Amid mounting pressure from activist investors, years of shrinking sales, a tanking stock price and a dead-end attempt to sell the business, it’s perhaps no big surprise that Kohl’s CEO, Michelle Gass, decided to leave her post for greener pastures.
The retailer said on Tuesday that Gass would step down next month to join Levi Strauss, where she’ll replace Chip Bergh as chief executive within the next 18 months. Gass, 54, has led Kohl’s since 2018.
“It’s inevitable that Michelle has left Kohl’s because there I think there has been so much pressure put on her and the board,” Neil Saunders, managing director of GlobalData’s retail division, told Forbes. “It has become really difficult to do that job and execute the plans she wants to.”
Gass, who was previously an executive at Starbucks and is well regarded in the industry for her merchandising and marketing abilities, was supposed to revive the flailing department store chain. However, she presides over a retailer today that is smaller, both by sales and market capitalization, than when she took over. Its stock has lost half its value during her tenure.
“It’s the right time for the company to pivot to a leadership team with enhanced operational expertise and strong turnaround experience,” said Fredrick D. DiSanto and James Chadwick, executives at investment firm Ancora, in a written statement on Tuesday. Ancora, which owns 2.5% of the company, has been lobbying for a new chief executive who can focus more on containing costs and growing margins.
The retailer has also been under pressure to sell itself, but earlier this year walked away from a buyout deal with the owner of Vitamin Shoppe, which had initially offered to pay $60 a share, valuing the retailer at $8 billion, before reducing its price to $53 a share. Kohl’s stock hasn’t broken $39 since June.
Under Gass, Kohl’s has leaned heavily into partnerships. The chain began accepting Amazon returns in its stores in 2018, which it said has helped it acquire millions of new customers. It also installed Sephora shops in hundreds of locations, targeting $2 billion in sales.
It doubled down on activewear, giving more space in stores to brands like Champion, Nike and Adidas and adding new brands like Lands’ End and Toms Shoes. It invested in its 1,100 stores, most of which are located in high-traffic strip centers that are considered more desirable than shopping malls, rolling out in-store pickup for online orders and experimenting with self-service returns.
It’s hard to say these efforts paid off. Sales have only shrunk during Gass’ tenure, slipping from $19.2 billion in 2018 to $18.5 billion in 2021. In August, the retailer said same-sales declined another 7.7% during the second quarter and slashed its guidance for the year.
Inflation has caused many consumers to pull back on spending, the retailer said, noting that the middle-income consumers who frequent its stores were making fewer trips and spending less on discretionary items such as apparel. Like many retailers, it has also had to offer major discounts in an effort to clear excess inventory, a measure that eats into profits.
Department stores have faced heavy competition in recent years from fast-fashion retailers, off-price chains and online brands. However, other department stores have fared better, with both Macy’s and Dillard’s growing sales and profits this year. “Kohl’s has been the laggard,” said Saunders. “And that’s the issue.”
At Levi Strauss, Gass will preside over a legacy denim brand that made a triumphant return as a public company in 2019 and has been opening its own stores. Like Nike, it has become more interested in selling apparel and other products directly to consumers, rather than relying on department stores and other retailers. It now generates 36% of its sales from its website and stores, up from 32% in 2016.
Gass will be the first woman to lead the 169-year-old company. “She’s probably been looking for a while,” Saunders said, “and obviously found something that’s a great fit for her.”