Kohl’s CEO Michelle Gass is leaving her job at the department store to take the position of president of Levi’s. Kohl’s on Tuesday said Dec. 2 she will leave the post and its board, according to a company press release.
Also on Tuesday, Levi’s said that, a month later, Gass will join as president and a board member, and succeed Chip Bergh as CEO within 18 months. For now, Gass will lead the Levi’s brand and its global digital and commercial operations, according to the denim maker’s press release.
Tom Kingsbury, who joined Kohl’s board on the recommendation of activist investors last year, will take on chief executive duties in the interim, and serve on a committee to find Gass’s replacement. In September Kohl’s board including Kingsbury unanimously backed Gass as CEO after Ancora Holdings publicly called for her to give up her post, and the hedge fund was said to favor him as her replacement.
Michelle Gass arrived at Kohl’s four years ago with a reputation for operational acuity, but her tenure has been marked by upheaval at the mid-tier department store. In the past couple of years in particular, the retailer has been the focus of activist investors. A number of those firms have called for dramatic changes, including board overhauls, a sale or at least a spin-off of its e-commerce, and the ouster of Gass herself.
The activists succeeded in many ways, as Kohl’s put itself up for sale (ultimately rejecting an offer as too low), monetized its real estate and shook up its board more than once at their behest. Now they wave goodbye to Gass. In a statement, Ancora CEO Fredrick DiSanto and Ancora Alternatives President James Chadwick said “it is the right time for the Company to pivot to a leadership team with enhanced operational expertise and strong turnaround experience” and that they “are very pleased” with Kingsbury’s appointment as interim CEO.
“Ancora has been a long-term shareholder of Kohl’s and believes that under the right leadership, the Company can be a source of tremendous value for investors, customers suppliers and employees,” they also said.
Gass’s departure may be unsurprising in light of Kohl’s struggles compared to rivals and the pressure to unseat her. But she leaves behind a long list of accomplishments, including getting Kohl’s through the pandemic’s challenges; improving its assortments, multichannel services and store format; and overseeing partnerships with Sephora and Amazon, according to GlobalData Managing Director Neil Saunders.
“Although many of these things have been insufficient to move the dial, it is fair to say that Gass has saved Kohl’s from more serious decline,” he said in emailed comments. “As such, we believe her legacy should be viewed favorably.”
Gass is looking forward to her new job, saying in a statement that she is “thrilled to join Levi Strauss & Co., with its iconic brands, incredible team and unwavering commitment to corporate citizenship.”
Meanwhile, on Tuesday Kohl’s said it anticipates Q3 comps to fall 6.9% year over year and net sales to fall 7.2%. Its estimate that operating margin will reach 4.7%, which beat analyst expectations, is a good sign, as long as the retailer is also managing to sell off inventory, according to Credit Suisse analyst Michael Binetti.
Without Gass at the helm, Kohl’s is now more likely than ever to take cues from its activist investors, Binetti also said. The reins are in the hands of activist favorite Kingsbury, who has extensive retail experience, as a previous senior executive at Kohl’s itself, and as CEO of Burlington and Filene’s department store.
That’s fine in the interim, as Kohl’s navigates the important holiday season, but not longer term, according to marketing consultant Brian Kelly. Saunders agrees, adding that Kohl’s needs a “powerful, big hitter” with experience in retail turnarounds. The CEO pick will speak volumes about how the beleaguered retailer will do in the long run, and whoever it is needs to arrive soon, according to Saunders.
“Investors love financial maneuverers that extract short term value, but those things do not always leave the company in a stable position for longer-term trading,” he said. “This battle between short-term gains and long-term success has been a tension Kohl’s has had to deal with for the past few years. The appointment of a new CEO will signal which direction the company intends to move.”