Kohl’s Future Is Hanging In the Balance

By Joseph Farago | Published

Many retailers are threatened by the precarious economy these days. Kohl’s is one of those companies trying to move forward but may lean towards selling the company. Wall Street is putting immense pressure on the company to decide how to bring in new revenue.

Last Thursday, Kohl’s sent an intensely worded letter to shareholders ahead of its annual meeting in May. The letter disclosed financial troubles within the country and urged shareholders to a specific investor’s intentions to purchase the company. The investor wanted to install a new board of directors as well, which galvanized Kohl’s executives to push back. The company is still pinned between selling the company or continued financial distress.

The giant retailer has been criticized openly by analysts and economists, highlighting Kohl’s inadequacies around revenue initiatives. The hedge fund Macellum has continually scrutinized Kohl’s underperformance, referring to the company’s unknown strategies for bumping sales. If Kohl’s has no plan to increase its revenue, Macellum encourages Kohl’s to sell its remaining assets. Many economists believe that, with the position that Kohl’s is in currently, the corporation should consider selling.

Macellum isn’t just an outside hedge fund commenting on Kohl’s downfall, but it has a current relationship with the American retailer. Last month, the fund nominated ten new directors to Kohl’s board. With only 13 members on the board, instilling ten brand-new people from outside the company would mean Macellum could move forward with a corporate takeover. This sparked outrage for Kohl’s executives, motivating them to send a letter encouraging its shareholders to reject these nominations.

With the letter, Kohl’s main objective was to showcase the incorrigible and inexperienced nature of the nominees. The letter referred to the nominations as “unqualified,” trying to sway the shareholders to believe these people had no business running a nationwide retailer. Kohl’s also highlighted Macellum’s possible plan, stating that the hedge fund is trying to make a fast sale for monetary gain. The company ended the letter by urging the board to re-elect the longstanding board, or destruction is imminent.

Though Kohl’s is fighting to keep its board in place, the company is not private about its potential to sell. The retailer mentioned that earlier in March meetings were held with more than 20 different buyers. Among those buyers is revered Hudon’s Bay Co., the owner of Saks Fifth Avenue. With massive, lucrative retailers considering a bid for the retailer, the company may land in someone else’s hands before the looming board changeover.

Kohl’s has recently engaged with outside businesses to gain younger crowds strategically. Instead of the company-designed makeup line, the department store teamed up with Sephora, attracting newer customers to the retailer. Kohl’s also recently allowed for processing Amazon returns in-store, giving customers more flexibility with pick-up and drop-off policies. Even with new engagement and strategic relationships, the company is still fumbling from shrinking yearly sales.

Kohl’s is a department store essential to the memory of most Millenials. But as retailers transition to online markets, department stores are struggling to keep up. The aging store is one of those retailers stuck in a transitional phase between upgrading its policies or selling the company entirely.