The Barbarians are Back at Kohl’s Gate….Again

For those who thought the Kohl’s divide-and-conquer saga was over, all one can say is “tsk, tsk, tsk.” Haven’t you seen this game before?

Last week Ancora Holdings – they are described as an activist investor but, I don’t know about you, I still long for the days when these folks were called corporate raiders and guys like Carl Icahn ran rampant – renewed its call for a regime change at Kohl’s with the ouster of its CEO and chairman of the board.

If you think you’ve heard this one before…well, it’s because you have.

Ancora, which according to published reports owns 2.5% of the retailer, has agitated things before, wanting all kinds of changes besides in management, including selling all or some of the company to whoever was interested. Kohl’s appeased Ancora and its cohorts in 2021 by putting some of its supporters on its board and then going through a process to see if a sale was feasible.

Not surprisingly, at least when it comes to exercises like this, Kohl’s management decided a sale was not in its best interests and rejected that plan. What was particularly fascinating was that it then summarily announced it was no longer for sale and it was time to get back to the business of running of retail business.

Apparently Ancora didn’t get that memo because it’s back in the agitation game wanting pretty much what it asked for two years ago.

In the meantime, Kohl’s fortunes – and its stock price – have not fared well at all. The retailer has reported dismal results, including a 63% drop in net income and 8% lower comp store sales in its last quarter. More critical for investors is that a stock that traded as high as $63 a share as recently as March is now floating at around $25 a share. The math is particularly ugly.

There’s more bad news: Moody’s is reviewing its latest credit rating after S&P downgraded Kohl’s to junk status earlier this month.

Kohl’s market cap is now just below the $3 billion level, which means a takeover can be financed so much easier than when its value was double or even triple that…which wasn’t all that long ago. Kohl’s management, led by the aforementioned CEO Michelle Gass and board chairman Peter Boneparth, has been trying to roll out all kinds of programs, from more Sephora shop-in-shops to new-smaller-format stores to assorted merchandising initiatives to build business – not to mention keep the barbarians away from the gates – but so far there’s been little improvement in its performance.

When Gass and Boneparth announced after the last round of incoming fire that the battle was over it was a little like breaking up with your significant other…without them agreeing to any such thing. Kohl’s is once again in play and this time around it’s going to be even harder for the end game not to play itself out.

Because as we all know the game itself is not over until the fat money sings.

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