Kohl's Corp. (KSS) shares moved sharply higher Tuesday after the struggling retailer said CEO Michelle Gass will step down next month following another set of disappointing quarterly sales that test the group's turnaround plans.
Kohl's said Gass, who started with the group in 2013 before being promoted to the top role four years later, will step down on December. Tom Kingsbury, the former head of Burlington Stores (BURL) who joined the board last year, will serve as interim CEO while a formal search is put in place.
A separate statement from Levi Strauss (LEVI) said Gass will assume the role of president at the iconic clothier on January 2, with the aim of replacing CEO Chip Bergh over the following 18 months.
Kohl's also said that unaudited results for the three months ending on October 29 showed diluted earnings of 82 cents per share -- firmly ahead of the Refinitiv forecast of 65 cents per share -- with same-store sales falling 6.9% from last year, with overall revenues down 7.2%. The group will publish its full set of figures on November 17.
Kohl's warned over the summer that it sees both weakening demand over the back half of the year, with a shift towards value-orientated private brands and fewer shopping trips and smaller ticket purchases "for the foreseeable future".
That will likely pull full-year earnings to a range of between $2.80 and $3.20 per share, well below its prior forecast of between $6.45 to $6.85 per share.
"The Board is grateful for Michelle’s many contributions since she joined the Company in 2013. Under her leadership, the company has driven a strategic transformation, expanded its partnerships and brand portfolio, and supported an inclusive and collaborative culture," said Kohl's chairman Chair Peter Boneparth. "On behalf of all Kohl’s associates, we wish her well in her next endeavor.”
“Tom is highly regarded and perfectly equipped to take the role of Interim CEO, and the Board looks forward to working closely with him and the team to facilitate a smooth transition process and continue driving Kohl’s strategy,” he added.
Kohl's shares were marked 7.5% higher in early trading immediately following news of Gass' departure to change hands at $28.87 each. Levi Strauss shares were marked 1.8% lower at $15.07 each.
Securities and Exchange Commission filings in August indicated that activists investors at Starboard Value have slashed their stake in the struggling retailer following attempts to buy it earlier this year.
The filing showed Starboard has cut around 80% of its 2.59% stake in Kohl's, which it began accumulating in January, over the three months ending in June. The fund now owns around 535,000 shares, according to its 13-F report.
Kohl's ended talks with the Franchise Group (FRG) over a possible $8 billion takeover in July, following similar interest from private equity firms and retail asset investors, including Sycamore Partners, Simon Property Group SPG and Brookfield Asset Management..
