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Kohl’s Puts Board Battle to Bed

Kohl’s got the last laugh in a months-long battle for board control—at least for this year.

Shareholders rejected Macellum Advisors’ argument that the department store retailer needed a wholesale board overhaul when they cast their ballots Wednesday to re-elect all 13 of Kohl’s nominees, including Michael J. Bender, Yael Cosset, Christine Day, Chuck Floyd, Michelle Gass, Margaret Jenkins, Thomas Kingsbury, Robbin Mitchell, Jonas O. Prising, John E. Schlifske, Adrianne T. Shapira, Stephanie Streeter and board chairman Peter Boneparth.

None of the activist hedge fund’s 10 candidates—not even the two  Institutional Shareholder Services recommended—received enough votes to gain a board seat.

“While we have had differences with Macellum, this board is committed to serving the interests of all our shareholders,” Boneparth said. “The board remains focused on running a robust and intentional review of strategic alternatives while executing our strategy to drive shareholder value.”

“Kohl’s has a bright future ahead,” Boneparth said, adding that the board appreciates feedback from shareholders and “looks forward to engaging with them further.”

The victory marks a vote of confidence in Kohl’s strategy and progress. The board has added six independent directors over the past three years, including the three that joined last year as part of the settlement with Macellum and other investors when the activist made its first push for board refreshment. Another plus was the retailer’s achievement of record earnings per share last year, which allowed it to double its annual dividend to $2 per share for 2022, a sign some perceive to mean the department store retailer is heading in the right direction.

Macellum CEO Jonathan Duskin had accused Kohl’s leadership of failing to grow same-store sales in a decade. However, a Glass Lewis report last week said the retailer is making the right moves to improve sales and profits.

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So, what’s next for Kohl’s?

The retailer will report first-quarter results next week. The sale process will continue as planned, with Kohl’s working with advisors to evaluate offers. Preliminary offers still require proof of financing. Companies in the mix include Hudson’s Bay Co., a Leonard Green-led consortium that includes Authentic Brands Group, Sycamore Partners and Franchise Group.

There’s also a rumored joint bid from Simon Property Group and Brookfield Asset Management. Simon CEO David Simon threw cold water on those rumblings, telling Wall Street analysts Monday “please don’t believe any rumors or media reports concerning our M&A activity.” He said the company is focused growing existing platforms and stock buybacks.

Executives at Macellum did not respond to a request for comment by press time. The investor can keep its stake and see what happens with a potential sale. Or it could sell off its holdings, which is what some activists do when they don’t get their way. But Macellum showed it has staying power through the round two battle this year, and could decide to try again in 2023 should Kohl’s decide not to sell itself.