Activist Investors Try for Control of Kohl’s After $500 Million Deficit in 9 Months — Report

By McKenzie Carpenter Monday, February 22, 2021

In-store retail shopping has changed significantly since the Internet was invented and the COVID-19 pandemic began. Kohl’s, an American department store retail business, is one of the victims of the changing shopping landscape. Reports indicate activist investors are trying to take over the retail company as the business experienced a $500 million deficit in 9 months.

Kohl's storefront in Minnesota.

Kohl’s Board Control

The retail company has been a giant in the industry for many years; however, the $8.31 billion business experienced more than a $500 million deficit in nine months. Consequently, a group of activist investors, with a combined company stake of roughly 9.5%, are attempting to take control of the board for the business. Investors include Macellum Advisors GP LLC, Ancora Holdings Inc., and Legion Partners Asset Management LLC, and 4010 Capital LLC, in the now 12-person board.

The activist investors are calling on the retail company to take action, such as adding directors with retail experience who can work with the CEO, asking the business to consider a sale-leaseback of Kohl’s more than $7 billion in non core real estate, and reducing inventory levels while improving offerings, discounts, and promotions that are easier for customers to follow.

These activist investors are said to be taking control of the company as they have prior experience in situations similar to that of Kohl’s. The investors previously worked together on a campaign that remade the board for houseware business Bed Bath & Beyond.

According to MarketWatch, the operating margin for the retail company dropped to 6.1% from 11.5% in 2011, with revenue falling 25% by October 2020 for the business.

The Wall Street Journal was the first to report on this story, stating that neither the size of the investors’ stake in Kohl’s or the board bid was previously known.

The Retail Market

Kohl’s is the latest company to be a victim in the retail apocalypse. Last year, many stores and restaurants declared bankruptcy, including J. Crew, True Religion Apparel, JCPenney, Pier 1 Imports, Lord & Taylor, Ruby Tuesday, and countless others.

It seems as though every day another retailer announces bankruptcy, and while COVID-19 is a large contributing factor, it is not the only factor. The Internet makes shopping easier and more convenient, as people don’t have to leave their homes, and everything can be delivered right to their door.

Services like Amazon make everything one could possibly think of available and quickly. In 2019, CNBC reported that for the first time in history, US online retail sales were higher than general merchandise sales at brick-and-mortar stores. Furthermore, retail sales were projected to jump 18% in 2020 due to a combination of more shopping online and the pandemic. In addition, the global mobile retail shopping industry is expected to grow at a CAGR of 14.8% until 2025.

For some of these companies, the pandemic may have been the final blow, but for Kohl’s, these activist investors might be breathing new life into the company.

About the Author

Headshot of McKenzie Carpenter

McKenzie Carpenter is a graduate of Central Michigan University with a B.A.A. in Integrative Public Relations and French. McKenzie has previously worked for small businesses and nonprofit organizations.

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