Kohl’s strikes agreement with activists

Kohl’s striked a deal with a group of activist investors who have been trying to take control of the deponent stores’ board. Yahoo Finance’s Brian Sozzi shares the details.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live. Let's take a look at a stock Brian Sozzi has been watching very closely over the last several years, maybe his whole life. Kohl's, that stock is up about 2% this morning, Brian. Kohl's coming out with an announcement that it has reached an agreement with investors that collectively own about 9% of the company.

Now, there has been an activist situation involved with Kohl's trying to get some changes within the management group. They're going to get a couple of board seats here. Sozzi, I guess, are you surprised that we're not seeing a bigger market reaction on reaching some kind of settlement? Is this implying that there's more to come with this situation?


BRIAN SOZZI: Long-time follower of Kohl's, Myles, not a long-time shopper of Kohl's. They just can't get the job done. But anyway, yes, a little bit of breaking news here. Two new independent directors are going to be added to the already enormous 12-person Kohl's board of directors, so more people in those big digital meetings, trying to make decisions on a company that has not gotten it done. Sales profits, earnings, you name it, going on three years.

Nonetheless, in addition to those two independent directors, one Margaret Jenkins-- she's one of them. She is the former chief-- she was the former chief marketing officer at Denny's and El Pollo Loco, I know a chain that many of our watchers know very well. Also, Thomas Kingsbury, he is the former CEO of Burlington Stores. And the wild card here, Myles, Christine Day. Christine Day is the former long-time CEO of Lululemon. She knows everybody in retail. She was a name that-- she's a name that will be added as an independent director of the board. It was an agreement with investors and Kohl's. She wasn't expected to be added, but she will be added. So now, that 14-person board will go to 15.

Now I did catch up with a source close to the matter just now on this. The activist investors here, McCallum and several others, they are not planning to divest their stake in Kohl's. This source tells me they own about a 9 and 1/2% stake in Kohl's. They're going to stick with it here. They're also-- overall, this is viewed as being a wake up call, the source tells me, to the Kohl's management team.

Whether that wake up call leads to better sales and profits in the years ahead, keep in mind the activist team absolutely shredded Kohl's management when they came out with this letter in February, really attacking how they've been approaching their business, also executive compensation. So there's a lot of bad blood here, but at least for today, some meeting of the minds, so to speak.

MYLES UDLAND: And, you know, Sozz, it's interesting. I mean, really, I should correct myself. I came on saying not a huge market reaction. As we saw over the last year, the stock has pretty much gone up and to the right in an unbroken stretch since that activist first got involved back in the fall. I think it was really some of our first shows together as a new team. We see the stock move starting right in the middle of November there, pretty much continuing unabated through to the present.

But I wonder, Sozz, thinking about another big activist situation underway, GameStop, certainly a lot more with the GameStop story as it relates to the stock price, the way it's become memefied, so on and so forth. But we're seeing some of the outlines there of how many different steps can be taken as you start to accumulate board seats, as you start to get a management team to either agree, or they say that they are going to disagree with kind of your vision for the company. Do you expect the same level of C-level turnover at Kohl's in the coming months that we have seen at GameStop over the last several?

BRIAN SOZZI: Well, it could be coming. And when you add new board members like this-- two of them are supported by the activists-- these folks are being brought on the board to drive change. You know, the activist group thinks Kohl's is $100 stock. The stock's about 63 bucks right now. So at least, in their view, they're hoping there is some big change over the next year. And this is a management team.

Listen, Myles, we've covered Kohl's extensively through the years. They have not gotten the job done. They have been completely tone deaf. And you hop onto these earnings calls. They continue to live in a different planet. But again, the source telling me that this might be a wake up call to the Kohl's team. We wish them well in their journey this year.

MYLES UDLAND: Yeah, and, you know, interesting, you got those two independent directors, but the press release specifically stating that Kohl's identified Christine Day, as you mentioned, former CEO of Lululemon, as someone that they wanted to bring on. You wonder if there's more thought around the role that Day could play at the company.

I'm guessing-- I'm guessing-- she does not want to be the next CEO of Kohl's, but certainly in the building now in those board meetings and a more prominent figure within their strategic direction, again, because Kohl's is-- you know, was an agreeing party to that addition to the board. As they say in their release, they had identified her as someone that they would like to add to the company's board. So, a situation we'll certainly be watching in the months ahead.