Kohl’s Attacked by 2nd Activist Investor, Dept Store Blasted for Lack of Urgency, Wasted Year

Two board seats and nine months after its prior shake-up attempt, and New York-based activist investor and Kohl’s shareholder Macellum Advisors is at it again.

In an open letter published Tuesday (Jan. 18) to shareholders of the country’s second-largest department store, Macellum pointed to the company’s slumping stock and a lack of urgency by the management and board for what it called “another lost year at Kohl’s.”

“We believe the Company’s Board of Directors … and executive leadership team have spent another year materially mismanaging the business and failing to implement necessary operational, financial and strategic improvements — contributing to a 22% share price decline from the point in which we settled with Kohl’s for two director designees in April 2021,” the letter stated.

In calling for “a meaningful director refresh,” Macellum, which was founded in 2009 by Jonathan Duskin, said it would nominate a slate of new directors to carry out its plans to monetize $4 billion of the retailer’s real estate assets, a move it contends would lift the stock to $100 per share, or roughly double its present $6.6 billion valuation.

The eCommerce Spin

In addition, Macellum also echoed an eCommerce spin-off option similar to the one put forth last month by activist investor Engine Capital, a move PYMNTS highlighted at the time as being the latest example of retailers mulling the split-up of digital assets from physical stores to unlock value for shareholders, but one that also essentially put the notion of a cohesive omnichannel platform on trial.

Read more: Breaking up Kohl’s Is About Valuation, Not Excellent Omnichannel Retail Execution

“We firmly believe a separate digital business could raise money at a significantly higher valuation, have a significantly lower cost of capital and accelerate its growth as a standalone entity,” Engine Capital said in a press release Dec. 6. Under this plan, it contends the two split businesses would have a contract to “keep the omnichannel experience for the seamless.”

Kohl’s, Nordstrom, Macy’s, Saks

The Macellum salvo is in line with an industry-wide trend aiming to revitalize department stores the past year, which started with Saks moving to split its digital and physical retail assets, a move that was soon followed by separate announcements from Nordstrom and Macy’s that they had each retained retail advisory firm Alix Partners to assess the pros and cons of such a reorganization.

See more: Digital Spin-Offs Are Suddenly in Fashion as Ailing Dept Stores Seek Easy Fixes

“When we look across the landscape, we need to deliver more,” Nordstrom CEO Erik Nordstrom said during the retailer’s last earnings report in November. “We need to grow market share and deliver greater profitability, and we are acting with a sense of urgency to do so.”

So far, Kohl’s board and CEO Michelle Gass, who has led the Wisconsin-based operator of 1,200 stores and 110,000 employees since May 2018, have not responded to the latest calls for action from Macellum. Previously, the company has defended its own “strategic efforts to transform Kohl’s” and said it had studied sale-leaseback ideas and determined they would not drive long-term value. In addition, Gass — like other retail CEOs including Macy’s and Dick’s — has said she believes in the omnichannel benefits of the eCommerce unit and stores working together.