Kohlâs 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 wasnât disclosed.
The company said itâs starting a search to find a permanent CEO replacement following the departure of Ashley Buchanan, who came to Kohlâs in January from retailer Michaels Cos. Chairman Michael Bender will serve as Kohlâs interim CEO, according to a statement.
The company declined to comment beyond its statement and public filings. Buchanan didnât respond to requests for comment.
Buchananâs business dealings were with a woman he has been romantically involved with, named Chandra Holt, according to a person familiar with the matter who wasnât authorised to speak publicly on the issue.
The two served together as executives at Walmart Inc.âs discount chain Samâs Club in the late 2010s. Holt then served brief stints as the CEO of retailers Bed Bath & Beyond and Connâs Inc. She is now a consultant and the founder of vitamin-seller Incredibrew.
âIâve known Ashley Buchanan for 10 years, but I have not received any compensation for my Incredibrew business from Kohlâs,â Holt told the Wall Street Journal, which earlier reported the relationship.
Buchananâs relationship with Holt was an open secret inside Walmart, their past employer, and across the retailerâs hometown of Bentonville, Arkansas, according to people familiar with the matter.
Three months ago, Holt congratulated Buchanan for his new role as CEO of Kohlâs on a public post on LinkedIn. Later, Buchanan reposted a video on LinkedIn from Holt promoting her Incredibrew products.
Board Probe
Buchananâs termination follows an outside investigation overseen by the boardâs audit committee.
The probe determined that Buchanan âhad 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.â
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. Kohlâs said that in neither case did Buchanan disclose this relationship as required under companyâs code of ethics.
The retailer said that Buchananâs termination is unrelated to the companyâs performance and did not involve any other company personnel. Heâll 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 Kohlâs 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 didnât provide information beyond the companyâs 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 companyâs current turnaround plan, said this person, who wasnât authorised to speak publicly on the matter. Bender didnât 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.
âState of Chaosâ
The CEO change will mark the companyâs fourth chief executive since 2018.
Itâs a âblow upon a bruise for the beleaguered department store chain,â Neil Saunders, managing director at GlobalData, said in a research note. While itâs not related to performance, âit gives the impression that Kohlâs is in perpetual state of chaos and it raises some questions about the due diligence over his appointment.â
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 â less than what analyst had anticipated. Kohlâs also projected a net loss for the period thatâs less than the average analyst estimate.
Kohlâs 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.
âOne small positive is that Kohlâs board moved decisively,â said David Swartz, a senior equity analyst at Morningstar.
Thursdayâs 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 companyâs 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 â or 1.7 percent of the total â left their positions in similar conditions.
The abrupt change adds more pressure to a retail business thatâs 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, Kohlâs said that it would eliminate about 10 percent of its roles reporting into corporate offices as it looks to lower costs and streamline operations. Itâs 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 âRâ Us shops in some locations. It has a longstanding relationship with Sephora, the cosmetics retailer.
Bender said in the statement that heâs âcommitted to continuing the execution of our strategic framework to grow shareholder value.â
By Lily Meier and Matthew Boyle