What Next for Kohl’s? Will Macellum Let Up On the Gass?

Having survived the barbarians at the gate who wanted to overthrow its current leadership and take the company into new and unknown directions, Kohl’s is back where it was when the siege began: How does it fix itself?

At this morning’s annual meeting, held virtually without the drama of in-person theatrics, shareholders voted (according to preliminary results released by the company) to retain the existing board of directors who support current management, led by CEO Michelle Gass. A slate of directors nominated by Macellum Advisors, the private equity firm that has been agitating for drastic changes that could include the outright sale of Kohl’s, was defeated and Gass and company now live to see another day.

The first of those days comes up next Thursday, May 19th, when the company reports its next quarterly results. With recent retail results all over the spectrum there will be enormous interest in how Kohl’s did. According to Zacks Investment Research, as reported on the Nasdaq website, “based on six analysts’ forecasts, the consensus EPS forecast for the quarter is $0.78. The reported EPS for the same quarter last year was $1.05.”

This will not be good news for Kohl’s if this is indeed what happens. Macellum is not likely to let up on the Gass since it remains a major shareholder and retains two seats on the reelected board.

Still sitting in front of that board are inquiries from as many as 20 or 25 parties who have expressed interest in buying Kohl’s. The retailer retained Goldman Sachs to sort this all out and it’s unknown how many serious buyers there are, versus tire-kickers. Rumors have surfaced, as yet unconfirmed, that Hudson’s Bay Co. as well as real estate operators — and JCPenney owners – Simon Properties and Brookfield are among the potential suitors.

Kohl’s has said none of the offers it’s received so far have matched the company’s expectations on what it believes it is worth.

But here’s where it gets sticky. Macellum has said offers in the mid-$60-a-share price would be acceptable but today the stock was trading at around $47 at mid-day, down from as much as $62 a share less than a month ago when speculation about a sale was at fever-pitch. That’s a pretty big spread.

The Kohl’s board said it will continue to look at all its options, which are believed to include its sale, the break-up of the company into online and in-store units and the spin-off of its real estate to a separate owner.

“The board remains focused on running a robust and intentional review of strategic alternatives while executing our strategy to drive shareholder value,” Peter Boneparth, Kohl’s newly elected chairman, said in a statement today.

This morning Boneparth, Gass and the rest of management got some breathing room. Unless Kohl’s starts to perform significantly better on its bottom line and with its stock price, it’s not likely to last.

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