Profitable Growth and Value Creation
July 2016
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Forward-Looking Language
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained herein may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to certain events that could have an effect on our future financial performance, including
but without limitation, statements regarding our plans, objectives, and future success of our store concepts, the implementation of our previously announced restructuring program,
and implementation of our program to increase the sales volume and profitability of our existing brands through four previously announced focus areas. These statements may address
items such as future sales, gross margin expectations, SG&A expectations, operating margin expectations, planned store openings, closings and expansions, future comparable sales,
inventory levels, and future cash needs. These statements relate to expectations concerning matters that are not historical fact and may include the words or phrases such as "expects,"
"believes," "anticipates," "plans," "estimates," "approximately," "our planning assumptions," "future outlook," and similar expressions. Except for historical information, matters
discussed in such oral and written statements are forward-looking statements. These forward-looking statements are based largely on information currently available to our
management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and are subject to various risks and
uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. Although we believe our expectations are based on reasonable
estimates and assumptions, they are not guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of
which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no
assurance that our expectations will, in fact, occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such
forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, general economic and business conditions, conditions in the
specialty retail industry, the availability of quality store sites, the ability to successfully execute our business strategies, the ability to achieve the results of our restructuring program,
the ability to achieve the results of our four focus areas, the integration of our new management team, and those described in Item 1A, “Risk Factors” and in the “Forward-Looking
Statements” disclosure in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K. There can be no assurance that the actual
future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Investors using forward-looking statements are encouraged to review
the Company's latest annual report on Form 10-K, its filings on Form 10-Q, management's discussion and analysis in the Company's latest annual report to stockholders, the Company's
filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Company's business, results of operations and financial
condition. All written or oral forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The Company does not
undertake to publicly update or revise its forward looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements
will not be realized.
Additional Information
Chico's FAS, its directors and certain of its executive officers are participants in the solicitation of proxies from Company shareholders in connection with the matters to be considered
at the Company's 2016 Annual Meeting. The Company has filed a definitive proxy statement and WHITE proxy card with the U.S. Securities and Exchange Commission (the "SEC") in
connection with any such solicitation of proxies from Company shareholders. COMPANY SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY
STATEMENT AND ACCOMPANYING WHITE PROXY CARD AS THEY CONTAIN IMPORTANT INFORMATION. Information regarding the identity of the participants, and their direct or
indirect interests, by security holdings or otherwise, is set forth in the proxy statement and other materials filed with the SEC. Shareholders can obtain any proxy statement, any
amendments or supplements to the proxy statement and other documents filed by the Company with the SEC for no charge at the SEC's website at www.sec.gov. Copies are also
available at no charge at the Company's website at www.chicosfas.com, by writing to Chico's FAS at 11215 Metro Parkway, Fort Myers, FL 33966, or by calling the Company's proxy
solicitor, Innisfree, toll-free at (877) 825-8971.
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$1,358m
53%
$871m
34%
$332m
13%
Chico’s FAS has a Powerful Portfolio of Brands, Providing a Platform for
Profitable Growth and Value Creation
One of the most loyal customer bases in the industry:
>90% of revenues from loyalty-program customers
Leading omni-retail capabilities: differentiated ability
to leverage deep customer analytics to maximize
profitability
Sustained long-term revenue growth, with 6% CAGR
from 2010 – 2015
Under the direction of our recently appointed Chief
Executive Officer and President, Shelley Broader,
Chico’s FAS is executing a new strategic plan
Four clear focus areas designed to usher in a new era
of profitable growth and value creation
Renewed discipline on operating model
Powerful, Iconic and Differentiated Brands
1 FY2015 Sales; Excludes Boston Proper.
Strong Customer Loyalty, Leading Omni-Retail
Capabilities and Sustained Revenue Growth
Iconic brand with a
cult-like following of
loyal customers of
women 45 years and
older
Aspirational and
sophisticated styles fill a
niche for fashionable
women 35 years and
older
Intimate apparel brand
that caters to a vastly
underserved intimates
market focusing on
women 35 years and
older
Positive Change is Underway
1 1
1
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Operational Initiatives
On April 25th , announced realignment of Marketing
and Digital Commerce functions
— Estimated annualized savings of ~$14 million
On May 26th, announced three additional initiatives
— Estimated incremental annualized savings of $50
to $70 million
Estimated aggregate savings of $65 to $85 million —
equivalent to 2.6% to 3.3% of LTM revenue — and
reflecting significant progress towards achieving our
goal of a 10% operating margin
Progress in New CEO’s First 180 Days Clearly Demonstrates
Company is on Right Track to Enhance Shareholder Value
Management Enhancements
Ms. Broader has begun to build out her management
team with new leaders who bring skills and expertise
to support and accelerate our progress
Key new hires in real estate and construction,
planning and allocation, legal and human resources,
including amongst others:
— Susan Lanigan (EVP & General Counsel)
— Kristin Oliver (Chief Human Resources Officer)
Governance Changes
Company-sponsored proposal to declassify the
Board over a three-year period
— Entire Board would stand for election at the 2019
Annual Meeting
Adopted formal policy limiting directors to four
public Boards, in addition to Chico’s FAS Board
Board Evolution
Proposed world-class leaders in our nominees to be
added to the Board
With the election of Bonnie Brooks and Bill Simon,
four of the Company’s nine directors, or almost half
the Board, will be new directors added in the past
three years
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Discussion Agenda
I. Chico’s FAS is Successfully Executing on a New Strategy for Profitable Growth and Value Creation
II. Chico’s FAS Board has Proactively Taken Action to Enhance Management, Corporate
Governance and Board to Drive Value
III. Barington’s Misguided Initiatives Would Jeopardize the Company’s Plan to Drive Profitable Growth
and Value Creation
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Powerful, Differentiated Brands Serving Attractive
Consumer Segments
1 % of total sales excludes Boston Proper.
