Activist hedge fund Macellum Advisors said on Tuesday Kohl’s should explore strategic options, including a sale, if the retailer does not improve business to boost its stock price.
The push comes months after the department store chain reached a deal with activist investors, including Macellum, agreeing to add two of its nominees to Kohl’s Board as independent directors.
Macellum said on Tuesday that Kohl’s stock price had slid more than 20 percent since reaching the deal in April 2021, adding that the retailer had spent another year “materially mismanaging the business.”
The statement said, “We question how the Board could reject our recent offers to collaborate on a meaningful director refresh that would add retail sector expertise and shareholder perspectives to the boardroom, particularly in light of the company’s continued underperformance.”
The investor said it planned to nominate director candidates at a shareholder meeting this year unless Kohl’s decided to work together to implement specific changes.
Macellum said, “We intend to nominate a slate of highly-qualified and independent candidates for election at the 2022 Annual Meeting of Shareholders unless the Board decides to collaborate with us on a director refresh and promptly implement changes to improve operational execution and optimize the balance sheet. Even using a historically low PE multiple of ~7x-8x, our analysis indicates a properly optimized balance sheet (e.g., by monetizing $4 billion of its real estate and returning the proceeds to shareholders through a buy-back program) could translate to at least $100 per share.”
The investor added that if the Board were unwilling to pursue improvements, it should explore strategic alternatives.
The statement read, “We believe there are well-capitalized strategic and financial buyers that could pay a meaningful premium to acquire Kohls. We also see value-creation potential in separating the company’s e-commerce and brick-and-mortar businesses. In the event the Board wants to continue rejecting our thoughtful suggestions, it should retain qualified advisors to support an objective evaluation of these options as well as any offers for the company that have been made to date.”
Last month Engine Capital, with around a 1 percent stake in the company, petitioned its Board to consider a sale or a separation of its faster-growing e-commerce business.
Kohl’s has not responded to Macellum’s statement.
Photo courtesy Chicago Times
