Under pressure to sell, Kohl’s Corp. has been in talks with roughly 20 potential buyers in recent months, according to its preliminary proxy statement filed Monday afternoon.
The Menomonee Falls-based retailer, through investment banking firm Goldman Sachs, has fielded unsolicited bids and put out its own calls to “financial sponsors, strategics and real-estate focused investors.” Some of those bidders have been invited to submit proposals to the company and were given access to a data room and “management presentation” led by senior leadership. These talks took place in January, February and have continued into March.
It’s no secret that Kohl’s has been engaged with potential suitors ever since it turned down two purchase offers last month – one for $64 per share and the other for $65 per share – in pursuit of better opportunities. The company also adopted a “poison pill” to avoid a future hostile takeover, while still allowing the board to consider qualified offers.
The rejection was in spite of mounting pressure by activist investor Macellum Capital Management to improve performance or consider a full sale of the company, and Kohl’s has repeatedly said it’s committed to doing so, having tapped its Finance Committee to lead an open review of potential sale opportunities and retained Goldman Sachs to engage with interested parties. Still, Macellum has since repeatedly accused the board of attempting to “chill a normal course sale process” behind closed doors.
Other than shedding light on the scale of interest in Kohl’s, the proxy statement did not reveal much more about how the review process is playing out. In an interview with Bloomberg TV on Monday following the proxy filing, Kohl’s CEO Michelle Gass asserted that the board is doing its due diligence to weigh a potential sale against the company’s turnaround plan.
“Ultimately, all of this will be considered as we decide our path forward,” said Gass.
But realistically, the future of Kohl’s will be decided by its shareholders, who will vote at the upcoming annual meeting to either keep the 13 incumbent directors on the board or vote to replace them with Macellum’s slate of 10 nominees, who will likely pursue a full sale.
First announced in October 2020, Kohl’s current turnaround strategy aims to grow top-line sales and operating margin by capitalizing on activewear trends, prioritizing brand partnerships, and striving for a reputation among consumers as “the most trusted retailer of choice for the active and casual lifestyle.” The strategy was the subject of a BizTimes Milwaukee cover story last year.
In the face of activist investor pressure on top of industry headwinds that only seem to grow stronger, Kohl’s has bolstered its turnaround plan with several new initiatives, including plans to open 100 small-format store locations over the next four years. Gass announced the updated plan Monday as part of the company’s virtual investor day. It includes the goal of growing its partnership with Sephora to a $2 billion line of business.
“We have fundamentally restructured our business to drive sustainable and profitable growth, while providing a strong return to shareholders,” said Gass. “We have laid the foundation for our winning strategy and have started to implement key initiatives that will scale and accelerate our growth in the years ahead.”
Kohl’s stock fell 13% following the investor day presentation but rose 5% in morning trading Tuesday.
