Slide 1: Our Solution for Long-Suffering Shareholders
APRIL 2022 OUR SOLUTION FOR LONG-SUFFERING SHAREHOLDERS: 9 A RECONSTITUTED, QUALIFIED BOARD 9 A STRATEGIC OPERATING PLAN TO UNLOCK VALUE 9 A CLEAR, OBJECTIVE REVIEW OF STRATEGIC ALTERNATIVES VOTE THE WHITE PROXY CARD
Slide 2: Disclaimer
DISCLAIMER The materials contained herein (the “Materials”) represent the opinions of Macellum Badger Fund, LP and the other participants named in this proxy solicitation (collectively, “Macellum”) and are based on publicly available information with respect to Kohl's Corporation (the “Company”). Ma
Slide 3: Table of Contents
TABLE OF CONTENTS EXECUTIVE SUMMARY 4 THE CASE FOR URGENT & MEANINGFUL CHANGE 24 - TSR 25 - OVERVIEW 28 - SALES 29 - GROSS MARGIN 33 - SG&A 36 - EBIT 37 - CAPITAL ALLOCATION 39 - CREDIBILITY 40 - VALUATION 50 - PERFORMANCE VISUALIZATION 53 - GOVERNANCE 66 OUR SLATE 78 OUR STRATEGY & PLAN 100 APPENDI
Slide 4: Executive Summary
EXECUTIVE SUMMARY
Slide 5: Why We Are Here: Sweeping Change Is Needed Atop Kohl's
WHY WE ARE HERE: SWEEPING CHANGE IS NEEDED ATOP KOHL’S We believe the current Board… X Has overseen a failed operating plan which has resulted in significant share loss and the latest 3-year plan appears no better X Is entrenched and refused to add a meaningful shareholder for a second year X Is run
Slide 6: Why We Are Here: Our Slate Is the Right Solution at the Right Time
WHY WE ARE HERE: OUR SLATE IS THE RIGHT SOLUTION AT THE RIGHT TIME Sorely needed ownership perspectives to bring a sense of urgency Significant consumer and retail sector expertise that can address market share losses and failed execution Strong M&A and transaction expertise A viable plan for produc
Slide 7: About Macellum
ABOUT MACELLUM Macellum is a long-term holder, with ownership of nearly 5% of Kohl’s Firm Overview • Founded in 2009 by Jonathan Duskin, Macellum Capital Management is an investment firm with deep expertise in the retail and consumer sectors • Macellum invests in undervalued companies we believe can
Slide 8: About Kohl's
ABOUT KOHL’S Kohl’s can be a source of tremendous value if it has a Board with the right leadership and plan BUSINESS SUMMARY COMPANY SNAPSHOT • Kohl’s is an omnichannel retailer focused on apparel, footwear and • Founded: 1962 accessories for women, men and children • Went Public: 1992 • Kohl’s als
Slide 9: Another Wasted Year Following a Lost Decade
ANOTHER WASTED YEAR FOLLOWING A LOST DECADE Kohl’s’ shares have underperformed relevant peers and indices over every applicable time horizon SINCE PRE-COVID (12/31/2019) TSR 3-YEAR TSR 105% 125% 106% 86% 99% 85% 105% 87% 66% 76% 65% 58% 85% 48% 65% 45% 45% 25% 6% 25% 5% 3% 5% (15%) (3%) (15%) (35%)
Slide 10: The Current Board Has Lost Credibility
THE CURRENT BOARD HAS LOST CREDIBILITY 2022 Unaffected “Greatness Agenda”1 Share Price Stagnation stock price (01/14/22) announced $90 “Greatness (10/29/14) Agenda COVID Economic $80 Evolution” Recovery 2020 announced $70 strategy (10/27/15) announced $60 (10/20/20) $50 $40 $30 2022 $20 strategy ann
Slide 11: The Current Board Has Lost Credibility (Cont.)
THE CURRENT BOARD HAS LOST CREDIBILITY (CONT.) Poor Governance and Oversight REFUSAL TO ADOPT UNIVERSAL IMPLEMENTATION OF TWO- OPAQUE STRATEGIC PROXY CARD TIERED POISON PILL ALTERNATIVES REVIEW PROCESS POOR EXECUTIVE LACK OF DIVERSITY AT INEFFECTIVE CAPITAL COMPENSATION POLICIES EXECUTIVE LEVEL ALLO
Slide 12: The Current Board Has Lost Credibility (Cont.)
THE CURRENT BOARD HAS LOST CREDIBILITY (CONT.) Kohl’s has misrepresented several key facts pertaining to its performance and Macellum’s campaign for change x MYTH: Kohl’s stated that its March 7 investor day was “well-received” 9 THE REALITY: The Company’s much-touted analyst day and the release of
Slide 13: New 3-Year Plan Would Result in EBIT Declines and Has Meaningful Risk
NEW 3-YEAR PLAN WOULD RESULT IN EBIT DECLINES AND HAS MEANINGFUL RISK Kohl’s stock dropped 13% the day of its analyst day and release of the 3-year plan Disappointing Investor Day1 Estimated Cumulative CapEx vs. Annual EBIT ($s in millions) • Kohl’s 3-year plan resulted in analyst projecting a 19% d
Slide 14: Even If Kohl's Hits Its Targets, the Stock Will Likely Not Achieve Reported Offer Prices
EVEN IF KOHL’S HITS ITS TARGETS, THE STOCK WILL 01. 02. 03. 04. LIKELY NOT ACHIEVE REPORTED OFFER PRICES PERFORMANCE (VALUATION) And under many scenarios, Kohl’s could be substantially lower Kohl's EPS 2024 Targets • Kohl’s, on an unaffected basis, was trading at a 6.5x P/E. Mid-point $8.20 Given th
Slide 15: The "New Strategy" Is More of the Same
THE “NEW STRATEGY” IS MORE OF THE SAME Ms. Gass was the architect of the “Greatness Agenda” in 2014, and in recent years, little has changed with the strategy or the stock price • In October 2014, Kohl’s announced its “Greatness Agenda”, which 2014 failed to even come close to meeting its targets or
Slide 16: The Current Strategic Review Does Not Appear to Be Credible
THE CURRENT STRATEGIC REVIEW DOES NOT APPEAR TO BE CREDIBLE 16 Source: Company SEC Filings, Bloomberg LP
Slide 17: Indicative Timetable of a Sale Process
INDICATIVE TIMETABLE OF A SALE PROCESS WOULD POINT TO SUFFICIENT TIME TO CONSUMATE A TRANSACTION It appears to us that the process has been designed to provide the illusion of a sale process only to give incumbent directors the aircover to say the process is on-going and should not be disrupted by t
Slide 18: Kohl's Is at a Fork in the Road
KOHL’S IS AT A FORK IN THE ROAD We believe substantial and urgent change is clearly needed – or else value will be permanently impaired One year following Macellum’s campaign for incremental change on the Board, Kohl’s has failed to create value for shareholders and experienced meaningful underperfo
Slide 19: Our Slate
OUR SLATE We assembled a slate with the experience, expertise and ownership mentality required to deliver the long-term, value-enhancing change that Kohl’s needs GEORGE JONATHAN FRANCIS KEN PAMELA J. STACY BROKAW DUSKIN DUANE EDWARDS HAWKINS 9 Capital Markets Acumen 9 Sector Expertise 9 Sector Exper
Slide 20: Our Slate (Cont.)
