Please ensure Javascript is enabled for purposes of website accessibility

Kohl's Targeted by Same Activist Investors Who Cleaned House at Bed Bath & Beyond

By Rich Duprey - Feb 22, 2021 at 10:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

They've also sought to make big changes at closeout retailer Big Lots.

The trio of activist investors who cleaned house at Bed Bath & Beyond are looking to do the same at Kohl's (KSS -4.00%).

Macellum Advisors, Ancora Holdings, and Legion Partners Asset Management, which own a combined 9.5% stake in the department store chain, want to appoint nine directors to Kohl's 12-person board.

There are a number of issues the activist investors want the retailer to take, but a priority is having directors with retail experience to work alongside CEO Michelle Gass to turn the company around.

Kohl's order pickup station

Image source: Kohl's.

A fish rots from the head

When the hedge funds targeted Bed Bath & Beyond, it was a wholesale cleansing they were looking for. They saw then CEO Steven Temares as much a part of the problem as the entrenched board, which included the home goods retailer's co-founders.

With Kohl's the situation is different. In a site created to explain their position called CreateValueatKohls.com, the private equity firms say over the past decade Kohl's has fallen behind its rivals, losing market share and suffering gross margin contraction, even as it has spent more on operational expenses, capital investments, and executive compensation.

Yet it notes this has happened over various management teams, so it's not necessarily their problem. What has remained mostly constant at the retailer is the board of directors.

They want Kohl's to improve its merchandising while reducing costs, partially through sale-leaseback arrangements. While they want to realign executive compensation and incentives with performance, they're also looking to juice earnings through "material share repurchases," which would serve to give their equity stake in the retailer a quick boost.

Two of the three hedge funds have also targeted Big Lots (BIG -2.50%) where they similarly want to replace the board of directors.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Kohl's Corporation Stock Quote
Kohl's Corporation
KSS
$37.68 (-4.00%) $-1.57
Big Lots, Inc. Stock Quote
Big Lots, Inc.
BIG
$22.60 (-2.50%) $0.58
Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
BBBY
$6.75 (-3.57%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.