Activist investor wants Kohl’s to oust CEO and chairman

An activist investor is once again turning up the heat on Kohl’s Corp.

Ancora Holdings Group on Thursday sent a letter to the board of Kohl's calling for the removal of CEO Michelle Gass and chairman Peter Boneparth. Gass has led Kohl’s since 2018. Bonepart, a director at Kohl’s for 15 years, became chairman this year.

In the letter, Ancora said it believes that Kohl’s needs new leadership with “demonstrated experience in cost containment, margin expansion, product catalog optimization and, most importantly, turnarounds” following a failed strategic review, credit downgrade and dramatic decline in sales.

The letter comes nearly three months after Kohl’s, citing “market volatility,” said it had ended its strategic review process and would no longer consider selling itself. The retailer had been under heavy pressure from activist hedge fund Macellum Advisors to explore strategic options, including a sale. Previously, in 2021, Ancora and other investors, including Macellum, reached a settlement with the retailer that saw three new directors join the board.

In the letter, Ancora, which has a 2.5% stake in Kohl’s, criticized what it said was Kohl’s failure to properly consider the takeover offers.

“The Board’s decisions to reject multiple indications of interest in the $64-$65 per share range in the winter and then proceed with an opaque strategic review throughout the spring – as financing markets gradually deteriorated – have destroyed billions of dollars in equity value and painted the company into a corner,” Ancora said. “With a failed review of alternatives and recent credit downgrade now casting shadows over what is a shrinking business, we estimate that Kohl’s has begun to trade at a steep discount to its liquidation value.”

Ancora said that Kohl’s management is now challenged to execute “flawlessly” against a backdrop that includes high inflation, intense competition and recessionary headwinds.

“Unfortunately, the facts indicate Kohl’s lacks the right leadership for the exceedingly challenging period ahead – one that will require the company to reverse high-single-digit sales declines, contain capital expenditures and operating expenses, and immediately optimize fulfillment, marketing and merchandising,” Ancora said.

Ancora was more critical of Boneparth than it was of Gass, calling her “a talented leader who deserves credit for establishing an innovative partnership with Sephora USA, Inc. and holding the organization together during the pandemic.”

"During the Boneparth era, the board has created an environment in which Ms. Gass is no longer well-positioned to lead," Ancora wrote.