OUR SLATE (CONT.) We assembled a slate with the experience, expertise and ownership mentality required to deliver the long-term, value-enhancing change that Kohl’s needs JEFFREY A. PERRY M. CYNTHIA S. KENNETH D. CRAIG M. KANTOR MANDARINO MURRAY SEIPEL YOUNG 9 Sector Expertise 9 Sector Expertise 9 Se
Slide 21: Overview: Standalone Plan Pillars
OVERVIEW: STANDALONE PLAN PILLARS With a materially refreshed Board that includes sector expertise and shareholder perspectives, we believe Kohl’s can achieve significantly better results MEANINGFULLY GROW INCREASE GROSS LEVERAGE SG&A COSTS SALES MARGIN IMPROVE CAPITAL ALIGN EXECUTIVE ALLOCATION COM
Slide 22: Overview: Our Vision for Improving Kohl's
OVERVIEW: OUR VISION FOR IMPROVING KOHL’S Our slate would assess all paths to maximizing shareholder value, including sale opportunities versus a new strategic plan for pursuing market share and earnings growth Operational Financial & Strategic 9Culture of strong execution 9 A more open and transpar
Slide 23: Kohl's Has Tremendous Value Creation Potential
KOHL’S HAS TREMENDOUS VALUE CREATION POTENTIAL Accretion from Gross Margin – Accretion from FY 2024 Adjusted FY 2021 Adjusted Incremental Incremental Credit SG&A Leverage Prior Interest Share Repurchase FY 2024 Sourcing & Tax Delta potential $4B Sale EPS EPS Sales Revenue (Incl. D&A) Share Impact Im
Slide 24: The Case for Urgent & Meaningful Change
THE CASE FOR URGENT & MEANINGFUL CHANGE PERFORMANCE | STRATEGY | OPERATIONS | GOVERNANCE
Slide 25: If You Invested $100 in Kohl's 10 Years Ago
IF YOU INVESTED $100 IN KOHL’S 10 YEARS AGO… 01. 02. 03. 04. PERFORMANCE (TSR) 700 Kohl's Retail Peers ISS Peers XRT S&P 500 Kohl’s “Momentum”? 600 500 400 300 200 100 0 1/14/11 1/14/12 1/14/13 1/14/14 1/14/15 1/14/16 1/14/17 1/14/18 1/14/19 1/14/20 1/14/21 1/14/22 ….IT WOULD BE WORTH ABOUT THE SAME
Slide 26: Looking at Kohl's Performance Pre-COVID Neutralizes the Post-COVID Momentum
12/31/19 1/15/20 1/30/20 2/13/20 2/28/20 3/13/20 3/27/20 Source: Bloomberg LP– Data as of 1/14/2022 4/13/20 4/27/20 5/11/20 5/26/20 6/9/20 6/23/20 shareholders in the future 7/8/20 7/22/20 8/5/20 8/19/20 9/2/20 9/17/20 Kohl's 10/1/20 10/15/20 10/29/20 11/12/20 11/27/20 12/11/20 Retail Peers 12/28/20
Slide 27: Kohl's Has Underperformed Department Store Peers Since October 2020 Analyst Day
KOHL’S HAS UNDERPERFORMED DEPARTMENT STORE 01. 02. 03. 04. PEERS SINCE ITS OCTOBER 2020 ANALYST DAY PERFORMANCE (TSR) 900 “Well, one thing we certainly have seen is that we have been able to take 800 share in the more traditional department store sector... I think for 700 Kohl's, it's really market
Slide 28: Persistent Inability to Grow Sales & Reverse Operating Profit Decline
PERSISTENT INABILITY TO GROW SALES & 01. 02. 03. 04. REVERSE OPERATING PROFIT DECLINE PERFORMANCE (OVERVIEW) Macellum believes these problems are solvable but require a Board with relevant expertise and experience that will hold management accountable 2011 2012 2013 2014 2015 2016 2017 2018 2019 202
Slide 29: Sales Have Stagnated for Years
SALES HAVE STAGNATED FOR YEARS 01. 02. 03. 04. PERFORMANCE (SALES) Over the last 10 years, Kohl’s’ merchandise sales have not grown despite an increase in sales due to the pandemic and the significant opportunity to gain market share driven by competitors’ store closures Merchandise Sales ($ in Mill
Slide 30: Kohl's Lost Market Share to Peers as Trends Deteriorated
AS THE ECOMONY REOPENED, KOHL’S LOST MARKET 01. 02. 03. 04. SHARE TO PEERS AS TRENDS DETERIORATED PERFORMANCE (SALES) We believe that management is often overoptimistic Q1 v 19 Q2 v 19 Q3 v 19 Q4 v 19 FY 21 vs. 19 and does not have a handle on the business Act. Act. Act. Act. Act. AEO 17% 15% 19% 15
Slide 31: Operational & Strategic Missteps Have Caused Market Share Losses
WE CONTEND OPERATIONAL & STRATEGIC 01. 02. 03. 04. MISSTEPS HAVE CAUSED MARKET SHARE LOSSES PERFORMANCE (SALES) Kohl’s’ market share losses are not a new phenomenon; over the past 10 years, the broader industry has grown 42% while Kohl’s has fallen behind 142% KSS Relative Same Store Sales vs. Peers
Slide 32: Sales Have Declined Despite a Significant Opportunity to Seize Market Share
SALES HAVE DECLINED DESPITE A SIGNIFICANT 01. 02. 03. 04. OPPORTUNITY TO SEIZE MARKET SHARE PERFORMANCE (SALES) Kohl’s’ sales have not grown despite the multibillion-dollar market share gap left from other retailers entering bankruptcy “[…] as you just said, the marketplace is changing. We're stayin
Slide 33: Failure to Increase Gross Margin Since 2011
FAILURE TO INCREASE GROSS MARGIN SINCE 2011 01. 02. 03. 04. PERFORMANCE (GROSS MARGIN) The Company has been targeting gross margin growth since 2014 without success • In February 2014, Kohl’s began targeting a 38% gross margin. While the Company did achieve this target in 2021 due to a lack of inven
Slide 34: Fulfillment Costs Are Up Significantly While Sales Have Declined
FULFILLMENT COSTS ARE UP SIGNIFICANTLY 01. 02. 03. 04. WHILE SALES HAVE DECLINED PERFORMANCE (GROSS MARGIN) Kohl’s increased distribution center capacity significantly while sales declined and 30% migrated online. As a result, Kohl’s runs a DC network that is materially under optimized and inefficie
Slide 35: Kohl's Has Still Trailed Retail Peers Despite Gross Margin Growth
DESPITE GROSS MARGIN GROWTH FROM 2019, 01. 02. 03. 04. KOHL’S HAS STILL TRAILED RETAIL PEERS PERFORMANCE (GROSS MARGIN) Gross Margin % Gross Margin Basis Point Growth 45.0% 2019-2021 40.0% 38.1% 37.8% 35.7% 34.2% 35.0% 31.1% 31.7% 238 30.0% 25.0% 358 20.0% 15.0% 10.0% 5.0% OVER 50% 0.0% BELOW PEERS
Slide 36: SG&A Growth Has Outpaced Revenue Growth
SG&A GROWTH HAS OUTPACED REVENUE 01. 02. 03. 04. GROWTH PERFORMANCE (SG&A) Kohl’s SG&A as a percentage of sales is projected to grow ~199 basis points to 29.4% in 2022, the Company has deleveraged SG&A since 2017 and consensus and guidance show this growth will continue Total SG&A as a % of Revenue
Slide 37: Declining Sales and Deleveraging Have Resulted in a Material Drop in EBIT
DECLINING SALES AND DELEVERAGING HAVE 01. 02. 03. 04. RESULTED IN A MATERIAL DROP IN EBIT PERFORMANCE (EBIT) Kohl’s’ EBIT has steadily declined 22% over the last decade – while management claims its “strategy is improving profitability”1 Further, EBIT Dollars are expected to decline $716 million or
Slide 38: EBIT Has Declined and Significantly Trailed Peers
EBIT HAS NOT ONLY DECLINED BUT ALSO 01. 02. 03. 04. SIGNIFICANTLY TRAILED PEERS PERFORMANCE (EBIT) Kohl’s’ EBIT decline contrasts to material growth in peers’ EBIT over the last decade and since before the pandemic started EBIT, Adj. Growth Growth 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20
Slide 39: Material Capital Expenditures Have Not Benefited EBT
MATERIAL CAPITAL EXPENDITURES HAVE NOT 01. 02. 03. 04. BENEFITED EBT PERFORMANCE (CAPITAL ALLOCATION) Kohl’s has spent a cumulative $7.5 billion in CapEx since 2011 and is projected to spend a total of $8.4 billion by 2022. EBT has decreased 24% since 2011 and is projected to fall by 39% through 202
Slide 40: A History of Overly Optimistic Prognostications
A HISTORY OF OVERLY OPTIMISTIC 01. 02. 03. 04. PROGNOSTICATIONS THAT DON’T MATERIALIZE PERFORMANCE (CREDIBILITY) “Our ongoing focus on the key pillars of our Greatness Agenda and our 2 key priorities of driving traffic and operational excellence continue to deliver strong momentum across the busines
Slide 41: Strategic Déjà Vu: Same Strategy Since 2014 With No Gains
STRATEGIC DÉJÀ VU – THE BOARD HAS OVERSEEN 01. 02. 03. 04. THE SAME STRATEGY SINCE 2014 WITH NO GAINS PERFORMANCE (CREDIBILITY) “Now let me go into more detail around our key initiatives to “…bolder pivot to be more relevant and repositioning the company from a drive top line growth beginning with p
Slide 42: Why Will the Focus on Active Wear Work This Time?
