Commentary: Kohl’s fate up to shareholders

Kohl’s headquarters
Kohl’s headquarters in Menomonee Falls.

Last updated on March 22nd, 2022 at 02:41 pm

The future of one of southeastern Wisconsin’s largest companies is hanging in the balance and could hinge on an upcoming vote by its shareholders.

The leaders of Menomonee Falls-based Kohl’s Corp., one of the largest apparel retail companies in America, are under increasing pressure to improve the company’s performance, or consider a sale.

New York-based hedge fund Macellum Capital Management, an activist investor that owns a 5% stake of Kohl’s, has been highly critical of the company’s performance and the strategy of its leadership and has said the company should seriously consider a sale. Macellum was also part of an activist investor group that attempted to take control of the Kohl’s board last year.

As I write this, shares of Kohl’s stock are listed at about $54. Macellum at one point said it believed the company’s stock could be worth $100 a share with a new board and improved strategy. But lately, Macellum has been pushing for a sale of the company.

Earlier this year, Kohl’s confirmed that it had rejected takeover offers worth $64 a share and $65 a share. The company said it has been in talks with roughly 20 potential buyers in recent months.

The retail industry has been through a massive shakeup in recent years as online retail, led by Amazon, has drastically changed the game and taken market share away from brick-and-mortar retail. Several retailers, like Boston Store, have been unable to adapt and have gone out of business while others have had to close several store locations.

Kohl’s, with about 1,100 locations, has avoided closing stores and recently said it plans to open 100 new store locations in the next four years. The new stores will be smaller than the typical 35,000-square-foot Kohl’s store and will be located in smaller markets with themes tailored to the community they are located in.

It’s clear that Kohl’s management, led by CEO Michelle Gass, has little interest in selling the company. They strongly believe in their plan to restructure the company and improve performance. Despite a 13% decline in year-over-year fourth quarter earnings, the company’s 2021 fiscal year earnings of $938 million was a big improvement from a net loss of $163 million in 2020 and earnings of $691 million in 2019.

A key component of the Kohl’s strategy is the partnership with beauty retailer Sephora, which Kohl’s plans to have in 850 of its stores by 2023 and says will generate $2 billion in business.

Gass recently said last year’s results laid the foundation for “a complete reinvention of our business model and brand.”

Not convinced, Macellum is asking shareholders to support its slate of 10 nominees to the Kohl’s board at the company’s upcoming annual meeting. 

So, who will the shareholders support? The current board and management’s vision for the company, or a new board to shake things up and likely sell the company? The fate of one of Wisconsin’s largest companies is in their hands.

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Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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