Activist investor calls on Kohl's board to oust chairman and CEO

Activist investor calls on Kohl’s board to oust chairman and CEO

An activist investor wants Kohl’s to remove longtime chairman Peter Boneparth and veteran chief executive Michelle Gass.

In a letter sent to the department store chain’s board on Thursday, Ancora Holdings says Boneparth and Gass have failed to reverse Kohl’s “sustained underperformance” and unlock shareholder value.

“The combination of ineffective leadership from the Boneparth-led Board of Directors and poor management execution, as evidenced by the company’s numbers, compels us to call a new CEO at this critical bifurcation,” he said. Ancora writes.

Teleprinter Security Last To change To change %
KSS KOHL’S CORP. 26.93 -0.97 -3.48%

The letter says Kohl’s shares have fallen 11.38% since Bonepath’s appointment as director in 2008 and 24.71% since Gass was named CEO-elect in September 2017.

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The company, which owns 2.5% of the retailer’s outstanding shares, says it spent nearly 18 months engaging privately with Kohl’s management on recommendations to help turn around its business.

“We carefully held back public criticism during this time to give Kohl time to rebound from the COVID-19 pandemic, conduct a productive review of strategic alternatives, and produce a viable stand-alone plan that investors could rally around,” indicates the letter. “To our disappointment, Kohl’s has failed to deliver on each of these critical priorities under the leadership of Chairman Peter Boneparth (who has served as a director for nearly 15 years) and Managing Director Michelle Gass (who is a senior-level executive). C for nearly a decade).”

A car drives past the entrance to a Kohl’s department store in Orlando, Florida (AP Photo/John Raoux, File)

Ancora argues that Kohl needs new leadership with “a proven track record in controlling costs, expanding margins, optimizing the product catalog and, most importantly, lead times.”

Last year, Kohl’s agreed to add three new directors to its board after Ancora, Macellum Advisors and Legion Partners Asset Management attempted to take control. Sources familiar with the matter told FOX Business that Ancora believes former Burlington Stores CEO Thomas Kingsbury, who joined Kohl’s board in 2021 as part of the settlement, could work as a possible successor. for Gass or Boneparth.

A representative for Kingsbury did not immediately return FOX Business’ request for comment.

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According to Ancora, Gass is a “talented leader” who “deserves credit for establishing an innovative partnership with Sephora USA, Inc. and keeping the organization going through the pandemic.”

However, they blame Gass for a “disturbing level of sequel turnover” and said she selected “sub-optimal personnel”. They also said his compensation of nearly $60 million between fiscal years 2017 and 2021 was too high given the company’s poor returns and the alarming rate of shrinkage.

Additionally, the letter claims that the Boneparth-led board has helped create an environment in which Gass “is no longer well positioned to lead.”

A spokesperson for Kohl’s told FOX Business that the board is “unanimously supportive” of Gass and his management team.

“We remain committed to maximizing value and acting in the best interests of all of our shareholders by remaining focused on managing the business, and the Board of Directors continues to actively engage with management to navigate the current retail environment,” the company added.

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The letter comes after Kohl’s rejected several offers from potential buyers for being too low. More recently, Kohl’s sales talks with Franchise Group ended in July. The Vitamin Shoppe owner originally offered $60 per share, but later lowered the offer to $53 per share due to an uncertain economic environment.

Earlier this month, people familiar with the matter told Reuters that private equity firm Oak Street Real Estate Capital had made an offer to acquire up to $2 billion worth of property from Kohl’s and that the company leased its stores.

Standard & Poor’s downgraded Kohl’s on September 16, citing that competitive pressures in the evolving and highly competitive department store segment remain significant.

“With a failed review of alternatives and a recent credit downgrade now casting a shadow over what is a declining business, we believe Kohl’s has begun trading at a steep discount to its liquidation value,” the statement added. letter from Ancora. “It is now up to management to start executing perfectly in an environment that includes high inflation, intense competition and recessionary headwinds.”

At press time, Kohl’s shares are down about 45% year-to-date.

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