WHY WILL THE FOCUS ON ACTIVE WEAR WORK 01. 02. 03. 04. THIS TIME? PERFORMANCE (CREDIBILITY) Despite identifying Active as a potential sales driver over eight years ago, total sales have remained stagnant as the category has not made a significant enough contribution to generate overall topline growt
Slide 43: Management Has Historically Overpromised
MANAGEMENT HAS HISTORICALLY OVERPROMISED 01. 02. 03. 04. PERFORMANCE (CREDIBILITY) In March 2019, management touted the Company’s path to improving sales growth, only to turn around two-and-a-half months later and report the worst same-store sales results in the last 11 quarters MARCH 5, 2019 MAY 21
Slide 44: Management Has Historically Overpromised (Cont.)
MANAGEMENT HAS HISTORICALLY 01. 02. 03. 04. OVERPROMISED (CONT.) PERFORMANCE (CREDIBILITY) Kohl’s could not get back to its 2019 numbers despite management’s continued claim of how well the Company was positioned for topline growth After these optimistic proclamations, Kohl’s experienced one of the
Slide 45: Comparison of Financial Goals From Each New Strategic Plan
COMPARISON OF FINANCIAL GOALS FROM EACH 01. 02. 03. 04. “NEW” STRATEGIC PLAN PERFORMANCE (CREDIBILITY) Goals of 2014 “Greatness Goals of 2020 Plan Goals of 2022 Plan Agenda” • Low-Single-Digit Sales Growth • Sales $21 Billion • Sales “Unknown” • Operating Margin 7-8% • Operating Margin 9% • Operatin
Slide 46: Kohl's Plan, Absent Share Repurchases, Will Result in Declining Earnings
WE BELIEVE THAT KOHL’S’ PLAN, IN THE ABSENCE OF SHARE 01. 02. 03. 04. PERFORMANCE REPURCHASES, WILL RESULT IN DECLINING EARNINGS (CREDIBILITY) • During its 2022 Analyst Day, Kohl’s outlined its long-term financial plan, which includes low-single digital sales growth driven by $2.5bn in capital expen
Slide 47: Kohl's Does Not Appear to Increase Operating Income
KOHL’S DOES NOT APPEAR TO INCREASE OPERATING 01. 02. 03. 04. INCOME PERFORMANCE (CREDIBILITY) • Kohl’s 3-YR plan implies roughly $8.22 in EPS at the midpoint in 2024 • Even with ~$1.12 in earnings growth from share repurchases, 12% earnings growth over three years is a disappointing outcome for shar
Slide 48: Kohl's Plans to Spend $2.5 Billion+ on CapEx Through 2024
KOHL’S PLANS TO SPEND $2.5 BILLION+ ON CAPEX THROUGH 2024 WHILE 01. 02. 03. 04. CONSENSUS (19%) AND GUIDED EBIT (11%) ARE EXPECTED TO DECREASE PERFORMANCE (CREDIBILITY) Kohl’s plans to spend ~$2.5 billion on cumulative CapEx through the end of 2024 and guidance has resulted in EBIT estimates decreas
Slide 49: Investors Cannot Hope Current 3-Year Plan Is Conservative
INVESTORS CANNOT HOPE THAT KOHL’S’ 01. 02. 03. 04. CURRENT 3-YEAR PLAN IS CONSERATIVE PERFORMANCE (CREDIBILITY) Prior to the unpredictable tailwinds of the economy reopening that enabled all retail peers to exceed their initial guidance, Kohl’s was unable to accurately plan the business and guide in
Slide 50: Declining Performance & Lack of Credibility Have Resulted in Industry-Low Valuation
WE BELIEVE DECLINING PERFORMANCE & LACK OF 01. 02. 03. 04. CREDIBILITY HAVE RESULTED IN INDUSTRY-LOW VALUATION PERFORMANCE (VALUATION) Under the current Board, Kohl’s’ valuation has contracted meaningfully versus relevant peers – now delivering one of the worst valuations in retail – which we believ
Slide 51: Since Our Campaign Last Year, Kohl's Valuation Has Contracted
SINCE OUR CAMPAIGN LAST YEAR, KOHL’S’ VALUATION 01. 02. 03. 04. HAS CONTRACTED PERFORMANCE (VALUATION) Not only is the Company’s valuation the lowest among its peers, but Kohl’s valuation has also deteriorated meaningfully over the last year as investors appear to be losing confidence in the future
Slide 52: Institutional Support for Kohl's Is Waning
INSTITUTIONAL SUPPORT FOR KOHL’S IS WANING 01. 02. 03. 04. PERFORMANCE (VALUATION) The Board believes there is meaningful institutional support for management, but we do not see it – analysts are more skeptical now than when we entered into a settlement agreement with Kohl’s in April 2021 BofA place
Slide 53: Performance Visualization
KOHL’S’ POOR PERFORMANCE IS EVIDENT IN THE FINANCIAL METRICS. THE FOLLOWING SECTION ILLUMINATES THE PROBLEMS FROM THE CUSTOMER’S LIKELY PERSPECTIVE THAT LED TO DECLINING SALES, MARKET SHARE LOSS AND MARGIN COMPRESSION. IN CONJUNCTION WITH THIS SECTION, PLEASE VIEW OUR VIDEO. 53
Slide 54: Low Employee Engagement Likely Leads to a Culture of Disenfranchisement
LOW EMPLOYEE ENGAGEMENT LIKELY LEADS TO A 01. 02. 03. 04. CULTURE OF DISENFRANCHISEMENT OPERATIONS (PERFORMANCE VISUALIZATION) Kohl’s ranks in the bottom 40% of companies in terms of its employee net promoter score, which we believe is due to a lack of strong leadership Lack of Communication Loss of
Slide 55: Poor Customer Experience Leads to Missed Sales
POOR CUSTOMER EXPERIENCE LEADS TO MISSED 01. 02. 03. 04. SALES OPERATIONS (PERFORMANCE VISUALIZATION) Recent customer feedback highlights customers’ frustration with limited product assortment, confusing promotional discounts, poor service and an inaccessible website • Kohl’s scores in a range of 1-
Slide 56: Poor Store Standards & Presentation
POOR STORE STANDARDS & PRESENTATION 01. 02. 03. 04. OPERATIONS (PERFORMANCE VISUALIZATION) Kohl’s’ stores struggle with details such as maintenance, size organization and product placement in many departments SLOW INVENTORY TURN AND POOR PLANNING AND ALLOCATION HAVE LED TO OVERBUYING, WHICH CAUSES A
Slide 57: Promotions Likely Frustrate and Confuse Shoppers
PROMOTIONS LIKELY FRUSTRATE AND CONFUSE 01. 02. 03. 04. SHOPPERS OPERATIONS (PERFORMANCE VISUALIZATION) “We're simplifying our pricing and promotional strategies and this is really resonating with our customers. We showed more simplified offers to new customers to reduce complexity.” – Jill Timm on
Slide 58: Promotions Likely Frustrate and Confuse Shoppers (Cont.)
