Activist investors are getting the attention of management of the retailers they seek to influence. The latest skirmish involves Macellum Advisors GP, LLC, along with its affiliates, and Kohl’s Corp
Investors that jab retailers to spark action include Jana Partners, which bought 4.6 million shares in Macy’s
Macellum has already pressured Kohl’s to undertake a series of initiatives, including spinning off its e-commerce business into a new company, selling property and buying back shares. Kohl’s today said it is “disappointed with the path” Macellum is taking as it continues to engage with the investor.
Kohl’s pointed out that it recently refreshed the board of directors with three independent directors as part of a settlement with an investor group that included Macellum, in April 2021. The retailer said it plans to share its updated financial framework and capital allocation at a previously announced investor day on March 7, and that the board and management refuse to be distracted and remain focused on executing strategy to drive sustained shareholder value.
“Our strategic plan to transform Kohl’s into the leading omnichannel destination for the active and casual lifestyle continues to gain traction,” Kohl’s said. “Our third quarter 2021 performance demonstrates continued progress: Net sales increased 16%, beating expectations due to strong performances across both stores and digital. Operating margin reached a nine-year high of 8.4% and our full year EPS outlook represents an all-time high for our company.”
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Kohl’s went on to say that it launched several transformational brand partnerships and unveiled 200 Sephora at Kohl’s shops in the fall. “These initiatives are off to a great start, attracting new customers and increasing sign-ups for our best-in-class rewards program,” the retailer said. “Further, through our focus on inventory management, pricing and promotion optimization, sourcing cost savings, and SG&A efficiencies, we are structurally improving the long-term profitability of our business.”
Based on its 2021 performance, Kohl’s said it’s poised to exceed its key 2023 financial goals two years ahead of plan. “We remain confident in our future and have accelerated our share repurchase activity,” the retailer said. “In 2021, we continue to expect to repurchase $1.3 billion in shares, reinforcing our commitment to driving shareholder value. We will discuss our 2021 results in more detail on our earnings call on March 1, 2022.”
The retailer said its refreshed board of directors has “the right mix of fresh perspectives, industry and financial expertise and institutional knowledge. As part of our agreement with the Investor Group, which included Macellum, following last year’s proxy contest, we added three independent directors to the Board, each with retail experience. In total, six new independent directors have joined Kohl’s board in the last three years. These new directors bring highly relevant experience from top roles at leading retail companies such as Lululemon, Walmart
Seeking to blunt pressure from Macellum to initiate a sale of the retailer, Kohl’s said its board of directors has the deep financial and industry expertise necessary to evaluate all opportunities to enhance shareholder value. “The Board regularly works with specialized advisors to evaluate paths that have the potential to create long-term value,” Kohl’s added. “Our Board and management team will continue to aggressively pursue the best interests of all shareholders as we manage the business to increase shareholder value in both the near- and long-term.”
Kohl’s sounded a defiant tone in response to Macellum’s calls for a company sale and more diversity in the board of directors.
“The Company has been open to engagement with shareholders, and after discussion with a larger group of shareholders last year agreed to certain board level changes,” Kohl’s said. “As recently as this weekend, Macellum refused to enter a confidentiality agreement to hear about the company’s progress across operating performance metrics, strategic initiatives and capital allocation plans, and provide input on these matters as a shareholder. [Macellum] has been unwilling to constructively engage. The board and management remain focused on sustained value creation. Distracting the company from this focus does not benefit shareholders.”