Founded in 1983 as a store on Florida’s
Sanibel Island
Iconic brand with a cult-like following of
loyal customers of women 45+ years
New merchandise initiatives based on
online and store testing (e.g. petites)
2015 Sales: $1,358 million (53% of Total
Sales)1
604 boutiques across the U.S., Canada
and Puerto Rico
117 outlets
46 Chico’s franchise locations in Mexico
Aspirational and sophisticated styles fill
a niche for fashionable women 35+ years
New initiatives include renewed focus
on special occasion business and a
revived and expanded accessories
business
2015 Sales: $871 million (34% of Total
Sales)1
434 boutiques across the U.S., Canada
and Puerto Rico
71 outlets
Enviable position that caters to a vastly
underserved market focusing on
women 35+ years
New initiatives include swim rolled out
to all stores and online after
successful test, amongst others
2015 Sales: $332 million (13% of Total
Sales)1
272 boutiques across the U.S., Canada
and Puerto Rico
19 outlets
31 franchise locations in Mexico
Comfortable, relaxed fit and modern
style. Accessories coordinate for an
individualized, outfitted wardrobe
Feminine and affordable alternative to
designer fashion. Primarily in black and
white and seasonal color splashes
Beautiful, sensual lingerie, loungewear
and beauty featuring luxurious fabrics,
innovative fashion, and a perfect fit in a
wide range of sizes
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Cutting-Edge Omni-Retail Capabilities Foster Customer
Loyalty and Drive Increased Sales
1 Source: Medallia. Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company's products or services to others.
Long before most peers, we have been tying purchases directly
to specific customer names
— Customer information databases
— Converted paper customer books to digital (iPad)
— Drove incremental appointment sales and Average Dollar Spend (ADS) by
expanding associates’ visibility of customers’ category of loyalty
New omni-retail initiatives
— Rollout of a new POS system
— Introduction of the customer book to allow store associates visibility to
past customer behaviors
– >90% of 2015 revenues were derived from customers in loyalty
programs
— iPads provide capability to buy items online and contact customers /
groups of customers
— Chico’s launched a new website in February 2016; the platform developed
for Chico’s is now being leveraged for new WHBM and Soma websites
Chico’s FAS Net Promoter Scores1 are well above the average
for the retail sector more broadly
— For 2015, Chico’s score of 77, WHBM’s score of 75, and Soma’s score of 75,
are all significantly above the retail industry average ¹ of 51
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Following Her Appointment as CEO, Ms. Broader Undertook a
Comprehensive Business Review…
Chico’s
FAS
360
Inside View
of Business,
Cadence and
Timelines
Outside View
of Business
and
Corporate
Structure
Stakeholder
View of
Business
Customer
View of
Brands
Field
Associate
View of
Experience
Merchant
View of
Product
Eight months ago, the Board appointed Ms. Broader as new CEO and President. She immediately undertook a
comprehensive review of the business to provide clear strategic focus and target operating improvements
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Evolve the
customer experience
Strengthen our
brands’ positioning
Integrate our digital and physical retail environments to
have the agility to meet our customers’ expectations as
their relationship with digital platforms evolves
Leverage the connection we have with our loyal
customers, attract new customers, and continue to
deliver unparalleled service
…As a Result of the Business Review, We Have Developed Four Clear
Focus Areas for Profitable Growth and Value Creation
1 2
3 4
In less than six months, Ms. Broader developed a new plan, recruited new team members to drive execution, and
launched multiple initiatives designed to improve the way we operate
Leverage
actionable retail science
Sharpen our
financial principles
Develop algorithms and models to drive and enable real-
time decision-making to improve how we go to market,
stock our product, and interact with our customers
Drive further savings through leveraging our shared
services model, optimizing our expenses, driving a high
ROI on marketing spend and facilitating value creation
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M a y 2 6
Announced three new initiatives —
Estimated savings of $50 - $70 million
Supply chain efficiency ($30 - $40 million in expected
annual savings): Better product testing to identify winners,
positioning fabric, optimizing our floor-set cadence, and
collaborating more actively with vendors
Non-merchandise expense reduction ($10 – $20 million in
expected annual savings): Instituting formalized and strategic
supplier rationalization, negotiations and collaboration
Marketing spend optimization (expect $11 million in annual
savings, in addition to ~$14 million already announced):
Using our rich historical data set to determine the most effective
marketing techniques to engage with our customers
Current Initiatives are Accelerating Progress Towards Significant
Improvements in Cost Efficiency…
A p r i l 2 5
Announced the realignment of Marketing and Digital
Commerce functions
Realignment enables us to better support the individual
brand’s needs and places these important functions closer
to our customers, both of which we believe will help drive
traffic
Reduces costs and complexity while improving execution
Estimated annualized cost savings of ~$14 million
Total announced expected annual savings of $65 – $85 million, representing 2.6% to 3.3% of LTM sales
Anticipate $15 million in savings in fiscal 2016 and we expect to complete the implementation of the
initiatives by the end of 2017
Making significant progress towards reaching 10% operating margin goal
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…Building on Progress that was Already Underway
Recent actions build on cost-cutting and strategic initiatives that the Company had been pursuing
before Ms. Broader joined the team, and long before Barington’s proxy contest:
Slowing square footage growth, including announcing plans to close 170-175 stores through 2017.
These actions are expected to result in $65 million of cost savings, with approximately $20 million
achieved to date, and improved store productivity over time
Implementing a corporate organizational realignment in 2015 to better align resources with growth
opportunities, resulting in a 12% reduction of the Company’s headquarters and field management
employee base and an estimated $38 million of annualized savings
Reducing capital expenditures in fiscal 2015 by 40% compared to the Company’s prior three-year
average
Divested Boston Proper, eliminating a 100 basis point drag on operating margins
Moderating promotions and focusing on more disciplined inventory management, resulting in a 30
basis point gross margin improvement from fiscal 2014 to fiscal 2015
Actions Underway Before Ms. Broader Joined as Chico’s FAS CEO
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Independent Industry Analysts Have Applauded Ms. Broader’s Strong
Leadership, Experience and Fresh Perspective, and Recognize the
Benefits and Potential of Her Actions
Note: Permission to use quotation neither sought nor obtained.