PROMOTIONS LIKELY FRUSTRATE AND CONFUSE 01. 02. 03. 04. SHOPPERS (CONT.) OPERATIONS (PERFORMANCE VISUALIZATION) Customers seem to struggle to understand what they are actually paying for and whether they are getting a real deal Store-Wide Discounts x Store-wide coupons, discounts and “Kohl’s Cash” d
Slide 59: Ineffective Marketing & Advertising
INEFFECTIVE MARKETING & ADVERTISING 01. 02. 03. 04. OPERATIONS (PERFORMANCE VISUALIZATION) With more than $850 million in advertising expenses, we believe Kohl’s should be producing better search results for its core products, which it has in abundance Top ads for “jeans” Google search Source: Incog
Slide 60: Kohl's Fails to Support Sephora With Marketing
DESPITE SEPHORA BEING ONE OF KOHL’S’ MOST IMPORTANT 01. 02. 03. 04. INITIATIVES, THE COMPANY FAILS TO SUPPORT IT WITH OPERATIONS MARKETING – JCPENNEY IS LISTED BEFORE KOHL’S! (PERFORMANCE VISUALIZATION) Source: Incognito Google Search on Week of April 4th, 2022. 60
Slide 61: Kohl's Trails Peers in Social Media Engagement
DESPITE ATTEMPTING TO COURT YOUNGER AUDIENCES, 01. 02. 03. 04. KOHL’S TRAILS PEERS IN SOCIAL MEDIA ENGAGEMENT OPERATIONS (PERFORMANCE VISUALIZATION) Kohl’s emphasized its marketing efforts to reach younger customers, but currently has half the Instagram followers of Nordstrom and 30% fewer followers
Slide 62: Confusing Online Shopping Experience Frustrates Customers
CONFUSING ONLINE SHOPPING EXPERIENCE 01. 02. 03. 04. FRUSTRATES CUSTOMERS OPERATIONS (PERFORMANCE VISUALIZATION) Site navigation to find and locate product is difficult, discounts are confusing and shipping is slow and inaccurate, all of which leads to an unhappy customer Poor Site Navigation & Ship
Slide 63: Split Shipments Continue to Drag Gross Margins Lower
SPLIT SHIPMENTS CONTINUE TO DRAG GROSS 01. 02. 03. 04. MARGINS LOWER OPERATIONS (PERFORMANCE VISUALIZATION) Many years after identifying the split shipment problem, Kohl’s has still not fixed it • For example, an order of eight SKUs led to two shipments, including very similar Men’s Socks, is packed
Slide 64: Planning and Allocation Problems Lead to Markdowns and Margin Pressure
PROBLEMS IN PLANNING AND ALLOCATION OFTEN LEAD TO 01. 02. 03. 04. OPERATIONS SIGNIFICANT MARKDOWNS AND GROSS MARGIN PRESSURE (PERFORMANCE VISUALIZATION) These pictures, recently taken, do not suggest Kohl’s lacked inventory needed to drive sales in Q4 Put simply, Kohl’s has plenty of inventory Howev
Slide 65: Planning and Allocation Problems Can Lead to Missed Sales
PROBLEMS IN PLANNING AND ALLOCATION CAN 01. 02. 03. 04. LEAD TO MISSED SALES OPPORTUNITIES OPERATIONS (PERFORMANCE VISUALIZATION) Lack of rigorous and analytical planning leads to out-of-stock issues in everyday basic items Women’s Sonoma Jeans is one of Kohl’s top items Out of Stock in sizes 10,12,
Slide 66: $8 Billion in Real Estate Sits Idle on Balance Sheet
$8 BILLION IN REAL ESTATE SITS IDLE ON 01. 02. 03. 04. BALANCE SHEET OPERATIONS (GOVERNANCE) The Board could have a significant opportunity to monetize the Company’s real estate assets and make meaningfully accretive repurchases Not only does Kohl’s trade at the lowest valuation among its peers on E
Slide 67: Without Sales Lift, Sephora Could Prove Negative to EBIT
WITHOUT A MEANINGFUL INCREASE IN THE SALES LIFT, SEPHORA 01. 02. 03. 04. COULD PROVE TO HAVE A NEGATIVE EBIT IMPACT OPERATIONS (GOVERNANCE) While Sephora is likely to drive traffic and is demonstrating a mid-single-digit lift to sales, we are concerned about its ultimate accretion to the bottom line
Slide 68: Significant Boardroom Gaps
SIGNIFICANT BOARDROOM GAPS 01. 02. 03. 04. OPERATIONS (GOVERNANCE) Denotes inadequacy Lack of retail sector expertise from the incumbent Board, with the exception of * Denotes executive committee Macellum’s 2021 nominees, has contributed to poor oversight Bender Boneparth* Cossett Day Floyd Gass* Mi
Slide 69: Executive Committee Is Long-Tenured Incumbents Without Retail Expertise
EXECUTIVE COMMITTEE IS COMPRISED OF LONG- 01. 02. 03. 04. TENURED INCUMBENTS WITHOUT RETAIL EXPERTISE OPERATIONS (GOVERNANCE) From the guidelines: “…Executive Committee which shall have and may exercise all of the powers and authority of the Board in the management of the Company’s business and affa
Slide 70: Poorly Run Strategic Alternatives Process
POORLY RUN STRATEGIC ALTERNATIVES 01. 02. 03. 04. PROCESS OPERATIONS (GOVERNANCE) The Board appears more focused on undermining a credible sale process rather than evaluating potential pathways to shareholder value creation x The Company hastily rejected indications of interest from two credible and
Slide 71: Board Approved an Onerous Poison Pill
THE BOARD APPROVED AN ONEROUS POISON 01. 02. 03. 04. PILL THAT SEEMS LIKELY TO CHILL A PROCESS OPERATIONS (GOVERNANCE) Shareholders will never know what might have occurred in the absence of this pill • Following reported expressions of interest in acquiring the Company, the Board adopted what appea
Slide 72: Inability to Align Management With Shareholders
INABILITY TO ALIGN MANAGEMENT WITH 01. 02. 03. 04. SHAREHOLDERS OPERATIONS (GOVERNANCE) The Board’s compensation plan continually rewards executives despite years of underperformance by consistently including short- and long-term targets for bonuses that are below prior years’ results x Annual Incen
Slide 73: Inability to Align Management With Shareholders (Cont.)
INABILITY TO ALIGN MANAGEMENT WITH 01. 02. 03. 04. SHAREHOLDERS (CONT.) OPERATIONS (GOVERNANCE) LTIP goals were consistently set lower and rewarded declining results • The Board set net income lower targets in 2017 and 2018 by (23)% and (9)%, respectively, versus the prior year’s actual results • Ne
Slide 74: Inability to Align Management With Shareholders (Cont.)
INABILITY TO ALIGN MANAGEMENT WITH 01. 02. 03. 04. SHAREHOLDERS (CONT.) OPERATIONS (GOVERNANCE) Kohl’s’ annual incentive plan awarded Ms. Gass a maximum 250% bonus in 2017 despite operating income that was (9)% below 2015. The following year, she received a 250% bonus for growing operating income 3.
Slide 75: Inability to Align Management With Shareholders (Cont.)
INABILITY TO ALIGN MANAGEMENT WITH 01. 02. 03. 04. SHAREHOLDERS (CONT.) OPERATIONS (GOVERNANCE) CEO total compensation has increased 37% to $12.9 million from $9.4 million in 2011, while EBIT over the same period has declined 22% from $2,158 million to $1,680 million in 2021 The CEO has been paid a
Slide 76: Inability to Align Management With Shareholders (Cont.)
