An activist investor wants Kohl’s to fire veteran president Peter Boneparth and veteran CEO Michelle Gass.
In a letter sent Thursday to the supermarket chain’s board, Ancora Holdings claims Boneparth and Gass failed to reverse Kohl’s “ongoing underperformance” and unleash shareholder value.
“The combination of the ineffective leadership of the Bonbarth-led Board of Directors and poor implementation of management, as evidenced by the company’s numbers, forces us to call upon a new Chairman and a new CEO at this critical crossroads,” Ancora wrote.
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The letter says Kohl’s shares have fallen 11.38% since Bonepath was appointed director in 2008 and 24.71% since Gass was appointed chief executive-elect in September 2017.
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The company, which owns 2.5% of the retailer’s outstanding stock, says it has spent nearly 18 months engaging privately with Kohl’s leadership on recommendations to help transform its business.
“We have carefully withheld public criticism during this period to allow Cole time to recover from the COVID-19 pandemic, conduct a productive review of strategic alternatives and produce a viable stand-alone plan that investors can rally behind,” the letter says. “Very disappointed, Kohl’s has failed to deliver on both of these critical priorities under the leadership of Chairman Peter Boneparth (who was director for nearly 15 years) and CEO Michelle Gass (who has been a c-level leader for nearly a decade, ten years). Years).”
Ancora argues that Kohl needs new leadership with “proven experience in cost containment, margin expansion, product catalog optimization, and most importantly, turnarounds.”
Last year, Kohl’s agreed to add three new directors to its board after Ancora, Macellum Advisors and Legion Partners Asset Management attempted to seize control. Sources familiar with the matter told FOX Business that Ancora believes former Burlington Stores CEO Thomas Kingsbury, who joined Kohl’s board in 2021 as part of the settlement, could serve as a potential successor to Gass or Boneparth.
A representative for Kingsbury did not immediately respond to a FOX Business request for comment.
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According to Ancora, Gus is a “talented leader” who “deserves recognition for establishing an innovative partnership with Sephora USA, and for keeping the organization together during the pandemic.”
However, they blame Gass for a “disturbing level of third-set turnover” and said she had selected “suboptimal staff”. They also said that its compensation of nearly $60 million between fiscal years 2017 and 2021 was too much given the company’s poor revenue and alarming contraction rate.
In addition, the letter claims that the board led by Boneparth helped create an environment where Gass was no longer “in a good position to drive”.
A spokesperson for Kohl’s told FOX Business that the board of directors “unanimously supports” Gass and her leadership team.
“We remain committed to maximizing value and working for the benefit of all of our shareholders by continuing to focus on managing the business, and the Board of Directors continues to actively engage with management to navigate the current retail environment,” the company added.
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The message comes after Kohl’s rejected several bids from potential buyers for being too low. Recently, Kohl ended sale talks with Franchise Group in July. The owner of Vitamin Shoppe initially offered $60 per share, but later reduced the offer to $53 per share due to an uncertain economic environment.
Earlier this month, people familiar with the matter told Reuters that private equity firm Oak Street Real Estate Capital made an offer to buy up to $2 billion in real estate from Kohl’s and lease back the company’s stores.
Standard & Poor’s lowered Kohl’s rating on September 16, noting that competitive pressures in the high-end and highly competitive department store sector remain significant.
Ancora’s letter adds: “With a failed review of alternatives and a recent credit rating downgrade now casting a shadow over what is a shrinking business, we appreciate that Kohl’s has begun trading at a significant discount to the liquidation value.” “The onus is now on the administration to start executing flawlessly against a backdrop that includes rising inflation, intense competition and recession headwinds.”
As of press time, Kohl’s shares are down about 45% so far.
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