What Can Kohl’s Do to Survive?

Amid ongoing attempts to pull itself out of its hole, Kohl’s Corp. must find a new chief executive officer — and should do it fast considering the store’s shrinking market share and increasing leverage.

But the pickings are slim, considering there are few retail executives with the proper track record of success, a broad enough skill set, or the willingness to take on one of retail’s most difficult turnaround situations, let alone relocate to Menonomee Falls, Wisc., where Kohl’s is based. Potential candidates are likely to be in stabler professional situations and legions of seasoned merchants have aged out of the industry without there being an adequate pipeline of replacements.

Kohl’s last month fired its CEO Ashley Buchanan following an investigation by outside counsel overseen by the board which determined he directed the company to engage in vendor transactions on highly unusual terms with a woman he has been romantically involved with, Chandra Holt, without disclosing what he was doing.

Michael Bender, chairman of Kohl’s board for the past year and a director since July 2019, was appointed interim CEO, a move suggesting a lack of bench strength. He served as president and CEO of Eyemart Express, president at the optical retailer, and held various executive positions at Walmart Inc., including chief operating officer of global e-commerce. Earlier he held senior positions at Cardinal Health Inc., Victoria’s Secret for L Brands and PepsiCo.

The Latest Upheaval

There have been further disruptions at Kohl’s as well.

On Friday, in a Securities and Exchange Commission filing, Kohl’s indicated that Christine Day resigned from the board over disagreeing with the company’s response to a “say-to-pay” recommendation giving shareholders the right to vote on executive compensation. The recommendation was from the International Shareholders Services group, which provides corporate governance and investment solutions and advice, market intelligence and other services to corporate clients. Day was a member of the board’s compensation, audit and finance committees.

In an emailed letter to the board, Day wrote, “I have been continually disappointed with the level of governance process.” In another letter, she wrote that Bender “handles everything, maybe speaks to one person or two, then ‘tells’ everyone what the decision is. Some people know more than others, leading to board members feeling alienated, out of the loop, and worse — developing a culture where real discussions rarely occur.”

Kohl’s responded in its filing by stating, “The company strongly disagrees with the assertions in Ms. Day’s emails.” Day was formerly CEO of Canada’s Luvo Inc. food company, and later Lululemon Athletica, and she was a senior executive at Starbucks.

Prior to Buchanan becoming CEO in January, Tom Kingsbury was CEO for two years. Before Kingsbury, Michelle Gass, current CEO of Levi Strauss & Co., was Kohl’s CEO for five years. Both were unable to pull Kohl’s out of it doldrums despite merchandise, marketing and store changes. Not long before his departure, Kingsbury acknowledged the changes he initiated had failed to resonate with shoppers.

“It’s always a tall order to find someone with a combination of merchandise expertise and operational strength who can also listen to the data, walk the stores, talk to customers, and effectively engage with the team, to create a path to improvement,” said Dana Telsey, CEO and chief research officer of the Telsey Advisory Group.

“The company has now had four incumbents over the past three-and-a-half years, which may signal an underlying governance issue. But even if the outgoing CEO ethical lapse was just a one-off event, Kohl’s must face the fact that there is a dearth of seasoned retail CEO candidates with a superior track record, and an unblemished record of integrity,” observed Craig Johnson, president of Customer Growth Partners.

“The search challenge is heightened further by the host of critical issues that characterize today’s retail environment, all ranging far afield from the typical CEO’s career ladder of merchandising, finance and/or operations to now include supply chain, digital/AI, innovation, human resources and of course, tariffs,” Johnson added. “It is rare to find a CEO candidate with in-depth expertise in even half of these functions, and rarer still that the candidate would be willing to leave a successful post for a company likely to shrink its fleet.”

Slim Pickings

There is not an obvious person for the task. Plenty of retail executives who would at least be checked out are difficult or near impossible to pluck out of their current job situations, though for some senior-level executives, becoming a CEO of a major retail company, albeit a highly troubled one, for their first time could be appealing.

Likely to be on Kohl’s radar are Denise Incandela, executive vice president of fashion for Walmart U.S. She’s credited with adding more than 1,000 national brands to Walmart’s apparel assortment and growing the mass retail giant’s exclusive brand portfolio. Earlier, she was interim CEO at Aerosoles; president, global digital and consumer intelligence and experience management at Ralph Lauren, and at Saks Fifth Avenue as executive vice president, chief marketing officer and executive vice president/president, Saks Direct. However, Incandela has a good thing going at Walmart, which has non-compete clauses, making her difficult to recruit.

Marc Rosen, CEO of the recently formed Catalyst Brands, which consists of JCPenney, Lucky Brand, Aéropostale, Nautica, Eddie Bauer and Brooks Brothers, could be a candidate. He had been CEO of Penney’s, and earlier served as president of Levi Strauss Americas and executive vice president of the corporation. 