“Importantly, we are encouraged by new CEO Broader’s focus on strengthening the retail/digital channels and core brands
while leveraging CRM data to improve customer engagement. We expect operational discipline around inventory and cost
control to complement sales and drive longer-term margin recovery.”
25-February-2016
“New CEO Impressive, Maintain Belief CHS is Best-in-Class…we believe the new CEO not only brings a wealth of experience
to the table but also recognizes the need to quickly address the ‘seismic’ shift taking place at retail, both of which we expect
will be instrumental in driving operating margins back to the DD levels.”
26-February-2016
“We believe the company’s leadership in omni-channel (strive for all-inclusive experience with brands--devices, channels,
products, etc.) aligns well with its strategic vision of building strong customer relationships, customer service, and a seamless
customer experience. We view its focus on customer service and personalization as a differentiator that is difficult to replicate
and a key to long-term margin expansion and profitability.”
26-April-2016
“[L]onger-term the company is on a path to return to +10%-plus EBIT margins from last year's 6.8% driven first by discipline in
inventory management, cost savings and real estate optimization, followed by category extensions, growth in Soma, digital
commerce and international expansion.”
26-May-2016
“We are impressed by the breadth of opportunity to rightsize the cost structure and improve operations, as identified by new
CEO Shelley Broader. While comps could take a long time to turn, she is going after what can be controlled and improved, and
isn't wasting any time.”
26-May-2016
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Discussion Agenda
I. Chico’s FAS is Successfully Executing on a New Strategy for Profitable Growth and Value Creation
II. Chico’s FAS Board has Proactively Taken Action to Enhance Management, Corporate
Governance and Board to Drive Value
III. Barington’s Misguided Initiatives Would Jeopardize the Company’s Plan to Drive Profitable Growth
and Value Creation
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12+ years of retail experience
Previously EVP of People at
Walmart U.S. from 2013 to 2015
Joined Walmart as Assistant
General Counsel in 2004
“Kristin has significant experience
implementing world-class talent
attraction, development and
retention programs, in addition to
defining roles, responsibilities and
structure”
— Shelley Broader
We Are Strengthening the Management Team as We Execute the New
Vision for Chico’s FAS
25+ years of professional experience,
including 15+ years in retail
Previously EVP & General Counsel at
Dollar General from 2002 to 2013
Prior to Dollar General, served as
General Counsel at Zale
“Susan brings a remarkable record
helping prominent national retailers
successfully navigate complex legal,
compliance and regulatory issues.
Throughout her career, she has also
been a strong partner to Boards and
management, advising on strategic
planning, business analysis and
governance matters”
— Shelley Broader
Kristin Oliver
Chief Human
Resources Officer
Susan Lanigan
EVP & General
Counsel
25+ years of retail experience, including 15 years
of merchandising experience
Previously Chief Executive Officer and President
of Walmart’s EMEA region
Prior to joining Walmart in 2010, Ms. Broader was
Chief Operating Officer and President of
Michael’s
Before joining Michael’s, Ms. Broader spent
seventeen years with the Delhaize Group, where
she held a range of leadership roles
“Shelley distinguished herself as our top choice,
having the extensive retail industry expertise,
leadership skills and appreciation for superior
service that we believe will take Chico's FAS and
each of our brands into our next phase of growth
and value creation” — David F. Walker
Shelley Broader
CEO & President
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We Have Demonstrated a Proactive Approach to Corporate
Governance and Shareholder Engagement
Engaged, independent Board with expertise that is relevant to our new strategic direction
and value creation objectives
— A majority independent Board fosters a culture of transparency and accountability
Board unanimously approved proposal to declassify; entire Board would stand for election
at the 2019 annual meeting
— Highlights commitment to shareholder-friendly corporate governance standards
Board adopted formal policy limiting directors to serve on four public company Boards in
addition to the Chico’s FAS Board
— Prioritizes focused and effective leadership at Chico’s FAS
Independent Board leadership with David Walker Independent Chair
Shareholder-friendly governance policies, with four rotations of the Board Chair over the last
10 years
Regular evaluation of skills and experience: with the election of Ms. Brooks and Mr. Simon,
four of the nine Board members will be new directors added in the past three years
— Recent nominees selected through rigorous skills matrix based on third party search
process, in consultation with Corporate Governance and Nominating Committee
Effective Board
Leadership and
Independent
Oversight
Governance
Aligned with
Shareholder
Interests
Executive compensation: Aligned with performance and shareholder interests
— Execution on four new initiatives impacts performance based compensation
— Compensation program under review by Compensation Committee and newly appointed
Chief Human Resources Officer
Active shareholder engagement program — 1,635 analyst and investor meetings with 547
analysts and investors in the last 3 years (average of 545 meetings / 182 investors per year)
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Janice Fields
Marketing and
Brand Building
Experience
Our Nominees, Together With Our Board, Have the Skills and
Experience Needed to Drive Shareholder Value
Independent director of Chico’s FAS since 2013
Made important governance and leadership
contributions to Chico’s FAS as Chair of the
Corporate Governance and Nominating Committee
Former President of McDonald’s USA
Board Director of Monsanto since 2008
Proven track record in consumer marketing and
brand building, multi-unit real estate and
