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The activist investor wants Kohl’s to oust longtime chairman Peter Boneparte and seasoned chief executive Michelle Gass.
In a letter to the department store chain’s board of directors on Thursday, Ancora Holdings said Boneparth and Gass were unable to reverse Kohl’s “continued inefficiency” and disclose shareholder value.
“Bad leadership and management performance by the Boneparth-led board of directors has compelled us to call in a new chairman and CEO at this critical fork,” Ankora wrote, according to company data.
Cole’s shares have fallen 11.38% since Bonepath was named director in 2008 and 24.71% since Gass was named CEO in September 2017, the letter said.
The company, which owns 2.5% of the retailer’s outstanding shares, said it spent almost 18 months privately talking to Kohl’s management about offers to help him turn the business around.
“During this time, we deliberately dismissed public criticism in order to give Cole time to recover from the COVID-19 pandemic, conduct a productive review of strategic alternatives, and develop a workable independent plan,” the letter says. “We are very disappointed to see the company in the hands of Chairman Peter Boneparte (Director for almost 15 years) and CEO Michel Gass (CEO for almost ten years).”
A car drives past the entrance to Kohl’s department store in Orlando, Florida. (AP Photo/John Raoux, File)
Ancora believes Kohl’s needs a new management team “with extensive experience in cost control, margin expansion, product catalog optimization and, most importantly, turnover.”
Last year, Kohl’s agreed to add three new directors to its board after Ancora, Macellum Advisors and Legion Partners Asset Management tried to seize control. Sources familiar with the matter told FOX Business that Ancora believes former Burlington Stores CEO Thomas Kingsbury, who will join Kohl’s board in 2021, could succeed Gass or Boneparte as part of a settlement.
According to Ankora, Gass is a “talented leader” who “deserves commendation for forging an innovative partnership with Sephora USA, Inc. and bringing the organization together during the pandemic.”
However, they accused Gass of “disrupting employee turnover” and stated that she was selecting “sub-optimal people”. They also said the nearly $60 million she received in compensation between fiscal 2017 and 2021 was too much given the company’s low profitability and staggering pace of downsizing.
In addition, the letter stated that the board led by Boneparth helped create an environment in which Gass “was no longer in a management position.”
Ankora accused CFO Michelle Gass of “disturbing employee turnover” at Kohl’s and said she chose “non-essential people”.
A spokesman for Kohl’s told FOX Business that the board is “unanimously supportive” of Garth and her management team.
“We remain committed to maximizing value and acting in the best interest of all shareholders by focusing on running the business, and the Board of Directors will continue to work actively with management to navigate the current retail environment,” the company added.
The letter came after Kohl’s turned down several underpriced offers from potential buyers. More recently, in July, Kohl ended sales talks with the Franchise Group. The vitamin store owner originally offered $60 per share, but later cut the offer to $53 per share due to uncertain economic conditions.
Private equity firm Oak Street Real Estate Capital has made an offer to buy up to $2 billion worth of property from Kohl’s and let the company lease its stores, people familiar with the matter told Reuters earlier this month.
Standard & Poor’s downgraded Kohl’s on September 16, citing continued pressure from competition in the growing and competitive department store segment.
“As the failed review of alternatives and the recent credit downgrade now cast a shadow over the shrinking business, we estimate that Kohl’s stock has begun trading well below liquidation value,” Ancora said in a letter. “Now the responsibility to start operating flawlessly amid high inflation, intense competition and recession headwinds lies with management.”
Quotes are displayed in real time or with a delay of at least 15 minutes. Market data provided by Factset. FactSet Digital Solutions operates and is being implemented. Legal notices. Mutual fund and ETF data provided by Refinitiv Lipper.
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