Lizanne Kindler, executive chair and CEO of the KnitWell Group, which is comprised of Ann Taylor, Chico’s, Haven Well Within, Lane Bryant, Loft, Soma, Talbots and White House Black Market, has a strong reputation and could be considered for Kohl’s. She was honored by the National Mother’s Day committee at the Outstanding Mother Awards luncheon on Thursday in New York.

Ken Hicks, current CEO of PetSmart, and former CEO of Academy Sports & Recreation, CEO of Foot Locker, and senior executive at JCPenney, has a strong reputation as a merchant and competed against Kohl’s during his career, but just joined PetSmart in October.

Mike Nicholson, president and chief operating officer at J.Crew Group, and a valued executive by CEO Libby Wadle there, could help Kohl’s strengthen its balance sheet and redirect the company.

There’s also Gary Muto, who served as CEO of the former Ascena, which comprised Ann Taylor, Loft and Lane Bryant and earlier served as CEO of the Gap and Banana Republic divisions of Gap Inc. He’s not tied to a job currently.

Then there’s Brendan Hoffman, a former Lord & Taylor CEO who years ago was considered for the top job at Kohl’s, but he’s running both P180, which he formed last year, and Vince, where he became CEO after P180 purchased a majority stake in the brand. Both are caught up in the scandal surrounding rental platform CaaStle and its former CEO Christine Hunsicker.

Marvin Ellison, chairman, president and CEO of Lowe’s, who earlier served as CEO of JCPenney, has strong leadership skills, but he had little success on the soft goods side at Penney’s.

Other top retail executives who could be checked out include Marc Mastronardi, current president of Equinox and former chief stores officer at Macy’s; Hal Lawton, CEO of Tractor Supply Co.; Calvin McDonald, CEO of Lululemon; Jane Elfers, former CEO of The Children’s Place and Lord & Taylor; Nata Dvir, Macy’s chief merchandising officer; Michelle Wlazlo, brand CEO of JCPenney, and Jill Sando, Target Corp.’s executive vice president and chief merchandising officer of apparel and accessories, home and hardlines.

A long shot, suggested by some, is bringing back Kevin Mansell, who spent three-and-a-half decades at Kohl’s. Mansell, who was part of the “A” team that catapulted Kohl’s into a thriving national chain in the 1980s and ’90s, rose to chairman, CEO and president. He retired in 2018.

Turnaround Strategies

Industry experts contacted by WWD stress that Kohl’s needs an experienced merchant at the helm, a sharper brand identity, investment in stores to update them while continuing to close underperforming units, some restructuring of the balance sheet to mitigate growing leverage, and a deeper dive into its customer base and the data to determine the merchandise focus, and what the best national brand and private brand opportunities are. Kohl’s has been overly dependent on big brands that are widely distributed at retail and has been impacted by the rise of Amazon, off-pricers and membership clubs as well as Walmart and Target.

Several experts said the Kohl’s shopping experience has become tired, though the retailer offers some desirable private labels and a value proposition that could stand out further. The “Kohl’s Cash” program has been popular, typically offering $5 or $10 coupons on $50 purchases, and the concept has been copied by other retailers.

Kohl’s could take some of the playbook Buchanan started to develop during his abbreviated tenure, including bolstering proprietary brands, which generally provide greater value for shoppers, better margins, and a point of differentiation. Buchanan’s playbook also called for restoring discontinued categories and deals on coupons within the private brand program, and putting more attention on fine jewelry, home decor, petites, impulse items and continuing to prioritize the Sephora beauty areas.

“The next leader of Kohl’s should be a proven executive from the consumer space with an understanding of the retail model,” said Elaine Hughes, managing director of the EA Hughes division of Solomon Page. “It is critical that this executive have the leadership skills that encompass the ability to study the issues that have affected Kohl’s and listens to the team within the organization that has experienced the journey, without the hubris to assume knowing the answers immediately.

“For retailers to succeed in the national market,” Hughes added, “they need to figure out why their brands should exist. What’s their identity? Kohl’s seems to have lost its way from the fundamentals that [once] made it successful and competitive. Since it’s inception and initial success, business has become more complex due to technology; however, other retailers have been able to integrate technology and adapt to changes in consumer needs.”

Executive search firm Heidrick & Struggles recruited Buchanan to Kohl’s. Questions have been raised on whether Heidrick did enough research on Buchanan before he was hired, but the firm is likely to be on the CEO search again since it owes Kohl’s for the debacle with Buchanan.

