Engine Capital, a New York-based hedge fund that owns about a 1% stake in Kohl’s, wants the retailer to consider the two alternatives in an effort to boost the stock price. The hedge fund wrote its desires in an open letter to the retailer’s board members.
The company’s stock price hovered above $51 on Dec. 6, although its value has declined more than 10% since CEO Michelle Gass took the helm in 2018, Engine Capital alleged in its letter.
“Given leadership’s failure to create value through operational excellence and strategic initiatives over long periods of time, it is time for the board to accept the fact that the public market is not appreciating Kohl’s in its current form,” the letter reads. “Even the most patient long-term shareholders cannot be expected to endure the punishing underperformance and perpetual value disconnect seen at Kohl’s. This is why we are urging the board to publicly commit to conducting a full review of strategic alternatives.”
The letter comes as Kohl’s has introduced several new strategies to re-create itself as a lifestyle company, with new brand partnerships, store layouts and assortment refinement.
Separating the e-commerce business from brick-and-mortar retail will help realize more stock value, Engine Capital urged. Online sales revenue is $6.2 billion, fetching a conservative value of $12.4 billion and a share price of at least $75.
Kohl’s noted it is actively examining opportunities to maximize shareholder value.
“Our strong performance this year demonstrates that our strategy is gaining traction and driving results,” a Kohl’s spokeswoman told CNBC. “We appreciate the ongoing dialogue we are having with our shareholders and value their input and perspectives.”