franchising
Accomplished executive recognized by both Forbes
and Fortune for her leadership
35+ years of experience
We are enhancing our Board with individuals who have the most relevant skills, expertise and track record to support our
success and the execution of our strategic plan
Bonnie Brooks
Merchant and CEO
Experience
Bill Simon
Merchant and
Operations
Experience
Vice Chairman of Hudson’s Bay Company since 2014
Joined Hudson’s Bay in 2008 as President & CEO
Talented merchandising executive with substantial
current retail, digital and turnaround expertise and
strong track record across several leading global
apparel retailers
— Includes leading three major international
department store turnarounds, where
merchandising, marketing, digital and
ecommerce were instrumental in revitalizing sales
and profitability
— Significant experience in executing M&A and
other strategic alternatives
30+ years of global executive leadership experience in
retail and 14 years in merchandising
Former President & CEO of Walmart U.S. from 2010
to 2014
Joined Walmart in 2006 and served as COO from
2007 to 2010
Previously held senior executive positions at Brinker,
Diageo and Pepsi
Seasoned executive with extensive supply chain
expertise and a proven track record leading large,
complex global retailers with best-in-class cost
structures
9 years of merchandising experience and 13 years of
experience on the supplier side
Shelley Broader
CEO and Retail
Experience
CEO & President of Chico’s FAS since Q4 2015
Former CEO & President of Walmart EMEA and
former CEO & President of Walmart Canada
Architect of the Company’s new focus areas and
leading the progress underway
15 years of merchandising experience, including
Chief Merchandising Officer of Walmart Canada and
Vice President of Merchandising at Hannaford
Brothers
Led financial and operational turnaround at Kash n’
Karry that included a complete re-branding into
Sweetbay Supermarkets
25+ years of retail experience
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Discussion Agenda
I. Chico’s FAS is Successfully Executing on a New Strategy for Profitable Growth and Value Creation
II. Chico’s FAS Board has Proactively Taken Action to Enhance Management, Corporate
Governance and Board to Drive Value
III. Barington’s Misguided Initiatives Would Jeopardize the Company’s Plan to Drive Profitable Growth
and Value Creation
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Barington’s Assertions Distort the Truth
Barington’s Assertions The Truth
“Barington sought to establish a private dialogue with the
Company. On September 22, 2014, representatives of Barington
had an introductory conference call [with the CFO and then
head of Investor Relations]”
“In September 2015, Barington believed that Chico’s common
stock was significantly undervalued and decided to begin
making a sizable investment in the Company.”
Failed to engage with the Company in any substantive manner between September 2014 and
March 2016
Barington sold down its entire position in the Company between September 2014 and
September 2015; has been a current holder for only 8-9 months
Barington held only 0.92% of outstanding voting shares at the record date and own derivatives
potentially convertible into another approximately 0.64% of the Company’s outstanding shares,
the majority of which were purchased within the past six months
“When a Board is looking to add one or more new directors, the
nominating committee conducts a search, interviews the top
candidates as if it were a job interview, and selects their
favorites. The CEO often plays a key role in the selection
process, as we have seen recently in the case of Chico’s.”
Chico’s FAS conducted a thorough search led by our Corporate Governance and Nominating
Committee and an experienced search firm
The nomination of two extraordinary candidates, Bonnie Brooks and Bill Simon, was based on
careful and thoughtful evaluation by Board members and members of senior management
The same due consideration was given to Barington’s nominees, who were not as strong as ours
“The nominating committee failed to interview me for a position
on the Board and the new CEO ignored my invitation to meet.”
Members of the Chico’s FAS Board and management team have had numerous discussions
with Jim Mitarotonda, including four separate phone calls between him and Shelley Broader
Mr. Mitarotonda was also invited to present to the full Board, an invitation to which he has thus
far failed to respond
“Ms. Brooks is the Vice Chairman of Hudson’s Bay Company,
which owns and operates two sizable department store chains
that directly compete with the Company: Saks Fifth Avenue and
Lord and Taylor. Chico’s acknowledges that it directly competes
with department stores.”
Barington’s suggestion that Bonnie Brooks’ appointment would represent a conflict of interest
is wrong: neither Hudson’s Bay Company, nor any of the department stores within its portfolio
(including Saks Fifth Avenue and Lord & Taylor), are competitors in any practical sense to
Chico’s FAS
“The Board has [...] conditioned an in-person meeting between
Barington and the Board, upon us withdrawing our nomination
letter and supporting the Board’s nominees.”
Statement is categorically false
Chico’s FAS has been and remains open to engaging in a constructive dialogue with Barington –
as with all of its shareholders
On Long-Term Interest
in Chico’s FAS
“Barington sought to establish a private dialogue with the
Company. On September 22, 2014, representatives of Barington
had an introductory conference call [with the CFO and then head
of Investor Relations]”
“In September 2015, Barington believed that Chico’s common
stock was significantly undervalued and decided to begin making
a sizable investment in the Company.”
“When a Board is looking to add one or more new directors, the
nominating committee conducts a search, interviews the top
candidates as if it were a job interview, and selects their
favorites. The CEO often plays a key role in the selection process,
as we have seen recently in the case of Chico’s.”
“The nominating committee failed to interview me for a position
on the Board and the new CEO ignored my invitation to meet.”
