Key points:
- Kohl's shares are up premarket
- The rise follows a WSJ report that an activist investor has called for board changes
- Kohl's shares are down 47% in 2022
Department store Kohl's (NYSE: KSS) is under increased pressure from an activist investor to make board changes or risk another proxy battle, according to the Wall Street Journal.
Following the breakdown of sales negotiations earlier this year, Macellum Advisors GP, which owns about 5% of Kohl's, is asking the business to replace three or more long-serving directors, including its chairman, according to people familiar with the situation who spoke to the WSJ.
Kohl's shares have fallen 47% this year as consumers' budgets have become more constrained by soaring prices. It fell over 2% on Wednesday but has gained 2.4% premarket Thursday.
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Over the past several months, the New York hedge fund attempted to reach an agreement with Kohl's to make board changes, but the talks were unsuccessful, according to the sources.
Therefore, Macellum has told the company that another proxy fight will be held next year if no settlement is reached.
In a draft of an open letter to be sent to Kohl's shareholders, which the WSJ viewed, Macellum CEO Jonathan Duskin wrote: “We believe there is an urgent need for change now, rather than waiting another eight months for another contested election at the 2023 annual meeting.”
According to Duskin's letter, Kohl's Chairman Peter Boneparth appears to be “a root cause of the board's poor oversight,” while he further criticizes other long-serving members for having no retail experience.
In response to the WSJ article, Kohl's reportedly expressed disappointment in Macellum's most recent action, stating the engagements “have been unproductive and a distraction from running the business” in a challenging retail environment.
If Macellum proceeds with the proxy fight, it would be the third consecutive year that the fund has taken aim at the retailer.
Kohl's will nominate board members from mid-January to mid-February.
