Board Shake-up: Kohl’s Reaches Pact With Activist Investors

Kohl’s Corp. entered into an agreement with activist investors fighting for fresh blood on the retailer’s board.

Making various concessions giving shareholder activists greater influence over the company, Kohl’s said Wednesday that two independent directors nominated by the activist group — Margaret Jenkins and Thomas Kingsbury — will join the Kohl’s board at the close of the 2021 annual meeting of shareholders scheduled for May 12. Kingsbury formerly ran Burlington Stores, the off-price retailer, and years ago worked at Kohl’s, and Jenkins was a chief marketing officer at Denny’s and El Pollo Loco.

An additional independent director identified by Kohl’s and agreed to by the investor group, former Lululemon chief executive officer Christine Day, will join the board at the same time.

The activist group, consisting of Macellum Advisors GP LLC: Ancora Holdings Inc.; Legion Partners Asset Management LLC, and 4010 Capital LLC, collectively own 9.3 percent of Kohl’s outstanding common stock, including options.

“We are pleased to further strengthen our board with the addition of Christine, Margaret and Tom as part of our continued refreshment process,” Kohl’s chairman Frank Sica, said in a statement Wednesday. “Today’s agreement reflects our board’s ongoing dialogue with our shareholders and our commitment to maximizing long-term value for all stakeholders. We welcome the new directors and look forward to their perspectives as we continue to execute Kohl’s growth strategy.”

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Kohl’s CEO Michelle Gass added: “I look forward to working with our newly expanded board to further advance our transformative strategy and deliver results for shareholders. Amidst ongoing industry disruption and evolving consumer trends, we are uniquely positioned to build on our momentum and accelerate growth and profitability.”

The investor group stated: “These new directors are all proven leaders in retail who will add valuable expertise to the board. We are pleased to have been able to reach this constructive resolution with the company, and we are confident these changes will help further our shared goal of creating long-term value for shareholders. We are excited for the future at Kohl’s.”

Two Kohl’s board members are leaving: Steve Burd at the end of August, and Frank Sica next year in connection with the company’s 2022 annual meeting. 

Also as part of the agreement, the board’s existing ad hoc finance committee will become a standing finance committee of the board, which Thomas Kingsbury will join. The purpose of the committee will include assisting the board on its oversight of capital allocation decisions made by the company.

The board expanded its existing share repurchase authorization to $2 billion. Similar to past practices, the authorization may be utilized to repurchase shares at the company’s discretion, subject to market conditions and other factors.

Had an agreement not been reached, Kohl’s ran the risk of seeing further changes to the board that the investor group had been proposing. The investor group had proposed a slate of five new members, but got three, as Kohl’s disclosed today. The group will not be submitting the white proxy cards for tabulation for the annual meeting of shareholders and has begun to encourage Kohl’s stockholders to submit the blue proxy card in support of the board’s recommendations on each proposal. All votes previously submitted on the white proxy cards (whether with respect to withdrawn directors or other agenda matters) will be disregarded in entirety.

The investor group has also agreed to abide by certain customary standstill provisions until 30 days prior to the close of the nomination window for the company’s 2022 annual shareholder meeting.

Just last week, Gass and chief financial officer Jill Timm in a letter to shareholders refuted activists’ contentions that Kohl’s has been underperforming the industry. The executives also said that real estate sale-leasebacks proposed by the activists to increase shareholder value would do exactly the opposite, and they defended the company’s board of 12 directors.

Day is cofounder and executive chairman of The House of LR&C, a new concept in retail with a focus on fashion, sustainability and doing good. She serves on the board of Performance Kitchen. As CEO of Lululemon from 2008 to 2013, Day was instrumental in driving revenues from about $300 million to $1.5 billion and growing the store fleet from less than 100 locations to 250. Prior to Lululemon she spent more than 20 years at the Starbucks in a variety of leadership positions, including president of the Asia Pacific Group.

Margaret Jenkins has served as a director for clothing retailer Citi Trends Inc. as well as for PVH Corp. In addition to serving as chief marketing officer for Denny’s Corp. and El Pollo Loco, Jenkins also held management positions with Taco Bell Corp. and PepsiCo International Foodservice. She’s the chair of the board of Prisma Health — Upstate, a large health care provider in the Southeast.  

Thomas A. Kingsbury, who has more than 40 years of experience in retailing, serves as an independent director at Big Lots, BJ’S Wholesale Club and at Tractor Supply Co. He was president and CEO of Burlington Stores from 2008 until his retirement in September 2019. Kingsbury also as Burlington’s chairman from May 2014 to September 2019 and as executive chairman from September 2019 to February 2020. Prior to Burlington, Kingsbury held leadership positions at Kohl’s and the former May Department Stores Co., which merged into Macy’s Inc. in 2005.

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