It would be the second time that Macellum has pushed for changes at Kohl's. It sought to replace nine board directors earlier this year in a campaign conducted with hedge funds Ancora Holdings Inc and Legion Partners Asset Management LLC.
The investors agreed to drop that challenge when Kohl's expanded its 11-member board by three directors.
Macellum, which is run by hedge fund veteran Jonathan Duskin, is preparing a slate of nominees with retail and operating experience to again challenge the Kohl's board early next year, the sources said.
The firm is concerned about Kohl's languishing stock price and the fact that public markets are not valuing the bricks and mortar retailer properly despite its ample free cash flow and efforts made by management.
Kohl's stock is trading roughly where it was a decade ago. If the board had new directors with more operational experience, the company might be able to pursue steps like betting more on ecommerce or selling its real estate to improve the stock price, the people said.
The sources requested anonymity because the matter is confidential. Duskin declined to comment and a Macellum spokesman said a standstill agreement with Kohl's, which expires Jan. 11, prevents the fund from making any statement.
It was not clear whether Ancora and Legion might again be part of a group. Ancora did not respond to a request for comment and Legion could not be reached for comment.
A spokesman for Kohl's was not immediately available for comment.
Kohl's already faces pressure from another activist shareholder, Engine Capital. The firm, run by Arnaud Ajdler, urged Kohl's this week to sell itself or consider separating its e-commerce business.
"My number one priority, the number one priority of the board, is to drive shareholder value," CEO Michelle Gass told CNBC on Wednesday.
Kohl's shares have risen 26% this year, trailing gains made by rival retailers like Macy's, whose stock price has jumped 143%.
As part of the settlement with the hedge funds earlier this year, Kohl's added former Lululemon CEO Christine Day, Thomas Kingsbury, a former CEO of Burlington Stores, and Margaret Jenkins, a restaurant industry veteran, to its board.
Headquartered in Menomonee Falls, Wisconsin, Kohl's has 1,162 stores in the United States and a market value of $7.7 billion.
(Reporting by Svea Herbst-Bayliss in New York; editing by Richard Pullin)
By Svea Herbst-Bayliss