Kohl's responds to activist investor, reaffirms strategy

Yahoo Finance's Brian Sozzi breaks down the situation facing Kohl's amid an activist investor push.

Video transcript

[MUSIC PLAYING]

JULIE HYMAN: Brian Sozzi remains on Kohl's watch, as the company is under activist pressure once again. In fact, you spoke to the activists yesterday, Soz. What did he have to say? What have we learned?

BRIAN SOZZI: Well, first, yesterday, late in the evening, Julie, Kohl's rolling into the muck, which is unlike them when it comes to these activist investors attacking the company. Normally, you have to wonder if the executive folks over at Kohl's have a pulse. But Kohl's saying this in a press release, quote, "We have continued to engage with McCallum since the settlement, which was in April of last year, and are disappointed with the path they have taken in unfounded speculation in their announcement and letter."

Kohl's going on to say in its press release, highlighting their performance over the past year, their stock price, and the institutional knowledge of their board of directors. One source familiar with this situation told me last night that this press release was embarrassing.

Now, I did talk to McCallum's managing partner, Jonathan Duskin, who is leading point on the company's new activist push against Kohl's. Here's what he told me.

- I've seen it a couple of different ways. Obviously, we've done this a long time. And sometimes you have a capable leader that just doesn't have a good supporting cast or doesn't have the right direction from the board, doesn't have the right initiatives, doesn't have the right incentive structure, and doesn't have the right counsel and guidance.

You know we retail, we're not splitting atoms here. But it's complicated. And every initiative seems to have two sides. And I think the quickest way for shareholders to get the greatest return is if we're able to work with Michelle and really put her on the right path to success. But there's a question mark.

BRIAN SOZZI: And who Duskin is referring there, of course, is to Kohl's CEO Michelle Gass. Gass has been the CEO of Kohl's since May 2018. Stock price down about 20% under her watch. And hence, you see an activist like Duskin come into the picture. Engine Capital also now involves. So you have two activists and firms firing away on the company, begging them, essentially, to explore strategic alternatives for the entire business or split off their e-commerce operations, or in Duskin's case, look for, perhaps, to create a REIT, a real estate investment trust for some real estate holdings that value, at least by his math, about $8 billion.

But this is a fascinating campaign, Julie. It's going to come to a head soon. You cannot continue to be attacked by activists at a public company and not do anything about it. And that essentially is what has happened over Kohl's since Duskin settled with the company on April 13 last year.

Really, the only thing Kohl's has done is come out here with a $2 billion share repurchase program. Has not reached out to independent financial advisors to explore strategic alternatives. It's going to have to do something. Something's going to happen soon.

JULIE HYMAN: All right, well, we'll count on you to keep watching and see what that something may be. The suspense, oh, the suspense. All right, thanks so much, Soz.