INABILITY TO ALIGN MANAGEMENT WITH 01. 02. 03. 04. SHAREHOLDERS (CONT.) OPERATIONS (GOVERNANCE) The Board revised the 2018-2020 LTIP plan that resulted in a payout for executives x In January 2021, long after the economy showed signs of recovering from the COVID pandemic and when it was known to the
Slide 77: Despite ESG Claims, Kohl's Incurred Largest Greenwashing Penalty
DESPITE ALL OF KOHL’S’ ESG CLAIMS, IT INCURRED 01. 02. 03. 04. THE LARGEST PENALTY FOR GREENWASHING OPERATIONS (GOVERNANCE) “The Commission has asked the court to order Kohl’s and Walmart to stop making deceptive green claims or using other misleading advertising, and pay penalties of $2.5 million a
Slide 78: Our Slate
OUR SLATE
Slide 79: How Our Nominees Stack Up
HOW OUR NOMINEES STACK UP 01. 02. 03. 04. OUR SLATE & DIRECTORS Macellum has nominated a slate of 10 highly qualified and experienced director candidates Brokaw Duskin Duane Edwards Hawkins Kantor Mandarino Murray Seipel Young Public Board Experience Apparel Sector Expertise Retail Sector Expertise
Slide 80: George Brokaw
GEORGE BROKAW 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Mr. Brokaw's background as an investment banker, M&A expert and public company director can help the Board run a credible sale process and explore all paths to enhanced value creation • Currently a director at DISH Network Corporation (N
Slide 81: Endorsements for Mr. Brokaw
ENDORSEMENTS FOR MR. BROKAW 01. 02. 03. 04. OUR SLATE & DIRECTORS “ "George's background as a banker, lawyer and investor enables him to see complex corporate situations from various “George has been invaluable in helping craft a long- term strategy for our business and has provided perspectives, re
Slide 82: Jonathan Duskin
JONATHAN DUSKIN 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Mr. Duskin’s capital markets acumen, significant retail sector investing experience and independent shareholder perspectives can help the Board pursue and evaluate all paths to maximizing value for shareholders • Chief Executive Office
Slide 83: Endorsements for Mr. Duskin
ENDORSEMENTS FOR MR. DUSKIN 01. 02. 03. 04. OUR SLATE & DIRECTORS Jon and I have worked closely over many years and he is a “ positive and constructive force for collegiality and progress in the boardroom. He appropriately challenges management by demanding financial rigor, operational excellence an
Slide 84: Francis Ken Duane
FRANCIS KEN DUANE 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Mr. Duane’s more than three decades of experience as a C-suite executive at leading public retailers can help management establish a new strategic plan that pursues greater operational efficiency, more aligned executive compensation
Slide 85: Endorsements for Mr. Duane
ENDORSEMENTS FOR MR. DUANE 01. 02. 03. 04. OUR SLATE & DIRECTORS “Ken develops long-term working relationships built on trust and mutual respect. He applies his strong business acumen to all situations. This skill, along with Ken’s clear understanding of merchandising, has aided him in building many
Slide 86: Pamela J. Edwards
PAMELA J. EDWARDS 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Ms. Edwards’ business and financial planning expertise and extensive executive-level experience in finance, strategy and operations across a variety of retail brands and sectors can help improve the Company's balance sheet and object
Slide 87: Endorsements for Ms. Edwards
ENDORSEMENTS FOR MS. EDWARDS 01. 02. 03. 04. OUR SLATE & DIRECTORS “ Pam has a unique combination of CFO & COO operating experience. Not only does she understand the numbers she also understands the retail business end-to-end. When it comes to strategic planning, establishing goals for organic growt
Slide 88: Stacy Hawkins
STACY HAWKINS 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Ms. Hawkins’ diversity consultancy experience, legal expertise and strong knowledge of public company governance can help the Board meaningfully improve its diversity initiatives as well as enhance its corporate governance and executive
Slide 89: Endorsements for Ms. Hawkins
ENDORSEMENTS FOR MS. HAWKINS 01. 02. 03. 04. OUR SLATE & DIRECTORS “ Professor Hawkins brings clarity, precision and professionalism to every task she encounters and every challenge she overcomes, and, for so doing, is a highly sought- after constructive partner on ambitious initiatives. “ “ John Ja
Slide 90: Jeffrey A. Kantor
JEFFREY A. KANTOR 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Mr. Kantor’s nearly 40 years of retail industry experience overseeing merchandising, planning, private label development and ecommerce can help turn around the Company's continued underperformance, pursue strategic and business impro
Slide 91: Endorsements for Mr. Kantor
ENDORSEMENTS FOR MR. KANTOR 01. 02. 03. 04. OUR SLATE & DIRECTORS “ Jeff’s business acumen and overall organizational perspective is ideal for the board of a public company. His experience leading E-Commerce, Merchandising, Stores, Real Estate, and Human Resources would be invaluable. […] In my expe
Slide 92: Perry M. Mandarino
PERRY M. MANDARINO 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Mr. Mandarino’s investment banking background and experience advising stakeholders on business and financial strategy across the retail and consumer industries can help the Board capitalize on the Company's strong brand, value creat
Slide 93: Endorsements for Mr. Mandarino
ENDORSEMENTS FOR MR. MANDARINO 01. 02. 03. 04. OUR SLATE & DIRECTORS “Perry has tremendous domain knowledge and takes a lot of interest to provide the best financial solutions to “Public boards require fresh visions and Perry is a creative, experienced leader with decades of experience crafting comp
Slide 94: Cynthia S. Murray
CYNTHIA S. MURRAY 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Ms. Murray’s significant executive expertise in the retail and apparel sector, with more than 35 years of experience leading business turnarounds, share price growth and long-term strategy, can help the Board properly oversee the Com
Slide 95: Endorsements for Ms. Murray
ENDORSEMENTS FOR MS. MURRAY 01. 02. 03. 04. OUR SLATE & DIRECTORS “ Cinny has the rare ability to recognize significant consumer shifts well in advance of competitors, “Cinny's creative vision, coupled with her pragmatic operational expertise, is a unique and highly- which is an invaluable strategic
Slide 96: Kenneth D. Seipel
KENNETH D. SEIPEL 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Mr. Seipel’s strong track record of helping grow and turn around retail companies as well as Fortune 500 brands can help the Board streamline the Company’s value proposition, create a compelling merchandise assortment and rationalize
Slide 97: Endorsements for Mr. Seipel
ENDORSEMENTS FOR MR. SEIPEL 01. 02. 03. 04. OUR SLATE & DIRECTORS “ As a board member, Ken is always prepared, challenges management appropriately, is strategic and most importantly, understands the role of the board. As our Nom/Gov chairman, Ken has brought a new set of standards and rigor to how w
Slide 98: Craig M. Young
CRAIG M. YOUNG 01. 02. 03. 04. OUR SLATE & DIRECTORS We believe Mr. Young’s strong real estate investment, mergers and acquisitions and capital markets experience can help the Board evaluate sale opportunities or optimize the Company’s real estate relative to a new strategic, operational and financi
Slide 99: Endorsements for Mr. Young
ENDORSEMENTS FOR MR. YOUNG 01. 02. 03. 04. OUR SLATE & DIRECTORS “ Craig is a natural leader. […] He has a unique balance of someone who is both highly empathetic, while also remaining unafraid of being decisive. And before he reacts, he listens. Not only has this disposition served him well in buil
Slide 100: Our Strategy & Plan
OUR STRATEGY & PLAN
Slide 101: Superior Standalone Operating Plan
01. 02. 03. 04. SUPERIOR STANDALONE OPERATING PLAN OUR STRATEGY (SUMMARY) With a meaningfully enhanced Board and management configuration and an improved culture, we believe Kohl’s can be a leading destination for value-conscious shoppers and regain market share MEANINGFULLY GROW INCREASE GROSS DECR
Slide 102: Kohl's Has Tremendous Value Creation Potential
KOHL’S HAS TREMENDOUS VALUE CREATION 01. 02. 03. 04. OUR STRATEGY POTENTIAL (SUMMARY) We firmly believe that low single-digit sales growth, margin expansion and share repurchases can lead to annual EPS of approximately $14.77 and unlock significant shareholder value within the next few years Gross M
Slide 103: Summary of Kohl's Estimated Future Financials if Macellum's Plan Is Undertaken
