kohl’s leadership has “regularly engaged” the investor since it first aired its concerns, “including numerous occasions since the annual shareholders meeting and several times this quarter.” She described those “unproductive” talks as little more than a “distraction from running the business during a challenging retail environment.”
Macellum says Kohl’s margins have suffered because it can’t manage inventory and it pays executives too much. It also accused the Menomonee Falls, Wisc. company of failing to pounce of real estate opportunities when a wave of store closures surfaced desirable new locations. Shareholders shouldn’t wait until the annual meeting in May to influence the retailer’s direction, it added.
Ahead of Kohl’s annual meeting five months ago, proxy advisor Glass Lewis rejected Macellum’s arguments and agreed the retailer is on the right path to improve sales and profits. Even rival Institutional Shareholder Services, which recommended Kohl’s shareholders vote in of two of Macellum’s nominees, had stopped short of saying the board needed a complete overhaul.