Activist investors target Kohl’s: ‘It’s really about their inability to execute’
- Shares of Kohl's hit a new 52-week high of $58.38 Monday.
- The surge is attributed to a group of activist investors accumulating a 9.5% stake.
- The group want a heavy representation on the board to execute on their vision.
Shares of Kohl’s Corporation (NYSE: KSS) were trading higher by around 8% Monday afternoon after a group of activist investors amassed a 9.5% stake in the US-based department store.
Activists want major board presence
Macellum Advisors, Ancora Holdings, Legion Partners Asset Management, and 4010 Capital are the main activist investors calling for Kohl’s to make major changes. According to a public letter written by the new investors, Kohl’s should take action to add new executives with particular expertise in retail and evaluate a sale-leaseback of some of its non-core real estate assets.
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Macellum Capital Management CEO Jonathan Duskin, a retail pro with more than two decades worth of experience in the consumer and retail segment, said on CNBC’s “Halftime Report” that Kohl’s stock has materially underperformed rivals. Even a rebound from its lows of $10.89 last year to a new 52-week high of $58.38 on Monday is not particularly impressive.
Given the underperformance, the group of investors wants to win nine seats on Kohl’s board of directors to better execute its vision.
Shares were $50 in 2001
Duskin highlighted the fact that shares of Kohl’s were trading at around $50 way back in 2001 so the stock has done “nothing” for 20 years. Many are quick to point out that Kohl’s has seen some momentum as of late by executing new initiatives, such as adding Sephora shops in its stores.
However, Kohl’s has failed in previous attempts to steer its business in the right direction. For example, the 2014 “Greatness Agenda” guided a path to generate $21 billion in sales and $1.9 billion in EBIT by 2017. The company ultimately fell short of its goals by 25% and by 2019 it was 36% shy of its goals.
“In our mind, it’s really about their inability to execute the initiatives that they set for themselves,” he said.
Board lacks experience
Among all members of Kohl’s board of directors, and the activist investors put together a roster of highly experienced executives who can add experience to the board, Duskin also said. At the end of the day, the activist investors believe Kohl’s is a good company that just needs some fixing.
“It could be a great company,” he said.
The group has every intention of working collaboratively with Kohl’s and its board of directors to create additional value for all shareholders.
“We would love to have further discussions, but we are obviously happy to run this out all the way to the end as we have done in so many other campaigns,” he said.