On Board Search
On Interviewing
Candidates
On Bonnie Brooks
On Addressing
the Board
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Barington Has Not Suggested Any Meaningful New Proposals;
Change Was Already Underway at Chico’s FAS
Barington Says… The Reality is…
Add 200-300
new Soma
stores
Barington’s 200 to 300 bricks & mortar store growth strategy conflicts with the way many consumers are
shopping today, particularly at Soma. In fact, Chico’s FAS customers, like those of many retailers, are
engaging with our brands at a faster rate on digital channels than in-store
Adding 200-300 stores would significantly impair shareholder value and our progress to double digit
operating margins. The added structural cost, the slow ramp to profitability, and the consumer’s increasing
shift to online channels are factors that make the prospect irresponsible from a return on investment
perspective
Reduce
operating
costs
Barington’s suggested cost reductions disregard actions we have already taken. Since divesting Boston
Proper, Chico’s FAS has already exceeded the reduction in advertising costs that Barington targets. Further,
Barington’s estimates ignore the $10 million to $20 million of non-merchandise procurement savings that
we have already identified and announced. In April and May 2016 (prior to Barington’s involvement), Chico’s
FAS announced numerous strategic, operating and financial initiatives, which are expected to result in
incremental annual cost savings of $65 - $85 million
Repurchase
more shares
Chico’s FAS has a strong track record of returning capital to shareholders but will exercise discipline in doing
so (and in leveraging the balance sheet more broadly)
Chico’s FAS has returned 131% of free cash flow since 2010, vs. a median of 103% for peers. Since 2015,
Chico’s FAS has returned $398 million to shareholders through dividends and share repurchases,
representing 3x free cash flow
Align pay and
performance
Chico’s FAS has a history of closely aligning executive compensation and performance, and has consistently
scored better than the majority of Russell 3000 companies on their relative degree of alignment
Enhance the
Board
In May 2016, after a thorough search with the assistance of an experienced search firm, we announced the
nomination of two world-class leaders, Bonnie Brooks and Bill Simon, who will bring extensive retail,
merchandising, supply chain and franchising experience, as well as proven leadership skills to our Board.
Barington’s hand-picked director nominees lack current, relevant experience that would support our
progress and new plan
1
2
3
4
Barington’s unsophisticated view of our business puts the execution of our strategic plan
– and delivery of real shareholder value – at risk
5
Misguided!
Misleading!
Underway!
Misleading!
Already Done!
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128
181
209
249
280
287
2010A 2011A 2012A 2013A 2014A 2015A
Chico’s FAS is Pursuing Disciplined Growth of the Soma Brand
Source: Company filings.
1
“In the intimate apparel and sleepwear market, we believe that mature women are in need of an appealing alternative to
department stores and Victoria's Secret. We believe that Soma presents this alternative and can grow to become a much
larger brand. We do not think that the current modest pace at which management is expanding the Soma store base is
maximizing its value potential. We are convinced that Soma has the potential to become a billion dollar business. In time,
this business could also potentially become a spin-off opportunity. We therefore strongly recommend that the Company
focus on growing the Soma brand and believe that it should open an additional two to three hundred stores over the next
five years. ” – Barington
Chico’s FAS Has Been Pursuing
Disciplined Expansion of the Soma Store Base…
…Driving Significant Revenue Growth
and Preserving SSS Momentum
Retail/
All-in
SSS
13.7 % 21.9 % 18.3 % 5.8 % 8.0 % 3.1 %
$ 125
$ 180
$ 236
$ 268
$ 311
$ 332
2010A 2011A 2012A 013A 2014A 2015A
“Opening two to three hundred new Soma stores is an antiquated strategy that might have been relevant five years
ago. Today, in the face of shifting consumer behavior, that strategy would mean saddling the Company with huge
capital investments for the next decade, solely to drive short-term top-line growth, in an era when the capital would
be better spent on ecommerce and other digital initiatives.”
– Shelley Broader
Barington’s suggestion that we add 200-300 new stores over 5 years runs counter to both secular shifts in apparel
retail and a disciplined strategy that our shareholders have applauded
Bad use of capital that would saddle us
with poor capital investments for a decade
Antiquated strategy and wrong
Kill orange text at top - Add quote from
Shelley
Opening 200 would be something we
would pursue 5 years ago. Short term top
line growth gained by saddling us with bad
capital investments for next 10 years
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In its letter dated 13 June 2016, Barington cited an incorrectly calculated SG&A margin, failing to adjust for store
Depreciation and Amortization (D&A) which is included in occupancy
While there is much more to do, announced cost saving initiatives are
moving our cost structure in the right direction
Chico’s FAS has embarked on a focused effort to drive a more efficient cost structure, including initiatives such as:
— Supply chain efficiency ($30 – $40 million in expected annual savings)
— Non-merchandise expense reduction ($10 – $20 million in expected annual savings)
— Marketing spend optimization ($11 million in addition to expected annual savings of $14 million already
announced)
– Realignment of Marketing and Digital Commerce functions to better support the individual brand’s needs
– Further marketing optimization by using our rich historical data set to determine the most effective
techniques to engage with our customers
In addition, in 2015, we implemented a corporate organizational realignment, resulting in a 12% reduction of the
Company’s headquarters and field management employee base and $38 million of expected annual savings
Significant Actions Already Implemented to Reduce Operating
Costs
In its letter dated 13 June 2016, Barington cited an incorrectly calculated SG&A margin, failing to adjust for store
Depreciation and Amortization (D&A) which is included in occupancy
While there is much more to do, announced cost saving initiatives are
moving our cost structure in the right direction
Chico’s FAS has embarked on a focused effort to drive a more efficient cost structure, including initiatives such as:
— Supply chain efficiency ($30 - $40 million in expected annual savings)
— Non-merchandise expense reduction ($10 – $20 million in expected annual savings)
— Marketing spend optimization ($11 million addition to expected annual savings of $14 million already announced)
– Realignment of Marketing and Digital Commerce functions to better support the individual brand’s needs
– Further marketing optimization by using our rich historical data set to determine the most effective
techniques to engage with our customers
We have already implemented a corporate organizational realignment, resulting in a 12% reduction of the
Company’s headquarters and field management employee base and $38 million of expected annual savings
2
“Chico’s SG&A expenses as a percentage of sales are currently among the highest of its specialty retailer peers, and since
2012, these expenses have been growing nearly three times faster than revenue. As a result, despite Chico’s having one of the
highest gross margins among its peers, it has one of the lowest EBITDA margins. We are convinced that the Company’s
disproportionately high SG&A expenses are masking the Company’s true earnings power” – Barington
Total recently announced estimated
cost savings of $65–$85 million
represent 2.6% – 3.3% of LTM sales
Chico’s FAS management and Board continue to seek out efficiencies to drive operating margin improvement
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Chico’s FAS Has a Strong Track Record for Capital Return and
Will Continue to Exercise Discipline
Source: Company filings and Capital IQ.
