At a time when retailers and brands are already busy transitioning from a digital shift and two years of pandemic-era transformation, while also re-tooling their business propositions to fit consumers’ current concerns about inflation, a third trend is emerging that also threatens the industry’s status quo: activist investors.
Beyond the routine process of outsiders showing interest in businesses they perceive to be undervalued, the ongoing spate of external demands being put forth by large institutional investors onto the retail sector is something more akin to hyper activism.
In the past week alone, no less than six different buyout, break up and board shake up plans have burst onto the front pages of the retail trade press, with seemingly nothing in common amongst the target companies other than the fact that they sell stuff to consumers.
For example, toymaker Hasbro, as well as London-based designer Ted Baker, both reportedly rejected the advances of their particular suitors Monday (March 28).
In the case of the former, Reuters reported Sunday (March 27) that the Rhode Island-based toymaker, whose new CEO has been on the job for less than a month, has rejected Alta Fox Capital’s bid for five board seats, and turned down a settlement offer to allow even one.
In the latter instance, the British retailer and designer said its board is focused on “delivering value for Ted Baker’s shareholders well in excess of the [$335 million] price offered by Sycamore,” a company notice stated.
What Is Up?
And it’s not just those two. Last week, Ryan Cohen, Chewy founder, Gamestop chairman and RC Ventures activist, successfully placed three board members on Bed, Bath & Beyond where he controls a 9.5% stake in a company that has delivered a 70%, peak-to-trough slump over the past 15 months.
Read more: Bed Bath & Beyond Adds Three New Board Members in Deal with RC Ventures
There’s also the ongoing pursuit of department store Kohl’s, which has rebuffed multiple outside offers and investor reorganization demands this year that have sought to break the company into pieces, bring in new directors or buy it out entirely for as much as $9 billion.
See more: Why Are Activists Suddenly Swarming Kohl’s and Other Retailers Now?
In a letter to shareholders sent March 21, ahead of the retailer’s annual meeting May 11, Kohl’s board and CEO Michelle Gass confirmed the company had hired Goldman Sachs to coordinate a non-binding, preliminary expressions of interest, while also urging investors to reject the other proposals.
“Kohl’s Board and management team are producing strong results and continuing to successfully execute on the company’s long-term strategy,” the company’s most recent response to the activists said, while also stressing its ongoing commitment to evaluating opportunities that would increase shareholder value.
“Unfortunately, one of our shareholders, Macellum Advisors, is seeking to take control of your board with a slate of less qualified nominees,” the retailer told its shareholders. “We believe Macellum’s efforts to take control of Kohl’s are unjustified and unwarranted and highly concerning given Macellum’s intentions to engineer short-term financial actions that could damage the long-term future of the company.”
In February, Macy’s CEO Jeff Genette said a three-month independent analysis had determined that the retailer’s current omnichannel approach was the best business model for the brand, rather than splitting its digital assets from its physical stores.
“In every single scenario we considered, we found that the combination of our profitable digital platform with our national footprint will deliver greater value to shareholders than a separation of our digital and physical assets,” Gennette said, noting that Macy’s multiple nameplates, serving off-price to luxury consumers, was the most appealing way to serve the retailer’s diverse and multi-generational customer base.
Other firms that have been targeted this year amid the burst of hyper activism include Peloton, denim retailer/designer Guess?, as well as the consumer health unit of pharmaceutical giant GlaxoSmithKline.
Read more: New Peloton CEO Says No Plans to Sell Floundering Connected Health Brand
Activists Call for Guess Founders to Step Down From Denim Retailer’s Board
GlaxoSmithKline, Unilever Spar Over Future of GSK’s Consumer Health Business
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