Kohl’s Corp. said it fired its chief executive officer only months into his tenure after the board uncovered that he directed millions of dollars of business to someone he has had a personal relationship with that wasn’t disclosed.
The company said it’s starting a search to find a permanent CEO replacement following the departure of Ashley Buchanan, who came to Kohl’s in January from retailer Michaels Cos. Chairman Michael Bender will serve as Kohl’s interim CEO, according to a statement.
The company declined to comment beyond its statement and public filings. Buchanan didn’t respond to requests for comment.
Buchanan’s business dealings were with a woman he has been romantically involved with, named Chandra Holt, according to a person familiar with the matter who wasn’t authorised to speak publicly on the issue.
The two served together as executives at Walmart Inc.‘s discount chain Sam’s Club in the late 2010s. Holt then served brief stints as the CEO of retailers Bed Bath & Beyond and Conn’s Inc. She is now a consultant and the founder of vitamin-seller Incredibrew.
“I’ve known Ashley Buchanan for 10 years, but I have not received any compensation for my Incredibrew business from Kohl’s,” Holt told the Wall Street Journal, which earlier reported the relationship.
Buchanan’s relationship with Holt was an open secret inside Walmart, their past employer, and across the retailer’s hometown of Bentonville, Arkansas, according to people familiar with the matter.
Three months ago, Holt congratulated Buchanan for his new role as CEO of Kohl’s on a public post on LinkedIn. Later, Buchanan reposted a video on LinkedIn from Holt promoting her Incredibrew products.
Board Probe
Buchanan’s termination follows an outside investigation overseen by the board’s audit committee.
The probe determined that Buchanan “had directed that the company conduct business with a vendor founded by an individual with whom Mr. Buchanan has a personal relationship on highly unusual terms favourable to the vendor.”
Buchanan pushed the company to enter into a multimillion dollar consulting agreement wherein the same individual was a part of the consulting team, the board found. Kohl’s said that in neither case did Buchanan disclose this relationship as required under company’s code of ethics.
The retailer said that Buchanan’s termination is unrelated to the company’s performance and did not involve any other company personnel. He’ll also be required to reimburse the firm $2.5 million from his signing bonus, it said.
Town-Hall Meeting
At a surprise town-hall meeting Thursday at an auditorium in Kohl’s headquarters in Menomonee Falls, Wisconsin, Bender and chief financial officer Jill Timm addressed employees who were told their boss had been fired hours earlier.
While the meeting didn’t provide information beyond the company’s public statements, Bender urged employees to keep their heads down and focus on their work, according to a person who listened to the town hall, which was also broadcast to remote employees.
Bender spoke calmly, at times using a teleprompter, explaining that he knew the sudden departure may cause some uneasiness but that it was important to push through with the company’s current turnaround plan, said this person, who wasn’t authorised to speak publicly on the matter. Bender didn’t address whether the personal relationship was romantic or provide employees with the chance to ask any questions.
Employees had been shocked by the news, with Buchanan engendering goodwill among many staffers since he took the helm a few months ago, the person said.
‘State of Chaos’
The CEO change will mark the company’s fourth chief executive since 2018.
It’s a “blow upon a bruise for the beleaguered department store chain,” Neil Saunders, managing director at GlobalData, said in a research note. While it’s not related to performance, “it gives the impression that Kohl’s is in perpetual state of chaos and it raises some questions about the due diligence over his appointment.”
The company also released preliminary results for its first quarter, including a comparable-sales decline in the range of 4 percent to 4.3 percent — less than what analyst had anticipated. Kohl’s also projected a net loss for the period that’s less than the average analyst estimate.
Kohl’s shares rose as much as 9.9 percent in New York trading on Thursday. The stock has declined by about 50 percent so far this year, deeper than the decline of benchmark US stock indexes over the same period.
“One small positive is that Kohl’s board moved decisively,” said David Swartz, a senior equity analyst at Morningstar.
Thursday’s gain was also due to better-than-expected preliminary earnings, according to Bloomberg Intelligence analyst Mary Ross Gilbert. The company still has too many locations and has struggled with its product assortment, she said, adding company’s real estate has value.
Buchanan joins a small group of CEOs who have been terminated with cause in recent years, according to data from Exechange, which tracks executive changes at public companies. Since the start of 2017, only 43 CEOs on the Russell 3000 Index — or 1.7 percent of the total — left their positions in similar conditions.
The abrupt change adds more pressure to a retail business that’s struggled for years, posting 12 straight quarters of revenue declines. The company has lost market share as bigger competitors offer lower prices and a broader assortment of goods.
Job Cuts
Shortly after Buchanan became CEO in January, Kohl’s said that it would eliminate about 10 percent of its roles reporting into corporate offices as it looks to lower costs and streamline operations. It’s also closing underperforming stores.
To regain lost ground, the retailer has identified areas of focus such as fine jewellery. The company has also leaned on partnerships, such as opening Babies “R” Us shops in some locations. It has a longstanding relationship with Sephora, the cosmetics retailer.
Bender said in the statement that he’s “committed to continuing the execution of our strategic framework to grow shareholder value.”
By Lily Meier and Matthew Boyle
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