Activist Investors Gunning After Kohl's Retail Chain

The hedge fund Macellum Advisors, which has a 5% stake in the retail chain Kohl’s, said in a letter Tuesday, Jan. 18, 2022, that Kohl’s board of directors and leadership team spent last year "materially mismanaging the business,” Nathaniel Meyersohn reported for CNN.

Photo Insert: Kohl’s managed to avoid the bankruptcies that rivals like Sears and JCPenney faced after being forced to close during the pandemic. But that may not be enough to avoid a sale.

Macellum plans to nominate a slate of new board members unless Kohl's decides to work with the firm. If Kohl's refuses, the company should explore a sale, the activists said. In a statement, Kohl’s defended its strategy and said Macellum had been "unwilling to constructively engage" with the company.

Even though Kohl’s had a rebound in 2021, investors have been frustrated. Sales were stagnant from 2016 to 2019. And then, of course, came the pandemic, which forced stores to close. Sales plunged 20% in 2020.

Then, last spring, a group of activist shareholders got together to push Kohl's to pursue a new strategy and revamp its board. Kohl's reached a deal with the group in April and added three new directors.

Since then, Kohl’s has made a number of shrewd changes, including striking up a partnership with Sephora and working with Amazon to allow customers to return online purchases at Kohl’s stores. It’s also expanded its inventory and leased out space at a handful of stores to Planet Fitness and Aldi.

Still, the activist investors aren't quite satisfied. Since that April settlement, the stock has fallen about 20%, prompting the hedge fund sharks to begin circling yet again. Macellum’s letter comes just a month after another hedge fund, Engine Capital, said Kohl’s should spin off its online business or find a buyer to take the whole company private.

Kohl’s managed to avoid the bankruptcies that rivals like Sears and JCPenney faced after being forced to close during the pandemic. But that may not be enough to avoid a sale. According to Reuters, a potential buyer is already in the wings.

Acacia Research, which is backed by activist investment firm Starboard Value, has been talking with Kohl’s about options, Reuters reported, citing two people familiar with the discussions.

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