McKinsey’s Controversies May Weigh on Its Reputation

This isn’t Bed Bath Beyond, where the activist group taking on Kohl’s last had success. Bed Bath Beyond didn’t own much real estate, but it had a number of underperforming divisions and low board turnover. Kohl’s has tried to navigate the department store downturn by partnering with grocers to fill space in its larger boxes, with Amazon to offer returns from its stores and with Sephora to attract new customers. And while the activist group wants Kohl’s to add more board members with retail experience, retailers have in recent years focused on hiring from outside the industry to bring in new skills, especially in technology. Kohl’s said it has added six new directors since 2016.

Activists have pushed sale-and-leaseback deals on retailers before. The investors love them because they quickly generate cash that they hope will be returned to shareholders. Retailers hate them because they are left with less flexibility after those activists have gone. For years, Macy’s rejected Starboard’s push to monetize its real estate; when the pandemic hit last year, that property backed billions in much-needed loans. Even after the pandemic passes, the continued rise of e-commerce will force retailers to reassess their property portfolios. A sale-and-leaseback deal, which often entails long-term leases, could lock in retailers like Kohl’s at a time when they need to be nimble.

Charlie Munger lets loose

The 97-year-old vice chairman of Berkshire Hathaway is known for being Warren Buffett’s more brusque right-hand man. He lived up to his reputation yesterday at the annual meeting of the Daily Journal, the Los Angeles-based newspaper publisher that he chairs, during which he traditionally fields questions on a range of topics.

Some of the highlights:

“I think we’re crazy to allow it.” Mr. Munger said that the recent meme-stock mania was “fed by people getting commissions and other revenues out of this new bunch of gamblers,” apparently referring to online brokerages like Robinhood. He added, “It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mind-set of racetrack bettors.”

“The world would be better off without them.” SPACs have been the hottest trend on Wall Street, but Mr. Munger finds the phenomenon another instance of irresponsible gambling. “This kind of crazy speculation in enterprises not even found or picked out yet is a sign of an irritating bubble,” he said, adding some profane words for the banks bringing these companies to market.

“I don’t think Bitcoin is going to end up the medium of exchange for the world.” Mr. Munger said that digital tokens were too volatile to replace traditional currencies, and compared crypto to gold. “Since I never buy gold, I never buy any Bitcoin,” he said.

Article source: https://www.nytimes.com/2021/02/25/business/dealbook/mckinsey-kevin-sneader.html