SUMMARY OF KOHL’S ESTIMATED FUTURE 01. 02. 03. 04. FINANCIALS IF MACELLUM’S PLAN IS UNDERTAKEN OUR STRATEGY (SUMMARY) $ in millions except for percentages • Macellum’s operating plan projects Income Statement Analysis 2021A 2022E 2023E 2024E 21-24E low-single sales growth, 30 bps of Total Sales $18,
Slide 104: Greater Earnings Power if a Sale Leaseback Proved Viable
KOHL’S COULD HAVE EVEN GREATER EARNINGS 01. 02. 03. 04. POWER IF A SALE LEASEBACK PROVED VIABLE OUR STRATEGY (SUMMARY) Macellum’s nominees will evaluate a potential sale leaseback transaction to determine its merits To the extent it proves viable, it is possible that Kohl’s could earn substantially
Slide 105: 100-Day Transition Plan
100-DAY TRANSITION PLAN 01. 02. 03. 04. OUR STRATEGY (SUMMARY) Our nominees are ready to implement a strategy to create meaningful shareholder value ASSESS ANALYZE DEVELOP IMPLEMENT 1-4 WEEKS 4-7 WEEKS 7-10 WEEKS 11-14 WEEKS • Strategic alternatives • Analyze strategic • New merchandise • Sale lease
Slide 106: Meaningfully Grow Sales
01. 02. 03. 04. MEANINGFULLY GROW SALES OUR STRATEGY (SUMMARY) In our view, Kohl’s has a significant opportunity to improve sales and recapture a decade of lost market share by focusing on the following initiatives • Customer-centricity – take a comprehensive view of who the customer is and what the
Slide 107: Increase Gross Margin
01. 02. 03. 04. INCREASE GROSS MARGIN OUR STRATEGY (SUMMARY) We believe implementing the following initiatives can lead to meaningful increases in gross margins • Turn – increasing inventory turn creates a virtuous cycle of increased newness, higher full-priced selling and lower markdowns • Distribu
Slide 108: Decrease SG&A Costs
01. 02. 03. 04. DECREASE SG&A COSTS OUR STRATEGY (SUMMARY) Implementing the following cost cutting mechanisms will enable margins to increase substantially • Corporate costs – embark on a detailed analysis of where cost have increased over the last several years and implement a plan to reduce costs,
Slide 109: Improve Capital Allocation & Optimize Balance Sheet
IMPROVE CAPITAL ALLOCATION & OPTIMIZE 01. 02. 03. 04. BALANCE SHEET OUR STRATEGY (SUMMARY) In conjunction with operational improvements, we believe optimizing capital allocation and rationalizing the balance sheet will likely result in significantly higher EPS • Sale leaseback – evaluating the poten
Slide 110: Ability for Substantially More Share Repurchases
WE BELIEVE KOHL’S HAS THE ABILITY FOR 01. 02. 03. 04. SUBSTANTIALLY MORE SHARE REPURCHASES OUR STRATEGY (SUMMARY) Despite its underwhelming three-year plan, Kohl’s should generate a significant amount of cash, which can be used to make additional share repurchases. Undertaking a $3 billion share rep
Slide 111: Evaluate the Real Estate Opportunity
01. 02. 03. 04. EVALUATE THE REAL ESTATE OPPORTUNITY OUR STRATEGY (SUMMARY) We believe it is possible for Kohl’s to execute a meaningfully accretive sale-leaseback transaction • Our nominees are committed to evaluating a sale leaseback transaction to determine its merits Illustrative $4 Billion Sale
Slide 112: Sale Leaseback Would Not Materially Increase Leverage
A SALE LEASEBACK WOULD NOT MATERIALY INCREASE 01. 02. 03. 04. KOHL’S LEVERAGE, ESPECIALLY COMPARED TO PEERS OUR STRATEGY (SUMMARY) The analysis of the merits of entry into a sale leaseback transaction would be a top priority for our nominees It is worth noting that this is likely why all reported bu
Slide 113: Our Strategy & Plan – Details
OUR STRATEGY & PLAN – DETAILS
Slide 114: Improved Focus on Customer Centricity
IMPROVED FOCUS ON CUSTOMER CENTRICITY 01. 02. 03. 04. OUR STRATEGY Kohl’s has a significant opportunity to dominate the middle-income, value-focused segment of consumer families • The primary target is moderate income, families aged 30-45, with “mom” as the decision-maker • The secondary target is t
Slide 115: Improved Focus on Customer Centricity (Cont.)
IMPROVED FOCUS ON CUSTOMER CENTRICITY 01. 02. 03. 04. (CONT.) OUR STRATEGY Kohl’s’ store locations and market position as a middle-income price value retailer provides a significant opportunity to appeal to Caucasian, Latinx, African American and Asian families Racial minority groups are growing at
Slide 116: Develop Brand Strengths to Win vs. Competition
DEVELOP BRAND STRENGTHS TO WIN VS. 01. 02. 03. 04. COMPETITION OUR STRATEGY We believe Kohl’s can develop strong, defensible, repeatable strengths to pull ahead of the competition VARIOUS KOHL’S’ COMPETITORS & PEERS ACROSS RETAIL SECTORS Department Stores Off-Price Stores Mass Discounters E.g., Macy
Slide 117: Improve Merchandising Assortment Planning & Allocation
IMPROVE MERCHANDISING ASSORTMENT PLANNING 01. 02. 03. 04. & ALLOCATION OUR STRATEGY Kohl’s often “plans to fail” by purchasing beyond demand, redundant purchases and poor allocation Correct the Company from “overbuying” relative to customers' demand. This will lead to more edited assortments and les
Slide 118: Develop a Faster, More Efficient Buying Process
DEVELOP A FASTER, MORE EFFICEINT BUYING 01. 02. 03. 04. PROCESS OUR STRATEGY A more agile product buying processes with reduced lead times will allow merchants to make better decision closer to the customers’ purchasing point 1. Streamline the purchasing and decision-making process by removing silos
Slide 119: Improve Planning and Allocation to Increase Inventory Turn
IMPROVE PLANNING AND ALLOCATION TO PRIORITIZE 01. 02. 03. 04. INCREASING INVENTORY TURN OUR STRATEGY x Challenge: We believe that the lack of rigorous and detailed analytical planning and allocation creates meaningful amounts of excess inventory and product imbalances, leading to lower realized pric
Slide 120: Improve Pricing Clarity
IMPROVE PRICING CLARITY 01. 02. 03. 04. OUR STRATEGY Relatively similar items on the same fixture should have consistent prices x Challenge: We believe there is no clear promotion strategy on essentials items like t-shirts 9 Opportunity: Clear value proposition for essentials like t-shirts. Target i
Slide 121: Improve Pricing Clarity
IMPROVE PRICING CLARITY 01. 02. 03. 04. OUR STRATEGY Kohl’s can regain its reputation as a retailer providing great values by having sharp prices on ubiquitous items and by ensuring that Kohl’s has “opening price points” for basic products Kohl’s Men’s Croft and Barrow Plain Front—Khaki short What i
Slide 122: Good, Better, Best Pricing Architecture
KOHL’S HAS AN OPPORTUNITY TO INSTITUE A 01. 02. 03. 04. “GOOD, BETTER, BEST” PRICING ARCHITECUTRE OUR STRATEGY x Challenge: We believe Kohl’s does not have a compelling value proposition around “good, better, best” pricing for many items. Here we focused on a basic product like denim. They have thei
Slide 123: Improve In-Store Experience by Ensuring Products Are Appropriately Signed
IMPROVE THE IN-STORE EXPERIENCE BY ENSURING 01. 02. 03. 04. PRODUCTS ARE APPROPRIATELY SIGNED OUR STRATEGY x Challenge: We believe Kohl’s lacks the in-store controls to ensure products are properly labeled. Pictured below is the wrong $24 dollar Nike product listed for $100. This is not an isolated
Slide 124: Inaccurate Signage Is Not an Isolated Incident
INACCURATE SIGNAGE IS NOT AN ISOLATED 01. 02. 03. 04. INCIDENT OUR STRATEGY x Challenge: We believe that throughout Kohl’s stores, digital displays often represent the wrong product, confusing the customer and leading to a subpar in-store experience 9 Opportunity: Develop store grading tools that pr
Slide 125: Improve In-Store Signage
IMPROVE IN-STORE SIGNAGE 01. 02. 03. 04. OUR STRATEGY x Challenge: We believe Kohl’s’ signage often lacks energy and excitement. This sign for “women’s plus” does not create a positive image for this vital and growing customer base 9 Opportunity: Create signage with positive energy and enthusiasm fo
Slide 126: Improve In-Store Signage
IMPROVE IN-STORE SIGNAGE 01. 02. 03. 04. OUR STRATEGY Kohl’s has an easy yet meaningful opportunity to enhance the customer shopping experience x Challenge: We believe store standards are not enforced. Signs for accessories should not bring customers to ladies' clearance section. This would clearly
Slide 127: Improve the In-Store Experience
IMPROVE THE IN-STORE EXPERIENCE 01. 02. 03. 04. OUR STRATEGY x Challenge: We believe that Kohl’s does not display product in a manner that entices or excites customers 9 Opportunity: Develop a more robust mannequin program where Kohl’s can showcase great product and offer ideas for outfitting What i
Slide 128: Improve the In-Store Experience (Cont.)
