What happened

Kohl's (KSS -1.96%) can't win for losing. Shares of the department store chain fell 13.1% this week from where they closed last Friday, according to data from S&P Global Market Intelligence, after shareholders beat back an attempt by activist shareholders to gain a presence on the board of directors.

Macellum advisors tried to execute a turnaround at Bed Bath & Beyond, and tried to shake things up at Kohl's, but all 13 existing directors were reelected by shareholders.

Kohl's order pickup sign.

Image source: Kohl's.

So what

Macellum sought to have 10 directors elected to the department store's board, alleging management and the board were not doing enough to turn the retailer's business around.

Macellum had acquired a 5% stake in the company and wanted to install directors who had more retail experience to work alongside CEO Michelle Gass. Among the ideas they had, which included growing sales and cutting costs -- two favorites few can argue with -- was for Kohl's to engage in sale-leaseback arrangements for its real estate.

Of Kohl's 1,100 or so properties, though, it owns just 410 of them as of the end of its fiscal year, or 35%. The remainder are leased or subject to ground lease arrangements, which has a tenant lease the ground a building is built on, but it builds and owns the structure afterwards and pays rent only for the property. Recently, the fast-growing coffee shop Dutch Bros. announced it was switching from build-to-suit leases to ground leases because they are a more favorable arrangement.

It was said at the time that under the current directors Kohl's has exhibited "poor retail strategy and execution" that has led to "stagnant sales, declining operating margins, a 44% drop in operating profits between 2011 and 2019 and a chronically underperforming stock price."

Gass responded that Kohl's is already implementing many of the ideas the activist investors have called for.

Now what

Typically, calls to shake up a board by activist investors spark investor enthusiasm for the stock, and Kohl's stock was no different, surging on the prospects of fresh blood coming on board. There was already a flood of interest in Kohl's getting bought out by other private equity firms, but the vote by shareholders (often mostly made up of institutional investors, not small retail investors), shut the idea down and reelected the existing board.

Without that catalyst for potential growth on the table anymore, the shares folded.