Kohl's backs board after activist investor pushes for changes — again

Macellum Advisors is turning up the heat again at Kohl’s.

The activist investor group, which has long targeted the department store retailer, issued an open letter to Kohl’s shareholders in which it called for an “immediate” refresh of the board as opposed to waiting for a vote at the retailer’s annual shareholders meeting next year.

“There is an urgent need for change now, rather than waiting another eight months for another contested election at the 2023 annual meeting,” Macellum managing partner Jonathan Duskin wrote in the letter.

In calling for the board shakeup, Duskin was blunt in his assessment of Kohl’s performance.

“Kohl’s is having one of the worst years in its long history,” he stated. “Kohl’s results are the worst among its direct peers across almost every relevant measure.”

This is not the first time Macellum has set its sights on the Kohl’s board. Earlier this year, at the company’s annual meeting, Kohl’s shareholders rejected all the board nominees backed by Macellum, including Duskin, voting instead for the current board.

 Kohl’s responded to the most recent letter from Macellum, saying it was disappointed that Macellum, only five months after Kohl’s shareholders reelected its entire slate of directors, and "resoundingly opposed"  Duskin's election, has launched a  "disruptive public campaign" for the third time.

"Kohl’s Board and management have regularly engaged with Macellum during the last two years, including numerous occasions since the annual shareholders meeting and several times this quarter, to hear their perspective," Kohl' stated. These engagements have been unproductive and a distraction from running the business during a challenging retail environment. The Board and management remain committed to maximizing value and acting in the interests of all our shareholders by staying focused on running the business."

Macellum, which owns about 5% of the retailer, wants its candidates to replace some of the long-tenured Kohl's directors, including chairman Peter Boneparth and executive committee members John Schlifske, Stephanie Streeter and Jonas Prising. Macellum described the executive committee as a “shadow board” that exerts influence on the actual board.

“The Shadow Board is failing to adequately support Kohl’s senior management, which has resulted in the destruction of billions of dollars of shareholder value recently and perpetual stagnation over the long-term,” Duskin wrote. “We believe chairman Boneparth and the executive committee have demonstrated an inability to effectively address the company’s problems and seize on its opportunities.”

Duskin called out Boneparth, who has served on the board for over 14 years, as “a root cause of the board’s poor oversight and insular thinking.”

“We contend his own track record, best represented by his time as CEO of Jones New York, is one of unquestionable underperformance,” the letter stated.

In his letter, Duskin wrote that the May 2022 vote might have gone differently if shareholders had been aware of what he called the “true degree of business deterioration,” senior executive departures and the details of the “flawed” attempt to sell the department store.

Last month, another activist investor — Ancora Holdings Group — pushed for the removal of Boneparth as well as CEO Michelle Gass for what it called a botched strategy and dramatic sales declines.

[Read More: Activist investor wants Kohl’s to oust CEO and chairman]