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Kohl's gets blasted by activist investors, again

Brian Sozzi
·Editor-at-Large
·4 min read
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The boardroom battle between struggling Kohl's and its new activist investors is now starting to morph into a war of words, too.

"We believe Kohl’s fourth quarter earnings report and full year 2021 guidance substantiate the immediate need for change on the Board. The Board seems to be content performing just slightly better than the worst companies in retail. 'Best of the worst' is not a viable strategy, nor does it satisfy shareholders like us seeking long-term superior performance," said the activist group of Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital in a new letter Friday.

Together, the group owns about 9.5% of the outstanding shares of Kohl's.

The letter continued, "Further, we do not believe the company’s recent results are indicative of a strategy that is succeeding. The Investor Group believes that the company’s weak earnings and guidance are demonstrative of a Board comprised of directors lacking relevant retail expertise who are not in a position to provide the necessary oversight to help Kohl’s get back on track. In our view, a substantially refreshed Board with relevant retail expertise can help devise a strategy to take market share back from competitors and not just settle for being better than troubled mall-based department stores."

Shares of Kohl's (KSS) fell 2% Friday on the news.

Kohl's wasted no time firing back.

"As we recently disclosed, our business is building momentum and we have a clear strategy to accelerate revenues and profitability. Our recent operating results outperform across key metrics and demonstrate that we are on the right path. The activist investor group’s comparisons of 2019 results to expectations for 2021 are nonsensical given a continuing global pandemic," Kohl's spokeswoman Julia Fennelly said in an emailed statement to Yahoo Finance. "The activist’s comments and track record reveal that they are focused on short-term payout at the expense of sustainable success. The Kohl’s board of directors and management have successfully positioned our company for a multi-year improvement at the top and bottom line. We reject the activists’ short-termism and their attempt to disrupt our momentum at this critical time. We remain open and interested in new ideas that can help us increase value for our company and our shareholders." 

An empty parking outside a closed Kohl's store is shown in Indianapolis, Thursday, April 2, 2020. Kohl’s is fighting back against an investor group’s efforts to take control of the department store chain's board, arguing that it would derail its progress and momentum. The response, issued Monday, Feb. 22, 2021 comes after the investor group said it had nominated nine members for Kohl's board of directors as it looks to boost the company's stock and its financial performance. The group owns a 9.5% stake in Kohl's. (AP Photo/Michael Conroy, file)
An empty parking outside a closed Kohl's store is shown in Indianapolis, Thursday, April 2, 2020. Kohl’s is fighting back against an investor group’s efforts to take control of the department store chain's board, arguing that it would derail its progress and momentum. The response, issued Monday, Feb. 22, 2021 comes after the investor group said it had nominated nine members for Kohl's board of directors as it looks to boost the company's stock and its financial performance. The group owns a 9.5% stake in Kohl's. (AP Photo/Michael Conroy, file)

Revealed just a few short weeks ago, the activist group nominated nine people to Kohl's already enormous 12-person board.

They collectively blasted Kohl's for "poor retail execution, excessive executive compensation," a "long-tenured Board with insufficient retail experience," and a "systemic inability to achieve stated goals." These concerns were reiterated in the new letter on Friday. A source familiar with the matter says a large presentation detailing the woes at Kohl's is coming soon.

Kohl's has maintained it's seeing a momentum in its business, although the company's latest earnings report this week showed nothing of the sort.

The activists — who last teamed up in 2019 to shake up then dreadfully performing Bed Bath & Beyond (BBBY) — appear to be well-placed in their efforts. While Kohl's has garnered favorable headlines for its partnerships with Amazon (AMZN) (for store returns) and more recently cosmetics giant Sephora, the company simply has not delivered on several fronts.

The operating performance is more disappointing considering Kohl's pure-play rivals such as J.C. Penney and Macy's have closed hundreds of stores in the past five years. Theoretically, that should have pushed market share to Kohl's (something suggested in the letter).

Kohl's shares are down 20% over the past two years, while direct competitors Target has seen a 121% surge and TJX Companies a 22.4% pop.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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