Activist Pressures

The CEO turnover at Kohl’s, said one former retail CEO, stems from “having a dysfunctional board. Michelle [Gass] was a really strong executive for Kohl’s. She left the company on her own because the board didn’t support her enough,” particularly when activist shareholders including Macellum Capital Management pushed for board membership and strategy changes, and even a sale of the company. Activists came down hard on Gass and Kohl’s management with their criticism. Ancora Holdings Group, another activist shareholder, demanded the ouster of Gass as well as chairman Peter Boneparth who left Kohl’s in 2024.

Yet Gass did bring some positive changes to the store, in particular launching Sephora shops, better active and casual offerings, and new services and conveniences, though not enough to effect a turnaround. A smaller store prototype she introduced never amounted to much.

“The pressure from activists took the focus off running the business,” said the former retailer.

Another industry source, who also requested anonymity, said: “Michelle went after margin and the dot-com business. They lost sight of who the customer was. Meanwhile, customers wanted brand names with great discounts. That’s what drove them to the store in the first place.” Kohl’s wasn’t being run by a “true merchant,” the source claimed, noting that Gass’ background at Kohl’s and earlier at Starbucks was primarily in marketing, though she did hold the title of chief merchant and chief marketing officer at Kohl’s for awhile before ascending to CEO.

Ancora and other investors reached a settlement with Kohl’s in 2021 that saw three new directors join the board, including Kingsbury, the former CEO of Burlington Stores, the off-price chain, and eventual Kohl’s CEO succeeding Gass, who left to take the Levi’s job. “Kohl’s needed a person with strong digital skills. That wasn’t Kingsbury’s sweet spot. He proved to be the wrong choice,” despite having success at Burlington, the industry source said.

Other sources told WWD that Kohl’s must further pare down its real estate portfolio. The company in January revealed the closure of 27 locations, and it currently operates about 1,100 stores. The company’s San Bernardino, Calif., e-commerce fulfillment center was also closed as a cost-saving measure and because Kohl’s has enabled its stores to fulfill customer orders.

“Tom Kingsbury is one of the best merchants I know. If he couldn’t turn Kohl’s around, I don’t know who can,” said one supplier to Kohl’s who preferred not to be identified. Asked what Kohl’s should do to improve its business, he said, “Kohl’s should shrink its store count, and focus more on e-commerce.”

The supplier also said that Shein and Temu took a bite out of fast fashion, probably killed Forever 21 (which is liquidating) and has impacted the apparel business at Kohl’s and other retailers. But with Shein and Temu cutting their U.S. shipments due to the trade war, “There is a good opportunity for Kohl’s to recapture some junior trend business, fast-fashion items and accessories,” the supplier said. “Kohl’s is very promotional and can move more volume, if they double down on e-commerce, and capitalize on this whole Shein and Temu situation.”

In April, TD Cowen, the investment bank and financial services firm and division of TD Securities, put Kohl’s on a “liquidity watch” indicating that the retailer’s leverage has increased over the past year “given negativity profitability trends amidst a persistent declining sales backdrop.”

Cowen also noted that Kohl’s has $353 million in debt due July that needs to be refinanced. One possible way to improve the balance sheet is to sell a private brand to Authentic Brands Group or another brand management company. Kohl’s portfolio of private brands includes Sonoma, LC Lauren Conrad and FLX. It also sells on an exclusive basis Nine West, which is already owned by ABG.

“If they hook up with ABG, they could get some financial heft back on the balance sheet,” said the supplier.

Stuck in the Middle

“Kohl’s needs to appeal to a wider customer base, by investing in their store base to create an exciting store atmosphere and developing a compelling marketing program to get more dollars from existing customers,” said Telsey.

The trend at Kohl’s hasn’t been positive. Net sales decreased 7.2 percent last year to $15.4 billion. That compares to $20.2 billion in 2018. The stock is currently trading at just over $7, down from between $25 and $27 a year ago. The Kohl’s board in 2022 rejected a a $60-per-share offer from The Franchise Group, valuing the company at $8 billion, and also rejected a subsequent $53-per-share offer.

Kohl’s has a current market cap of $725.8 million, down from $2.7 billion a year ago.

The company is projecting to report more declines for the first quarter, with comparable sales seen down 4.3 to 4 percent, and diluted earnings per share are expected to range from down 24 cents to down 20 cents. Kohl’s plans to announce its first-quarter results on May 29.

Referring to the company’s revolving door of CEOs, Telsey said, “There has to be stability for the employees in order to drive excitement and be able to compete, certainly in this more competitive apparel environment. They have to become a destination of choice.”

“They’re stuck in the middle,” said another former retail senior executive, referring to businesses like Macy’s and Penney’s, which appeal largely to middle-income and working class families but have been squeezed by consumers trading down to off-pricers, dollar stores and outlets, or trading up to higher-priced specialty stores.

“The Kohl’s concept faded. I have no idea who they are today,” said one former retail CEO. “What TJX does, it’s very clear who they are.”