Kohl's Corporation · NYSE:KSS
Kohl's — Proxy Contest (March 2021)
20 slides from Kohl's's proxy contest presentation, Mar 29, 2021
Slide 1: Disclaimer — Important Information
Disclaimer — Important Information The presetaton fe escson an general nemsonstprpncs a os Mt nave rea oe spc vested ce, Hana! tuto, ‘Stobiy ene parc ee ta Sct person who fess hs peerabon shout ot be ake ab sve one ets of ay eset oeesen ‘The wens eqressea teen oe ose Lepen Pats Ase Wanapenet, LLC (L
Slide 2: Kohl's
KOHLS
Slide 3: Business Overview
Business Overview 7 KohI's is an omnichannel retailer selling apparel and home goods (Operates 1,162 department stores across the US comprising 88mm sq.ft. (82mm seling sq) COntine and app orders comprise 40% of sales (25% before pandemic) ~ 30mm loyalty members Kohls stote creditcard is used for 55
Slide 4: Financial Highlights
Financial Highlights | Z Koh!’s shares are at $61.68 today, down 1% from $62.00 twenty years ago, while S&P 500 grew 234% os 75 yi fy, pl 1% s Gian NG an one yal SS Shore prce S&P (ndared to KS)
Slide 5: KSS Shares Have Materially Underperformed
KSS Shares Have Materially Underperformed 2 Kohl’s shares have underperformed retail peers and market indices over the last 10 years (share price adjusted for dividends) + Significant destruction of shareholder value over the last ten years + TSR' for one, three, five and ten-year periods lag releva
Slide 6: Merchandise Sales Have Been Stagnant for Years
Merchandise Sales Have Been Stagnant for Years 2 Koh!’s same store sales have been anemic as marketing and merchandising initiatives have failed to produce meaningful impact Merchandise Sates (Sin Mitons) and Same Store Sales (FY 2011 -FY 2019) $19279 gigas s1a.g92 $19,162 $1900 $19.87 g4.505 siee0
Slide 7: Kohl's Has Lost Share to Peers and Retail Industry
Kohl’s Has Lost Share to Peers and Retail Industry 2 Koht’s sales have declined 1% from 2011 to 2019 while net sales for the clothing and clothing accessory store industry has grown 17% and average comparable sales of peers have grown 15% over the same period
Slide 8: Failure to Increase Gross Margin
Failure to Increase Gross Margin Koht’s has failed to increase gross margins — as early as February 2014 the Company was targeting to get back to a 38% gross margin “Over the next 3 years we're trying to get back to where we were in the store gross margin which is roughly ‘a couple hundred basis poi
Slide 9: SG&A Growth Outpaces Revenue Growth
SG&A Growth Outpaces Revenue Growth 2 “Tightly managing SG&A” appears to mean a 1.5% per year increase with no meaningful sales growth 206% 27% $5,705 ° $5,601 x $5,501 $5,490 — J | | — FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 s=ESCEA ($n Milons) _—SG8A as % of Total Revenue ‘SG&A grew at +1.
Slide 10: Advertising Budget Appears High Compared to Peers
Advertising Budget Appears High Compared to Peers The highest advertising % of sales among peers ‘Advertising % of Sales (FY 2019) Rank; 10/10 46% 3.3% rey cps BBY M = a TUX BURL JWN. What is management saying: “As an organization, we have a long history of operational excellence discipline, whichis
Slide 11: Operating Margin is at its Lowest Level in a Decade
Operating Margin is at its Lowest Level in a Decade Operating margins do not reflect anything close to operational excellence Operating Margin % (FY 2011 = FY 2 15% 9.8% 92% | 7 | [ I li o ryan FY 2012 Frama FYaO YAS FY2N6 FYZOIT FYZ20T6 a pertng marin down by 5400p over te Bea period ] What is mana
Slide 12: Significant CapEx Has Generated Poor Returns
Significant CapEx Has Generated Poor Returns 2 KSS has spent $6.6 billion in capital over nine years yet annual operating income declined by nearly $1 billion {Down $945 rata 4.0% J, seer Fang agin Pan sate conte APRCEREARY
Slide 13: Frequently Lowered EPS Guidance
Frequently Lowered EPS Guidance 2 FY 2020 guidance is 26% below initial FY 2019 guidance and 21% below FY 2018 actuals and illustrate weak grasp of operational drivers . EPS Guidance Pay oy, 1 is $518 1 sas wa aaron tnio019 — sa. ace eae GB oso corconn more
Slide 14: The Result Is a Highly Unattractive Valuation Multiple
The Result Is a Highly Unattractive Valuation Multiple Valuation is one of the worst in retail which we believe is due to lack of confidence in execution and poor governance EV/ CY 2021 EBITDA (Based on Consensus EBITDA Estimates) 19.4% 14.5% 135% | i 1 [ i LT BURL OST = TWK—BBBY sn GPs ‘Str SEC Pp
Slide 15: Compensation Overview
Compensation Overview Koh’s has a history of richly rewarding executives for mediocre performance — compensation practices need reform ‘CEO Total Compensation increa ed by 43% 10 ‘While 85,000 Employees Were Furtoughed '$13mm during COVID Ci = [ite Board as filed to appropriately align compensation
Slide 16: Board Skills Matrix
Board Skills Matrix Investor Group Board Candidates soars enter (oe Som fromm Angin | = foamy mr ee = experince parapets Apparat Reta Appore Rett ‘Apparel Reta x x x x x Marketing c Reta | Customer | E-Comm |Operatons) 2m! exp x x x x x x x x x oe ex fens ning Jswpnane A. suet 62 ots Current KohI's
Slide 17: Real Estate — Property Type & Valuation
Real Estate — Property Type & Valuation De’ one ser tel vaneless nm ear | tapes | —— 5a) | ae vaca] [0] we] — co <r cr roses =| a Dereaet [88 ay net [5 iat so08| to ramet |e Ent reas mo eC ina Of T | Faataroent YT 905, [$110,500 000 —— —— ‘Activist Plan focuses on achieving a $3.08 sé Sec: SEC Flag
Slide 18: "The next thing I'm going to talk about is a proxy fight"
“The next thing I'm going to talk about this is something that we are in a proxy fight over right now.” “And so, I'll just give you a little bit of background about Kohl's everyone's probably heard of it. They operate 1,100 department stores across the US, the average department store that they have
Slide 19: 2018 net income compares to 2017 figure after adjusting for tax rate
Source: SEC Filings Note: Net Income adjusted to exclude non-recurring items. 2018 net income compares to 2017 figure after adjusting for decline in corporate tax rate The 2018-2020 LTIP also set Target Levels below the prior year’s actual results, yet the Board still saw fit to apparently manipulat
Slide 20: Board Member Age, Tenure and Experience
Board Member Age Board Tenure Experience Apparel Retail Retail Marketing / Customer Exp. E-Comm Operations Merchandising Capital Markets Board Candidate Age Board Tenure Experience Apparel Retail Retail Marketing / Customer Exp. E-Comm Operations Merchandising Capital Markets Note: (1) Cumulative ch