By Tonya Garcia
Kohl’s Corp. once again responded to activist investors Macellum Advisors GP, LLC on Monday in a letter to shareholders laying out the skills and expertise of the company’s board, which Macellum seeks to replace.
The letter is the latest in the ongoing battle between the department store retailer and Macellum, which owns about 5% of shares outstanding. The back and forth between the two groups has gone on for months, with Macellum accusing the company of “mismanaging” the business and Kohl’s /zigman2/quotes/210414114/composite KSS +2.55% rebuking the criticism by pointing to steps it has taken to evolve, including a partnership with beauty retailer Sephora and an ongoing relationship with Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +3.60%
Kohl’s has also rejected takeover offers , which Macellum has called out. There are reports of a new $9 billion offer from Franchise Group Inc. /zigman2/quotes/210395132/composite FRG -3.36% , parent company to The Vitamin Shoppe and other businesses.
Kohl’s is just one of a number of companies across the consumer space that has gotten the attention of activist investors lately. Certainly, activist investor activity in the consumer space isn’t new. But right now, there are companies coming out of the pandemic in a strengthened position while others float somewhere in the middle of thriving and declining, like department stores, which were on a downward path prior to COVID but have seen some improvement more recently.
Macy’s Inc. /zigman2/quotes/201854387/composite M +4.62% recently completed a strategic review after Jana Partners called for the department store to separate its brick-and-mortar business from its e-commerce business. Macy’s determined that continuing on as a multichannel operation was the better option. Macy’s shares have rallied 54.1% over the last year.
The Wall Street Journal reported in February that Alta Fox Capital Management LLC has pushed for changes at toymaker Hasbro Inc. /zigman2/quotes/201249319/composite HAS +1.01% , including the possible spinoff of the Wizards of the Coast and Digital Gaming unit, which houses Dungeons & Dragons. It was announced in January that Hasbro had lost the license to sell the Disney Princess dolls to rival Mattel Inc. /zigman2/quotes/209819189/composite MAT +2.40%
Cowen analysts wrote in a March report that there are some trends, like the growth of online grocery and e-commerce, premium pet food, and a focus on health and fitness, that will stick around once the pandemic comes to an end. This bodes well for companies like Target Corp. /zigman2/quotes/207799045/composite TGT +2.34% , Walmart Inc. /zigman2/quotes/207374728/composite WMT +1.32% , Nike Inc. /zigman2/quotes/203439053/composite NKE +3.10% and Freshpet Inc. /zigman2/quotes/204676095/composite FRPT +0.85% , analysts say.
At the same time, these changing consumer behaviors are a “historical bankruptcy driver” to Fitch analysts. Fitch published a report on retail bankruptcy last week, finding that there was a decline in filings in 2021. But changing societal trends and strong competition are among the factors that have, in the past, been to the detriment of struggling brands.
While angry exchanges between a business and activist investors may seem like an unwelcome development for companies, all of this activist investor activity signals to Natalie Kotlyar, retail and consumer products industry leader at professional services firm BDO, that there is optimism for certain companies.
“The group in the middle that has potential for success or a turnaround gets the activist attention,” she told MarketWatch.
Companies are currently faced with hurdles that are out of their control, like sky-high inflation, supply chain disruption, and geopolitical upheaval, putting the response from business leaders in sharp focus.
“In [activist investors’] minds, I would imagine, they’re there to help and assist management to rebound from the issues they’re having,” Kotlyar said.
“It might not be the same strategy as management but there’s still a vision for a turnaround.”
The solutions being offered aren’t all getting rave reviews.