Kohl’s (NYSE:KSS) stock fell 3% overnight, even though its third-quarter earnings beat expectations. That’s because management withdrew full-year guidance. However, KSS stock is now recovering; shares are back in the green and up 3% for the day.
Looking forward, the company is seeking a new direction after CEO Michelle Gass, who had been under pressure from activists for almost two years, said she was finally leaving. The executive is moving on to become the “CEO-in-waiting” at Levi Strauss (NYSE:LEVI).
Although the Q3 numbers beat estimates, revenue was still down 7% year-over-year (YOY). Net income also came in down 60% from Q3 2021.
Kohl’s Is Now in Macellum Advisors’ Stocking
CEO Michelle Gass tried to improve results at Kohl’s by renting out parts of stores to companies like Planet Fitness (NYSE:PLNT) and making stores a hub for Amazon (NASDAQ:AMZN) returns. Gass also turned the discount retailer into a full-price center for merchandise from Under Armour (NYSE:UAA), Lands’ End (NASDAQ:LE) and LVMH Moët Hennessy’s (OTCMKTS:LVMUY) Sephora.
But Macellum Advisors, which owns about 5% of the company, has had no faith in management. Macellum first got involved with Kohl’s in early 2021. Shares of KSS stock are down roughly 42% since the firm’s initial involvement.
Macellum tried to oust the Kohl’s board last May and recently renewed its call for change. Macellum’s Jonathan Duskin has also repeatedly appeared on TV to attack management.
However, Levi Strauss CEO Chip Bergh is a fan of Michelle Gass, praising the Sephora deal and saying that “she’s been through the wars.” The new interim CEO of Kohl’s, Tom Kingsbury, is now one of three directors added to the Kohl’s board as a compromise with Macellum.
As of this writing, KSS stock trades at around $30 per share with a market capitalization of $3.5 billion and a trailing price-to-earnings (P/E) ratio of about 6 times. It also still has its 50 cent per share quarterly dividend, now yielding 6.7%, but investors seem to believe that will soon go away.
What Happens Next?
Macellum has won, but at an enormous price. With Kingsbury, it now faces the task of trying to get its investment back, probably through real estate sales and an auction of the company. What KSS stock and Kohl’s are worth after all the hullaballoo is uncertain, but that’s probably more than what it’s trading for today.
On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