Note: $ figures may not sum to total due to rounding.
1 Capital returned includes dividends and share repurchases, which are calculated gross of withholding tax for comparability with peers; free cash flow is calculated as cash flow from operations, less capital expenditures. Peers
as defined in Chico’s FAS proxy statement.
3
Since 2015, $398 million returned to shareholders through dividends and share
repurchases, representing 3x free cash flow1
Since 2010, over $1.1 billion has
been returned to shareholders Chico’s FAS Shareholder Return Over Time
$ 28 $ 34 $ 35 $ 38 $ 46 $ 44 $ 11
$ 19
$ 183
$ 112
$ 252
$ 18
$ 303
$ 41
$ 48
$ 217
$ 146
$ 290
$ 64
$ 347
$ 52
2010A 2011A 2012A 2013A 2014A 2015A 2016YTD
Dividends Share Repurchases
Chico’s FAS has a strong track record of returning capital to its
shareholders, returning 131% of free cash flow since 2010, vs. a
median of 103% for peers
Consistent with our focus on sharpening our financial principles, we will continue to exercise discipline
with respect to capital return and our balance sheet more broadly
Shareholders have applauded our prudent use of cash especially in the face of a slowing retail environment
Barington’s share repurchase strategy would deplete cash balances or increase leverage, limiting our future flexibility to
deploy capital and sacrificing our strong balance sheet for short-term gains
131%
103%
Chico's FAS 5-Year Peer Median
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Overview of CEO Compensation Plan
1 Source: Public sources, FactSet, ISS.
2 Based on ISS peer group of Abercrombie, Aeropostale, American Eagle, Ascena, Buckle, Children’s Place, Coach, DSW, Express, Finish Line, Foot Locker, Gap, Genesco, Guess?, L Brands, Men’s Wearhouse, Pier 1
Imports, Stage Stores, Williams-Sonoma, Ulta Salon, Urban Outfitters.
3 Compensation committee retained Frederic W. Cook & Co., a third party consultant, to review Ms. Broader’s pay package; on a mix basis they found it was in-line with 20 publicly-traded retailers.
Annual Meeting Say-on-Pay Voting Results
Year Proposal % For
2015 Advisory Vote on Compensation 96.6 %
2014 Advisory Vote on Compensation 97.5
2013 Advisory Vote on Compensation 97.9
Comparative Quantitative Analysis of Compensation Practices1
Year Relative Degree of Alignment
CEO Comp
(Mult. of Peer
Median2)
2015 Better than 73 % of Russell 3000 companies 1.07 x
2014 Better than 56 % of Russell 3000 companies 1.33
2013 Better than 62 % of Russell 3000 companies 1.04
One-time
incentive
payments
required to
attract top
industry
talent
“We believe that the Company’s executive compensation arrangements for its President and CEO Shelley Broader fail to
properly align pay with performance. .. We therefore strongly recommend that the Board more closely tie Ms. Broader’s
compensation to the Company’s performance beginning in 2017.“ – Barington
4 Compensation Strategy Aligns With Generating Shareholder Value
Base Salary
40%Performance-
Based Bonus
60%
Pay package is majority performance contingent in the
second year
All Three Leading Voting Advisors Recommended FOR
In its letter, Barington included one-time mitigating payments that were designed to compensate Ms.
Broader for economic losses incurred as a result of leaving her prior employment. Ms. Broader’s base salary is
in the 57th percentile and her long-term incentives are in the 75th percentile of a composite of publicly-traded
retail peers3, demonstrating incentives are aligned and within market.
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Barington’s Nominees Lack the Skills and Expertise Needed Today
to Support our Progress
Barington’s Board Nominees
Jim Mitarotonda Janet Grove
Ms. Grove’s executive
experience in the U.S. retail
industry is five years dated, a
significant gap in an industry as
dynamic as retail
Any experience and skills she
might offer already represented
by current directors and/or Ms.
Brooks and Mr. Simon
Lacks recent digital and
ecommerce expertise, which are
essential components of the
Company’s strategy and drivers
of success in the current retail
environment
Ms. Grove currently serves on
the Board of Aéropostale, which
just filed for bankruptcy in May
2016
According to his own proxy
materials and website, Mr.
Mitarotonda has served on only
one apparel retail Board
Any experience and skills he
might offer already represented
by current directors and/or Ms.
Brooks and Mr. Simon
Lacks digital expertise and
limited ecommerce experience
Suggested cuts are duplicative of
initiatives already underway
Traditional bricks and mortar
growth strategy conflicts with the
realities of today’s retail industry
5
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Jim Mitarotonda Does Not Have the Right Qualifications or Retail
Track Record to Merit Appointment to the Chico’s FAS Board
Not Qualified to Direct an Omni-Retailer
Mitarotonda’s limited experience on an apparel
retail Board has led to disappointing results.
Having joined The Jones Group Board in May
2013, he participated in the sale of the Company
to Sycamore Group just seven months later for
barely a 10% premium to the closing price on the
day he joined.
Poor Retail Track Record
Source: Public sources, FactSet, Barington proxy statements and website.
Mitarotonda Board Experience
Industry
Number of
Boards
Current
Boards Companies
Industrial 5 3
Technology 3 0
Apparel
Retail
1 0
Auto Parts
Dealer &
Service
1 0
Financial 1 1
Total 11 4
/ Hilco Acquisition Corp.
We believe Barington, and Mitarotonda
specifically, lacks the experience, insight and
capabilities to guide CHS toward long term
value creation.