IMPROVE THE IN-STORE EXPERIENCE (CONT.) 01. 02. 03. 04. OUR STRATEGY x Challenge: We believe Kohl’s’ presentation of a key initiative is not as competitive as peers’. Further, excessive clearance drowns out the display of two essential brands. Customers could mistakenly assume this is a Nike and Und
Slide 129: Improve the In-Store Experience
IMPROVE THE IN-STORE EXPERIENCE 01. 02. 03. 04. OUR STRATEGY Kohl’s has an easy opportunity to fix its store presentation x Challenge: We believe Kohl’s does not consistently display product in an inviting manner 9 Opportunity: For example, a broad selection of well-presented handbags in ~1500 squar
Slide 130: Opportunity to Have a Broader Offering in Many Categories
KOHL’S HAS AN OPPORTUNITY TO HAVE A BROADER 01. 02. 03. 04. OFFERING IN MANY CATEGORIES OUR STRATEGY x Challenge: We believe that Kohl’s does not have a compelling seasonal offering. The selection is so sparse that we believe shoppers don’t consider Kohl’s for their seasonal needs nor do shoppers fe
Slide 131: Opportunity to Have a Broader Offering in Many Categories
KOHL’S HAS AN OPPORTUNITY TO HAVE A BROADER 01. 02. 03. 04. OFFERING IN MANY CATEGORIES OUR STRATEGY x Challenge: We believe Kohl’s has not consistently deployed competitive queue lines 9 Opportunity: Best-in-class queue lines provide shoppers with high margin impulse-buy items and unique discoverie
Slide 132: Opportunity to Have a Broader Offering in Many Categories
KOHL’S HAS AN OPPORTUNITY TO HAVE A BROADER 01. 02. 03. 04. OFFERING IN MANY CATEGORIES OUR STRATEGY x Challenge: We believe that once Kohl’s reduces duplication and increases turn it will open up space for additional categories 9 Opportunity: Create a robust and competitive offering for shopping be
Slide 133: Opportunity to Have a Broader Offering in Many Categories
KOHL’S HAS AN OPPORTUNITY TO HAVE A BROADER 01. 02. 03. 04. OFFERING IN MANY CATEGORIES OUR STRATEGY Kohl’s’ competitors have found innovative ways to educate customers and enhance their shopping experience x Challenge: We believe Kohl’s is missing opportunities to communicate and educate customers
Slide 134: Reassess Third-Party Private Label Sourcing Model
REASSESS THIRD-PARTY PRIVATE LABEL 01. 02. 03. 04. SOURCING MODEL OUR STRATEGY We believe removing the middleman could improve total margins at Kohl’s by 40 to 60 basis points or $81 to $117mm, even after considering new supply chain costs • Macellum estimates that sourcing products through domestic
Slide 135: Rationalize Excess Distribution Capacity
RATIONALIZE EXCESS DISTRIBUTION CAPACITY 01. 02. 03. 04. OUR STRATEGY Rationalizing the distribution network could increase operating margins by 20 to 45 basis points, leading to $45-$90 million in additional income • As ecommerce penetration has increased to 30% of total sales, in-store sales have
Slide 136: Strengthen Ecommerce Operations
STRENGTHEN ECOMMERCE OPERATIONS 01. 02. 03. 04. OUR STRATEGY Kohl’s should transition beyond omnichannel and develop a “multichannel” platform that fully integrates the store experience, the digital experience and social media Putting the customer at the center of our strategy: Commerce Requires Ins
Slide 137: Conclusion
CONCLUSION 01. 02. 03. 04. OUR STRATEGY Our plan to create meaningful shareholder value at Kohl’s can only be implemented if a majority of the Board is changed VOTE ON THE WHITE PROXY CARD FOR OUR FULL SLATE WWW.KEEPKOHLSACCOUNTABLE.COM 137
Slide 138: Appendix
APPENDIX
Slide 139: The Current Board Has Lost Credibility (Cont.)
THE CURRENT BOARD HAS LOST CREDIBILITY 01. 02. 03. 04. (CONT.) EXECUTIVE SUMMARY Kohl’s has misrepresented several key facts pertaining to its performance and Macellum’s campaign for change x MYTH: “Macellum’s involvement has contributed to value 9 THE REALITY: Big Lots, Bed Bath and Beyond and Citi
Slide 140: The Current Board Has Lost Credibility (Cont.)
THE CURRENT BOARD HAS LOST CREDIBILITY 01. 02. 03. 04. (CONT.) EXECUTIVE SUMMARY Kohl’s has misrepresented several key facts pertaining to its performance and Macellum’s campaign for change x MYTH: Mr.r Duskin stated publicly that Kohl’s was worth $100 9 THE REALITY: Mr. Duskin stated clearly that w
Slide 141: Citi Trends, Inc. – Macellum Creating Value
CITI TRENDS, INC. – MACELLUM CREATING VALUE 01. 02. 03. 04. EXECUTIVE SUMMARY Overview In 2017, Macellum engaged with Citi Trends because we believed the company had not taken full advantage of the significant opportunities to increase its profitability. The board had failed to deliver value to its
Slide 142: Bed, Bath & Beyond Inc. – Macellum Creating Value
BED, BATH & BEYOND INC. – MACELLUM CREATING 01. 02. 03. 04. VALUE EXECUTIVE SUMMARY Overview In 2019, Macellum observed that Bed, Bath & Beyond was not realizing its true potential. At the time, our goal was to embark upon a significant turnaround and a more profitable and better capitalized company
Slide 143: Big Lots, Inc. – Macellum Creating Value
BIG LOTS, INC. – MACELLUM CREATING VALUE 01. 02. 03. 04. EXECUTIVE SUMMARY Overview In 2020, Macellum observed that Big Lots’ board had overseen poor operations and ineffective capital allocation strategies and failed to optimize the company’s balance sheet, including monetizing the company’s real e
Slide 144: 100-Day Plan Details - Assessment of People & Culture
100-DAY PLAN DETAILS - ASSESSMENT OF PEOPLE & APPENDIX CULTURE OUR PLAN (100 DAYS) HUMAN RESOURCES 144 Source: Macellum Estimates in Conjunction with Industry Experts, Board Candidates, and Top-Rated Retail Consultancy.
Slide 145: 100-Day Plan Details - Shopping Experience: Sales Opportunity
100-DAY PLAN DETAILS - SHOPPING EXPERIENCE: SALES APPENDIX OPPORTUNITY OUR PLAN (100 DAYS) MERCHANDISE STRATEGY 145 Source: Macellum Estimates in Conjunction with Industry Experts, Board Candidates, and Top-Rated Retail Consultancy.
