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Dive Brief:

  • Kohl’s needs new leadership, and CEO Michelle Gass and Chairman Peter Boneparth should be replaced, according to a letter to the retailer’s board sent by hedge fund Ancora Holdings Group, which made its demands and reasoning public on Thursday.

  • Ancora and its affiliates, among a group of activist investors that successfully pushed the retailer to shake up its board last year, criticized what it said was Kohl’s failure to properly consider takeover bids earlier this year, a subsequent “opaque strategic review” and a recent credit downgrade, among other issues, per the letter.

  • Kohl’s didn’t immediately respond to a request for comment. Earlier this year, as activist investors pushed for a new strategy including a possible sale, Gass defended the board’sopenness to maximizing value” and its approach as “robust and intentional.”

Dive Insight:

The signers of this letter, Ancora Holdings CEO Frederick DiSanto and Ancora Alternatives President James Chadwick, had high praise for Gass, calling her a “talented leader who deserves credit for establishing an innovative partnership with Sephora USA, Inc. and holding the organization together during the pandemic.”

But that’s apparently no longer enough. They criticized her level of compensation, which they said added up to $60 million between fiscal years 2017 and 2021, with her most recent package worth more than 1,000 times that of Kohl’s median employee’s compensation. 

“We have been proud to invest in a business that maintains strong gender diversity in the c-suite, as it aligns with our recognized focus on installing female leaders in more corporate boardrooms,” they wrote. “However, our view regarding the need for new leadership at Kohl’s is simply based on the facts.”

According to them, those include chronic underperformance and “value destruction,” high turnover of top executives including the chief merchandising officer and an ability to keep up with peers like Macy’s and Dillard’s. Macy’s beat expectations in its most recent quarter and several analysts see Dillard’s consistently outpacing rivals in the mid-tier department store segment.

Some analysts saw Kohl’s as less than enthusiastic about selling itself; takeover talks ended in June after Vitamin Shoppe owner Franchise Group lowered its bid. Earlier this month Kohl’s reportedly received a $2 billion offer for a portion of its real estate.

While Ancora wants both executives gone, the firm is placing much of the blame for Kohl’s situation on Boneparth, who they note has been a director for 15 years. They contend the board he leads is responsible for creating “an environment in which Ms. Gass is no longer well-positioned to lead.”

“Looking ahead, we believe shareholders’ capital should be utilized to compensate a new Chairman and Chief Executive Officer that possess operating expertise and turnaround pedigree,” they said.



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