An activist investor group is demanding that the leadership of Kohl's be replaced in a stinging rebuke that cites the beleaguered retailer's ailing sales, poor performance compared with competitors and a "botched" attempt to sell the company.

Ancora Holdings Group, a Cleveland-based firm that owns roughly 2.5% of Kohl's shares, called for the ouster of CEO Michelle Gass and Chairman Peter Boneparth "at this critical fork in the road" in a letter to retailer's board on Thursday morning.

"We contend that Kohl’s needs new leadership with demonstrated experience in cost containment, margin expansion, product catalog optimization and, most importantly, turnarounds," the letter said, asking the board to announce a succession plan and initiatiate "a robust search process" for new top management.

Kohl's, headquartered in Menomonee Falls, Wisconsin, issued a response to Ancora on Thursday afternoon.

"The Kohl’s board unanimously supports Michelle Gass and her leadership team," company spokeswoman Jen Johnson said in an email. "We remain committed to maximizing value and acting in the interests of all our shareholders by staying focused on running the business, and the board continues to actively engage with management to navigate the current retail environment."

The letter is the latest twist in a nearly 2-year-old saga that's included several investor groups, including Ancora, calling for changes at, and a potential sale of, the department store chain with roughly 1,100 stores. In early 2021, in a settlement, Ancora succeeded in having several members added to Kohl's board. But now, even retailers that suffered financially from 2020 pandemic closings such as Macy's and Dillard's, have managed rebounds, while Kohl's has failed to keep up with them, Ancora said.

"As Kohl’s has languished coming out of the pandemic, many retail peers have recovered and seen their sales dramatically increase over the past 12 to18 months," according to the letter.

Kohl's stock price has dropped 45% over the past year and the company is "on a dangerous trajectory," according to Ancora.

In the press release Thursday on its letter, Ancora described Kohl's strategic-review process as "botched." The retailer earlier this year weighed bids from a number of suitors. In the end, Kohl's proposed $8 billion sale to Franchise Group, based in Delaware, Ohio, fell through in July. The buyer was expected to finance that acquisition by selling Kohl's real estate and then leasing it back.

"Now that the dust has settled on the various acquisition offers, activists are once again ramping up the pressure on Kohl’s management," Neil Saunders, managing director of analytics firm GlobalData, said in an email to CoStar News. "The backdrop for this is Kohl’s continued under-performance, which shows no signs of improving. Activists have a point that Kohl’s needs to improve its performance. However, most of them simply want a management team that is more amenable to playing financial games such as selling off real estate."

When the sale to Franchise Group cratered, Kohl's said it would reevaluate "monetization opportunities for portions of the company’s real estate portfolio."

Doing a sale-leaseback deal for its real estate holdings won't help Kohl's even if it raises cash in the short term, according to Saunders.

"The problem with this approach is it doesn’t fix underlying problems and it doesn’t position Kohl’s for long-term success," Saunders said. "All the calls and speculation are also unhelpful to the running of the business but the only way management can stem the criticism is by improving trading fundamentals, which will be hard to accomplish in the current environment."

In its letter, Ancora criticized Kohl's for turning away a number of bids for the company.

"The board’s decisions to reject multiple indications of interest in the $64-to-$65 per share range in the winter and then proceed with an opaque strategic review throughout the spring — as financing markets gradually deteriorated — have destroyed billions of dollars in equity value and painted the company into a corner," Ancora said.

"With a failed review of alternatives and recent credit downgrade now casting shadows over what is a shrinking business, we estimate that Kohl’s has begun to trade at a steep discount to its liquidation value," according to Ancora. "The onus is now on management to begin executing flawlessly against a backdrop that includes high inflation, intense competition and recessionary headwinds. Unfortunately, the facts indicate Kohl’s lacks the right leadership for the exceedingly challenging period ahead — one that will require the company to reverse high-single-digit sales declines, contain capital expenditures and operating expenses, and immediately optimize fulfillment, marketing and merchandising."

The activist group also accused Kohl's of not being transparent about certain changes, including failing to disclose the departures of several senior executives, including its chief merchandising officer, until after this year's annual shareholder meeting.

Ancora lauded Gass for some of her initiatives, including partnering with Sephora to open shop-in-shop beauty boutiques in Kohl's stores, attracting new customers and driving foot traffic.

"We have been proud to invest in a business that maintains strong gender diversity in the C-suite, as it aligns with our recognized focus on installing female leaders in more corporate boardrooms," Ancora said in its letter. "However, our view regarding the need for new leadership at Kohl’s is simply based on the facts."

But the activist group also noted that Boneparth and Kohl's board "deemed it appropriate to award Ms. Gass nearly $60 million in compensation between fiscal year 2017 and fiscal year 2021, with her most recent fiscal year compensation being more than 1,000 times that of the median employee’s compensation."