Tomorrow is Kohl’s Big Day

Most annual meetings are pretty boring affairs, often pre-scripted and orchestrated, boilerplate rubber stamps for whatever management determines is the agenda.

Tomorrow’s annual meeting for Kohl’s promises to be anything but.

After months of attacks, counter-attacks and counter-counter-attacks, shareholders for the besieged retailer will gather virtually and have their say about the future of the company…and who gets to run that future.

The board meeting, scheduled for May 11 at 8:00 a.m. central time and being held virtually with no in-person attendance, will not actually produce potential new ownership for Kohl’s nor necessarily reaffirm current management’s position. The big drama will come with the election of a new slate of board of director members and exactly who wins that vote will have a large say in what happens next.

Kohl’s says its outside advisors Goldman Sachs have “engaged” with over 25 individual “parties” and that “select bidders who have put forward preliminary, non-binding proposals” have been given access to certain company information and data. It is not known how many such outsiders are serious potential bidders versus curious tire-kickers but most of the attention is on one group, the private equity firm Macellum, which is proposing its own slate of board members, replacing existing directors.

Current management, led by CEO Michelle Gass and current board member and planned incoming independent chairman Peter Boneparth have been burning up the internet over the past few months to support their position and oppose any incursion from outside investors looking to push them out.

“I’m writing to share my perspective on what’s at stake in this proxy contest,” Boneparth wrote in a letter to shareholders on April 29. “I believe it’s crucial that you understand the effort your Board has put into overseeing Kohl’s strategy, as well as the concrete risks presented by Macellum’s inexperienced slate of directors…Your Board is taking the right steps to maximize value for all shareholders.

“At this pivotal time for Kohl’s, we have the right Board to oversee this engagement and the Company’s strategy, always with the goal of maximizing shareholder value,” he wrote. “We believe a review of your Board’s qualifications alongside those of Macellum’s slate shows that your current leadership is best suited to continue to guide the Company forward.”

Macellum, which holds about a 5% stake in the company, of course sees things differently. “Over the past two years, Macellum has worked tirelessly to help improve the Board and unlock enhanced value for all of the Company’s stakeholders following more than two decades of stagnation,” it wrote shareholders in its own latter on May 1. “Unfortunately, these incremental changes were not enough to help Kohl’s deliver better results and keep pace with other soft goods retailers that began to grow in the post-pandemic environment.”

The letter suggests its slate of outside directors will be the best solution for taking the company in the right direction. “We believe voting (for) Macellum… is the best insurance policy for shareholders, regardless of whether a sale occurs or not. If Kohl’s is on its way to being sold for a fair price, that will be a great outcome for shareholders. Voting for Macellum’s nominees will not change that outcome of a sale.”

Wall Street seems to be unsure of what will happen tomorrow although trading on Tuesday could suggest it sees no change in the company’s management or board membership coming out of the meeting. After its stock has generally traded in the low-$60-range since mid-March it took a precipitous drop on Tuesday, trading at just under $49 by mid-day, well off its 52-week high of nearly $65 and dangerously closer to its trailing-52-week low of $43.67.

By this time on Wednesday, we may not have all the answers on what happens next for Kohl’s. But we may at least find out what won’t happen.

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