As a consequence, the only means for him to
create a lift in the company’s value is a fire
sale transaction before it becomes evident
that his strategies and tactics for running the
business won’t create value. [TO BE
DISCUSSED]
His actions on the Board of The Jones Group
are case in point.
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Chico’s FAS Board Nominees Have The Superior Skills and
Experience Needed to Drive Shareholder Value
Jim Mitarotonda Janet Grove
Current Retail /
Merchandising
No No
Current
Marketing
(Including
Digital)
No No
Operational Cost
Cutting
No No
Supply Chain No Yes
Multi-unit Real
Estate
No Yes
Franchising No No
Barington’s Nominees
Shelley Broader
Chico’s FAS’ new CEO and President
Architect of the Company’s new focus areas and leading the
progress underway
Janice Fields
One of the Company’s newest independent directors
Has made important governance and leadership contributions
to Chico’s FAS as Chair of the Corporate Governance and
Nominating Committee
Proven track record in consumer marketing and brand
building, multi-unit real estate and franchising
Bonnie Brooks
Substantial, current retail, merchandising, digital marketing,
ecommerce and turnaround expertise
Strong track record across several leading global apparel
retailers
Bill Simon
Extensive supply chain expertise
Proven track record leading large, complex global retailers
with best-in-class cost structures
Chico’s FAS Nominees
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Despite a Weak Overall Retail Environment, Chico’s FAS Has
Outperformed Since Ms. Broader’s Appointment as CEO
Source: Capital IQ as of 28-Jun-2016.
Note: Permission to use quotation neither sought nor obtained.
1 Peers as defined in Chico’s FAS proxy statement. Peer TSR weighted based on market capitalization.
25-Feb-16: Senior
Management’s
Announcement of
Company’s Four
Priorities
Chico’s FAS TSR Over / (Under) Performance vs. Peers1
Since Ms. Broader’s appointment as CEO,
Chico’s FAS has outperformed peers in a
very difficult retail environment
While we are on the right track, it will
take some time before the full value of
our strategic plan is fully implemented
and baked into our stock price
Name Category Commentary
Women's
apparel,
jewelry and
accessories
Chapter 11 liquidation on September 26, 2014
Listed assets worth $278.5mm and debts of $361.3mm in
bankruptcy filing
IP now owned by Sycamore Partners
Women's
apparel,
jewelry and
accessories
Closed 100 stores in 2011 and reduced 7% of corporate
employees and 13% of store operations staff
In 2015, >20% of shareholders voted to remove four of nine
directors
Six Board Directors stepping down in 2016 as a result of
urging by activist investor Macellum Capital Management
Women’s
apparel,
accessories,
and shoes
Closed all 78 kids and men's clothing stores in 2008
Sold J. Jill for $75m in 2009 after purchasing the company
for $517m in 2006
In 2011, announced closings of 110 stores
Women’s
specialty
clothing
Closed 75 stores at time of 2006 sale to Golden Gate
Exploring IPO in 2016 after shifting ownership four times
since 2006
Women's
apparel,
jewelry and
accessories
Following losses in FY2014 announced closure of over 20
stores
Plans to convert 50 regular stores into outlets by end of
FY2016
Women’s
apparel,
accessories,
and shoes
Failed roll-out of over 130 new stores led to closures of
numerous stores in 2006
Has not turned profit since 2011
Filed for Chapter 11 bankruptcy on February 4, 2015
Many other women’s retailers have faced challenging
circumstances, with two declaring bankruptcy in the last two years
“We are impressed by the breadth of
opportunity to rightsize the cost structure
and improve operations, as identified by
new CEO Shelley Broader. While comps
could take a long time to turn, she is going
after what can be controlled and improved,
and isn't wasting any time.”
26-May-2016
Spread chart out; add call out
box saying:
that says we are on right track
but going to take some time
6.9%
0.0 %
5.0 %
10.0 %
15.0 %
20.0 %
25.0 %
Feb-2016 Mar-2016 Apr-2016 May-2016 Jun-2016
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Barington only began accumulating its current position in
Chico’s FAS in Q3 2015
— By comparison, Chico’s FAS’ top 25 institutional investors
have, on average, held the stock for more than eight
years
— Almost half of its current claimed ownership is made up
of derivative contracts
– Of those derivative contracts, at least 650, 000 are
out-of-the-money call options
Barington’s 0.92% OS stake of common shares represents
less than 1 day of trading volume¹
Note: Ownership data is based on Barington’s proxy statement and quarterly 13F filings .
¹ Based on Chico’s 3 month average daily trading volume of 2.4mm shares as of 27-Jun-2016.
Barington is a Short-Term Holder, Not Committed to Chico’s FAS’
Long-Term Initiatives
Barington and its affiliates own approximately 0.92% of
the Company’s outstanding shares and own derivatives
potentially convertible into another approximately
0.64% of the Company’s outstanding shares, the
majority of which were purchased within the past six
months. Further, as shown in their proxy materials,
between September 2014 and September 2015,
Barington sold down their entire ownership position in
the Company’s common stock
Barington is not a significant shareholder or a long-term investor in Chico’s FAS
B
ar
ingt
on’
s
Sh
ar
es
Out
sta
n
d
ing
(%
T
otal)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Jun-16
Co mon Stock Derivative
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Chico’s FAS has embarked on a clear path to long-term value creation under the leadership of Ms.
Broader
The Chico’s FAS Board has:
— Appointed a new CEO
— Hired several new key management executives
— Announced four new focus areas
— Launched multiple new operating improvement initiatives
— Announced new governance enhancements, including two new Board nominees
— These are all in addition to the announced cost savings initiatives to-date
Barington’s actions jeopardize the successful execution of our strategic plan to enhance shareholder
value
PLEASE VOTE FOR THE SUPERIOR
CHICO’S FAS BOARD SLATE ON THE
WHITE PROXY CARD TODAY
Support Continued Enhancement of Shareholder Value at Your
Company
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Supplementary Materials
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Chico’s FAS Board Search Process and Barington Nominees
F e b r u a r y 2 0 1 6
CHS began search process
for new independent
director candidates
M a y 1 1
Received a list of five
candidates which
Barington suggested
for consideration by the
Board
M a y 1 9
After careful evaluation of all candidates,
CHS Board concluded that the addition
of Bonnie Brooks and Bill Simon to the
Board, together with the continuing
service of Ms. Broader and Ms. Fields,
represented the right combination of
expertise, experience and independence
for the Board.
