Benzinga | Jan 18, 2022 06:08AM EST

Kohl's 5% Shareholder Macellum Advisors Issues Letter With Intent To Nominate Director Candidates, Says Co. Should Explore Strategic Alternatives

Asserts the Board and Management Lack Urgency and Bear Responsibility for Another Lost Year, With Kohl's' Share Price Down More Than 20% Since Macellum's April 2021 Settlement

Believes the Board Needs Additional Retail Sector Expertise and Shareholder Representation to Effectively Drive Operational and Financial Improvements and Oversee the Management Team

Contends That Kohl's, Which Holds $7bn-$8bn in Real Estate Assets, Could Trade at up to $100 Per Share With an Optimized Balance Sheet and Improved Execution

Suggests Kohl's Also Explores Strategic Alternatives, Including a Potential Sale to One of the Many Well-Capitalized Financial Sponsors Apparently Interested in the Company

Urges Shareholders to Recognize the Time for Meaningful Change is Now -- Kohl's Cannot Continue Falling Behind Peers and Losing Market Share Under Misaligned, Ineffective Leadership

NEW YORK--(BUSINESS WIRE)-- Macellum Advisors GP, LLC (together with its affiliates, "Macellum" or "we"), which holds nearly 5% of the outstanding common shares of Kohl's Corporation (NYSE:KSS)("Kohl's" or the "Company"), today issued an open letter to its fellow shareholders to convey the following:

* It was another lost year at Kohl's. We believe the Company's Board of Directors (the "Board") and executive leadership team have spent another year materially mismanaging the business and failing to implement necessary operational, financial and strategic improvements -- contributing to a 22% share price decline from the point in which we settled with Kohl's for two director designees in April 2021.1

* The Board appears unwilling to address the drivers of long-term underperformance. We question how the Board could reject our recent offers to collaborate on a meaningful director refresh that would add retail sector expertise and shareholder perspectives to the boardroom, particularly in light of the Company's continued underperformance.

* We plan to nominate a slate of director candidates if the status quo persists. We intend to nominate a slate of highly-qualified and independent candidates for election at the 2022 Annual Meeting of Shareholders unless the Board decides to collaborate with us on a director refresh and promptly implement changes to improve operational execution and optimize the balance sheet. Even using a historically low PE multiple of ~7x-8x, our analysis indicates a properly optimized balance sheet (e.g. by monetizing $4 billion of its real estate and returning the proceeds to shareholders through a buy-back program) could translate to at least $100 per share.

* If the Board is unwilling to pursue improvements, it should explore strategic alternatives. We believe there are well-capitalized strategic and financial buyers that could pay a meaningful premium to acquire Kohl's. We also see value-creation potential in separating the Company's ecommerce and brick-and-mortar businesses. In the event the Board wants to continue rejecting our thoughtful suggestions, it should retain qualified advisors to support an objective evaluation of these options as well as any offers for the Company that have been made to date.

The complete version of Macellum's letter can be downloaded and viewed here.