Kohl’s Sacks CEO Ashley Buchanan Over Policy Breach, Michael Bender Steps In

Kohl's Corporation, the huge U.S. department store operator, has ousted chief executive Ashley Buchanan after she was found to be in breach of company policy, according to an internal investigation. A regulatory filing revealed that Buchanan had been up to her neck in vendor conflicts that also involved some undisclosed interest on her part, violating corporate governance rules.

Buchanan's departure, though it came suddenly, was made clear not to be connected to Kohl's financial results or its larger operational structure. The company stated that no other executives or staff were involved in the findings. Buchanan, who took on the role of CEO in November, has also been taken off the board of directors, and his re-nomination for election as a director at the upcoming shareholder meeting has been formally withdrawn.

Michael Bender Takes Over as Interim CEO

Taking over as interim CEO is Michael Bender, a retail and consumer goods industry veteran with executive experience that stretches back decades. Bender is a relatively recent addition to Kohl's board, having joined in 2019, but he has been serving as its chair since May of this year. Since the news broke about Kohl's plummeting performance over the last couple of quarters, Bender has taken on the task of serving both as a board member and as Kohl's executive lead.

Representatives of the board stressed that Bender's appointment makes sure there is continuity in this transitional period. A formal search for a permanent CEO, who will succeed Bender, will be initiated shortly. Kohl's has engaged a leading executive search firm to manage this process.

Bender has a long track record of not just operational efficiency but also long-term profit growth, and the nominating and governance committee expressed full confidence in Bender being able to guide the company while leadership is being realigned.

Retail Headwinds and Sales Forecasts

Kohl's is facing stiff competition from the e-commerce sector and consolidated big-box retailers like Walmart and Costco, as has the rest of the department store industry. Kohl's core customer, women ages 25 to 54, has been walking through its doors less frequently, visiting the store an average of just 1.9 times a year in 2021. By comparison, those same women visited Kohl's an average of 3.4 times a year in 2013.

Early outcomes for the first quarter show a similar sales downturn between 4% and 4.3%. While these numbers are slightly better than the analysts' predictions of a 6% drop, they nonetheless paint a picture of inadequate demand. Looking ahead, the company has forecast a first quarter loss between 20 and 24 cents per share. Indeed, this is a tighter range, and consequently a more favorable forecast, than the 52-cent loss analysts had been looking for.

To boost profits, Kohl's had previously declared that it would close 27 stores by April, cutting underperforming locations and "optimizing its retail footprint," as the company put it.

Investor Sentiment and Market Response

Investor sentiment got a small boost from the Kohl's episodes. The company's stock went up 7% after the announcement but remains down 52% year-to-date. The uptick could be attributed to relief that the problematic internal issue was resolved in a relatively clean way and slight enthusiasm over better-than-expected sales figures.

With eyes on Kohl's leadership transition, interim leaders have an opportunity to assure stakeholders the company will remain on its current course. They can do this by presenting clear, convincing narratives about how the company plans to overcome today's challenges and return to growth.