Kohl’s Says Its 2021 Results Prove the Plan to Maximize Profitability Is Working. One Activist Investor is Still Skeptical.

Kohl’s said on Tuesday that the restructuring of its business has helped it achieve profitability and record earnings per share in 2021.

The retailer said it hit an all-time record of adjusted earnings per share of $7.33 in 2021, with an operating margin of 8.6% that surpassed its goal of 7% to 8% two years ahead of schedule. Kohl’s also posted a better-than expected Q4 EPS of $2.20 versus an expected $2.12. Q4 revenues reached $6.22 billion, short of a predicted $6.54 billion, according to analysts.

In light of the results, Kohl’s shared an optimistic outlook for 2022 and expects net sales to increase 2% to 3% over 2021. The company expects EPS between $7 and $7.50.

“We have a strategic and financial plan that will deliver substantial value,” said Kohl’s CEO and director Michelle Gass in a call with investors on Tuesday. “The board is testing and measuring that plan against other alternatives.”

Shares of Kohl’s were up less than 1% on Tuesday morning. But one activist investor said it sees these results in a different light.

Macellum Advisors, which owns nearly 5% of shares at Kohl’s, said on Friday that it is still skeptical about the future of Kohl’s, given its current board of directors and perfomance compared to retail peers. Last month, Macellum said that it would nominate 10 candidates for election to the company’s board of directors at the annual shareholder meeting this year.

Macellum has also asked Kohl’s to consider taking an offer to sell its business and previously sent an open letter calling out Kohl’s for “mismanaging” the business and “failing to implement necessary operational, financial and strategic improvements.” Kohl’s rejected the offers to acquire the company and said they did “not adequately reflect the company’s value in light of its future growth and cash flow generation.” Kohl’s also instituted a “limited-duration shareholder rights plan” effective until February 2023 to help the company avoid an unwanted takeover.

Macellum is not the only investor to pressure Kohl’s to make changes in recent months. In early December, investor Engine Capital LP, which owns 1% of outstanding shares at Kohl’s, asked the company to separate its physical store business from its e-commerce business. Engine also asked the company to run a market test to determine how much certain financial sponsors would pay per share for the company.

According to Kohl’s, the company’s 2021 results are a testament to the effectiveness of its restructuring process in maximizing profitability.

Gass said Kohl’s continues “to engage with interested parties” and “unsolicited bidders” via Goldman Sachs, which Kohl’s retained to advise its responses to campaigns from activist investors.

“The board is committed to fulfilling its fiduciary duties and will choose the path it believes will maximize the value to shareholders,” Gass said. “So contrary to what others might say, the board’s approach is robust and intentional.”

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