Slide 146: 100-Day Plan Details - Shopping Experience: Sales Opportunity
100-DAY PLAN DETAILS - SHOPPING EXPERIENCE: SALES APPENDIX OPPORTUNITY OUR PLAN (100 DAYS) MERCHANDISE STRATEGY Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Fashion Assess organizational capabilities Assess categories with highest need fo
Slide 147: 100-Day Plan Details - Shopping Experience: Sales Opportunity
100-DAY PLAN DETAILS - SHOPPING EXPERIENCE: SALES APPENDIX OPPORTUNITY OUR PLAN (100 DAYS) MERCHANDISE STRATEGY Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Private Label Review current private label portfolio Assess 3rd party supplier re
Slide 148: 100-Day Plan Details - Value Proposition and Merchandise Margin
100-DAY PLAN DETAILS - VALUE PROPOSITION AND APPENDIX MERCHANDISE MARGIN OUR PLAN (100 DAYS) VALUE PROPOSITION AND MERCHANDISE MARGIN Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Value Proposition and Merchandise Margin Pricing Conduct co
Slide 149: 100-Day Plan Details - In Store Experience
100-DAY PLAN DETAILS - IN STORE EXPERIENCE APPENDIX OUR PLAN (100 DAYS) IN STORE EXPERIENCE Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 In Store Experience Remodeled stores Asses current results of remodel program Systematize testing in
Slide 150: 100-Day Plan Details - Website and Omni Channel
100-DAY PLAN DETAILS - WEBSITE AND OMNI CHANNEL APPENDIX OUR PLAN (100 DAYS) WEBSITE AND OMNI CHANNEL Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Website and Omni channel Functionality Evaluate ability and capability of platform(s) Asses
Slide 151: 100-Day Plan Details - Marketing and Advertising
100-DAY PLAN DETAILS - MARKETING AND ADVERTISING APPENDIX OUR PLAN (100 DAYS) MARKETING AND ADVERTISING Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Marketing and Advertising Customer centricity Collect all internal customer data Conduct
Slide 152: 100-Day Plan Details - Supply Chain
100-DAY PLAN DETAILS - SUPPLY CHAIN APPENDIX OUR PLAN (100 DAYS) SUPPLY CHAIN Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Supply chain Distribution Center Rationalization Assess excess capacity in store distribution net work Develop a pl
Slide 153: 100-Day Plan Details - Corporate Cost Assessment
100-DAY PLAN DETAILS - CORPORATE COST ASSESSMENT APPENDIX OUR PLAN (100 DAYS) CORPORATE COST ASSESSMENT Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Corporate Cost Assessment Head count assessment Assess and understand growth in expenses
Slide 154: 100-Day Plan Details - Store Profitability
100-DAY PLAN DETAILS - STORE PROFITABILITY APPENDIX OUR PLAN (100 DAYS) STORE PROFITABILITY Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Store Profitability Review payroll Assess payroll expenditure Assess scheduling and staffing hours De
Slide 155: 100-Day Plan Details - Capital Allocation and Balance Sheet Rationalization
100-DAY PLAN DETAILS - Capital Allocation and Balance APPENDIX Sheet Rationalization OUR PLAN (100 DAYS) CAPITAL ALLOCATION AND BALANCE SHEET RATIONALIZATION Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Capital Allocation and Balance Shee
Slide 156: 100-Day Plan Details - Information and Technology
100-DAY PLAN DETAILS - INFORMATION AND APPENDIX TECHNOLOGY OUR PLAN (100 DAYS) INFORMATION AND TECHNOLOGY Week Quarters Year 2 2nd 3rd 4th 1H 2H Pre-Vote 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Qtr Qtr Qtr Year 2 Year 2 Information and Technology Comprehensive review of systems Assess internal capability D
Slide 157: Summary of Kohl's Historical Financials
SUMMARY OF KOHL’S’ HISTORICAL FINANCIALS APPENDIX PERFORMANCE (OVERVIEW) $ in millions except for percentages Income Statement Analysis 2011A 2012A 2013A 2014A 2015A 2016A 2017A 2018A 2019A 2020A 2021A '11-'21 Total Sales $18,804 19,280 19,031 $19,023 $19,204 $18,686 $19,036 $19,167 $18,885 $15,031
Slide 158: Despite Gross Margin Growth From 2019, Kohl's Has Still Trailed Retail Peers
DESPITE GROSS MARGIN GROWTH FROM 2019, APPENDIX KOHL’S HAS STILL TRAILED RETAIL PEERS PERFORMANCE (OVERVIEW) 2019 FY 2020 2021 2021 vs. 2019 (bps) FY 2019 2020 FY 2021 FY E/A AEO 35.3% 30.5% 39.7% 437 BBBY 33.3% 33.6% 33.2% (6) BKE 41.9% 44.5% 50.4% 847 BURL 41.8% 38.2% 41.7% (8) CTRN 38.0% 39.8% 41
Slide 159: Summary of Kohl's and Peers' Leverage
SUMMARY OF KOHL’S’ AND PEERS’ LEVERAGE APPENDIX PERFORMANCE (OVERVIEW) KSS KSS AEO BBBY BKE BURL CTRN DDS DKS GPS HIBB JWN M PLCE ROST TGT TJX URBN WSM (Dollars in Millions) Current w/SLB 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 Finance lease and
Slide 160: Kohl's Once Claimed Short-Lived Outperformance Versus Department Store Peers
KOHL’S ONCE CLAIMED SHORT-LIVED OUTPERFORMANCE APPENDIX VERSUS ITS DEPARTMENT STORE PEER GROUP PERFORMANCE (TSR) 600 500 400 300 200 100 0 Kohl's Macy's Dillard's IS KOHL’S’ STRATEGIC PLAN (-6%)1 RESPONSIBLE FOR DILLARD’S’ (+241%) AND MACY’S’ (+53%) RECENT OUTPERFORMANCE, TOO? 1 Kohl’s Performance S
Slide 161: Another Wasted Year
ANOTHER WASTED YEAR 01. 02. 03. 04. EXECUTIVE SUMMARY One year after Macellum first ran a campaign highlighting the Board’s inability to create value, the Company’s shares have continued to significantly underperform its retail peers 35% 1-YEAR TSR 31% 30% 24% 25% 20% 15% 15% 14% 10% 7% 6% 5% 0% Koh
Slide 162: Another Year of Financial Underperformance
ANOTHER YEAR OF FINANCIAL APPENDIX UNDERPERFORMANCE PERFORMANCE (TSR) Kohl’s’ shares have underperformed relevant peers and indices over every applicable time horizon 1-YEAR PRE-COVID (12/31/2019) 35% 105% 31% 86% 30% 85% 66% 24% 65% 58% 25% 48% 45% 20% 14% 15% 25% 15% 6% 5% 10% 7% 6% (15%) (3%) 5%
Slide 163: Gains in Sales Per Sq. Ft. Trailed Peers
GAINS IN SALES PER SQ. FT. TRAILED PEERS APPENDIX PERFORMANCE (SALES) Sales Per Sq. Ft Growth Sales Per Sq. Ft 2011-2021 $600 $535 $500 3% $400 $383 $300 41% $229 $237 $200 $100 $0 2011 2021 Kohl's Retail Peer Average Source: Company SEC Filings, Bloomberg LP. Note: Retail Peer Average/Median Includ
Slide 164: Additional "Greatness Agenda" Details
ADDITIONAL “GREATNESS AGENDA” DETAILS APPENDIX PERFORMANCE (CREDIBILITY) • Ms. Gass, designed the “Greatness Agenda” to be a three-year plan to get Kohl’s back on track, but in 2017, sales were 4% below the financial goals, operating profit was 26% below targets • Nearly a decade later and the Compa
Slide 165: Additional "Greatness Agenda" Details - Same Story, Different Year (Cont.)
ADDITIONAL “GREATNESS AGENDA DETAILS” - APPENDIX SAME STORY, DIFFERENT YEAR (CONT.) PERFORMANCE (CREDIBILITY) In October 2014, Kohl’s announced its “Greatness Agenda,” which was in place for six years and ultimately failed to even come close to meeting its targets or creating shareholder value. 2014
Slide 166: Additional "Greatness Agenda" Details - Same Story, Different Year (Cont.)
ADDITIONAL “GREATNESS AGENDA” DETAILS - APPENDIX SAME STORY, DIFFERENT YEAR (CONT.) PERFORMANCE (CREDIBILITY) 2014 2020 2022 • “Expanding brand portfolio” • “Brand portfolio reinvention” • “Enhanced brand portfolio” • “Inventory optimization” • “Inventory management” • “Inventory management” • “Dest
Slide 167: Additional "Greatness Agenda" Details - Same Story, Different Year (Cont.)
ADDITIONAL “GREATNESS AGENDA” DETAILS - APPENDIX SAME STORY, DIFFERENT YEAR (CONT.) PERFORMANCE (CREDIBILITY) Kohl’s has persistently failed to meet objectives laid out in its “Greatness Agenda” • In October 2014, Kohl’s announced the “Greatness Agenda” at its Investor Conference, which focused on f
Slide 168: Another Example of Split Shipments
ANOTHER EXAMPLE OF SPLIT SHIPMENTS APPENDIX OPERATIONS (PERFORMANCE VISUALIZATION) Destination Shipping Facility Profit Per Transaction Without Current Split- New York, NY Process Shipments Order Total $120.00 $120.00 Middletown, OH Customer charge for shipping free free 1 2 Product cost (~50%) -$60