Kohl’s is calling on its shareholders to reject activist investor Macellum Advisors’ proposal ahead of its annual meeting in May amid pressure for the retailer to sell itself.
In a new letter sent to investors on Thursday, Kohl’s is pushing back on Macellum’s campaign to add new directors to the retailer’s board, calling Macellum’s nominees an “unqualified slate.”
“Macellum is attempting to take control of your board with an inexperienced, unqualified slate,” Kohl’s wrote in the letter. “Six of 10 nominees have never served on a public company board, and none have served on a retail company board of comparable size to Kohl’s. In addition, Macellum is promoting an ever-changing narrative, misinformed claims, and value-destructive proposals, all of which reveal a reckless and short-term approach that is not in the interest of driving long-term, sustainable value.”
The Wisconsin-based retailer went on to state that Macellum has offered “virtually no new ideas,” with the few ideas they have presented are “short-term focused and likely to destroy significant value.”
“The sale leasebacks that they are demanding are an inefficient source of financing that would negatively impact margins by adding unnecessary rent expenses in perpetuity and risk Kohl’s investment-grade rating,” Kohl’s added.
Macellum Advisors, which owns nearly 5% of shares at Kohl’s, has expressed skepticism about the future of the company, given its current board of directors and performance compared to retail peers. Macellum, which has asked Kohl’s to consider taking an offer to sell its business, last month said that it would nominate 10 candidates for election to the company’s board of directors at the annual shareholder meeting on May 11, 2022.
Early last week, Kohl’s confirmed that it is weighing offers from multiple parties that are interested in purchasing the company. The department store chain hired Goldman Sachs to engage with potential bidders and discuss alternatives for the business. Kohl’s said in a separate letter to shareholders that it has engaged with over 20 parties. These proposals, Kohl’s said, are non-binding and without financial commitment.
One of the rumored bids were from Saks Fifth Avenue parent company Hudson’s Bay Co. Private equity firm Sycamore is also rumored to be in the mix of potential buyers.
Kohl’s said it is continuing with its examination into potential bidders, adding in Thursday’s letter that Macellum is advocating for a quick sale of Kohl’s at any price. “Macellum’s push for a hasty sale at any price reveals a short-term approach that is not in the best interest of Kohl’s shareholders,” the retailer stated. “Macellum has repeatedly criticized Kohl’s for rejecting an offer to acquire the company at $64 per share, a price that is well below the value that Macellum itself publicly declared. Their focus on short-term value is further evidenced in the selling of stock in the low $60s over the last month.”
Kohl’s said this month that the restructuring of its business has helped it achieve profitability and record earnings per share in 2021. The retailer said it hit an all-time record of adjusted earnings per share of $7.33 in 2021, with an operating margin of 8.6% that surpassed its goal of 7% to 8% two years ahead of schedule.