CHS received notice from Barington that
it intended to nominate three of the five
individuals they had previously
submitted for the Board’s consideration
M a y 2 5
CHS announced the nomination of Ms.
Brooks and Mr. Simon, declassification of
Board and formal policy limiting directors to
service on 4 public company Boards in
addition to the CHS Board
Barington publicly announced its desire to
seek the appointment of two of the three
individuals – Jim Mitarotonda and Janet
Grove – at the 2016 Annual Meeting
A p r i l 1 2 / 2 8
At Barington’s request, CHS held a call to discuss
company performance and strategy.
Barington followed up with a second call during
which Jim Mitarotonda (CEO of Barington)
advised of his intent to nominate himself to join
the Board
2 0 1 6
A n n u a l
M e e t i n g
J u l y 2 1
M a y 1 5 / 1 6
CHS Board proceeded to
evaluate the prospective
candidates suggested by
Barington
David Walker, Janice Fields and
Shelley Broader met with one of
the candidates in Orlando, FL
M a y 2 0 1 5
CHS retained an executive search firm,
Herbert Mines, to assist with identifying
qualified candidates for the CEO position
as well as to identify up to two potential
independent Board nominees for future
consideration
M i d - M a y 2 0 1 6
In addition, members of the
Board requested to hold a
teleconference with another
one of the five prospective
nominees. However, that
individual advised that she
was withdrawing her name
from consideration.
Ms. Broader and Mr.
Mitarotonda also held four
separate phone calls
J u n e 3 / 6
CHS issues statement correcting
inaccurate assertions from
Barington, and subsequently files
definitive proxy materials and
mails letter to shareholders,
urging them to vote FOR each of
CHS Director nominees
J u n e 2
Barington delivered a letter to
the Chair of CHS’ Board, setting
forth Barington’s concerns with
respect to the Company’s
performance and outlining
measures Barington believes
CHS needs to implement
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Chico’s FAS Captures a Widely Different Customer Base than
Hudson’s Bay Company
Source: Chico’s FAS market research and APT.
1 Share of wallet is a survey method used in performance measurement to understand the amount of business received from a specific customer demographic. Share of Wallet is weighted by average purchase amount.
Proximity / Demographic Profile: Independent third party analysis from Applied Predictive Technologies (APT) has found
that Hudson Bay's stores are not competitively relevant to the Chico's brands in terms of geographic proximity or
demographic profile
Share of Customer Wallet: Our own customer analysis shows that our customers do not shop at Hudson Bay's stores
(only 1.3% SOW1), and we do not include Hudson Bay's in our routine market analyses
33
151 / 139 / 125
255 / 172 / 0
86 / 84 / 83
225 / 102 / 51
124 / 161 / 174
110 / 197 / 184
200 / 74 / 55
158 / 183 / 5
63 / 85 / 103
118 / 120 / 108
248 / 244 / 225
244/ / 138 / 32
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Additional Corporate Governance Statistics
Source: Institutional Shareholder Services, GMI Analyst, Public filings.
A Board with extensive retail, operating and public company experience comprised of our
directors and nominees would meet the highest standards of shareholder friendly
corporate governance
8 / 9 Independent Directors
De-staggering Board, per new proposal, with entire Board up for election in 2019
Average tenure of ~5.3 years, well below the S&P average of ~8.4 years
Formal policy to limit director over-Boarding
4 /9 Female Directors
Independent Chair of the Board
34
151 / 139 / 125
255 / 172 / 0
86 / 84 / 83
225 / 102 / 51
124 / 161 / 174
110 / 197 / 184
200 / 74 / 55
158 / 183 / 5
63 / 85 / 103
118 / 120 / 108
248 / 244 / 225
244/ / 138 / 32
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Our Board Nominees Have the Skills and Experience Needed to Drive
Shareholder Value
On May 24, Chico’s FAS nominated 2 new independent director candidates
Bonnie Brooks
Bill Simon
Vice Chair of Hudson’s Bay Company since
2014
30+ years of global executive leadership
experience in retail and 14 years in
merchandising
Former President & CEO of Walmart U.S.
from 2010 to 2014
9 years of merchandising experience and 13
years of experience on the supplier side
Skills and Qualifications
Retail / Operations: More than 30 years of global executive
leadership experience in retail
Merchandising: 14 years of experience in direct merchandising
in addition to 5 years of experience leading all merchandise
divisions of HBC
Digital: Digital and ecommerce were instrumental in revitalizing
sales and profitability during Ms. Brooks’ tenure at HBC and Lane
Crawford
Operational Cost Cutting: Led three major international
department store turnarounds, including at Hudson’s Bay
Company and the Lane Crawford Group in Asia
M&A / Strategy: Significant experience in executing M&A and
other strategic alternatives
Skills and Qualifications
Retail / Operations: Seasoned executive with extensive supply
chain expertise and a proven track record leading large, complex
global retailers with best-in-class cost structures and premier
consumer brands
Merchandising: 9 years of merchandising experience in addition
to 13 years on the supplier side
Digital: Lead the expansion of small format stores and the
integration of the digital and physical retail experience
Public Company: Board director of Darden Restaurants since
2012
Vice Chairman of Hudson’s Bay Company since
‘14
Joined Hudson’s Bay in 2008 as President &
CEO
>30 years of global executive leadership
experience in retail, 14 years in direct
merchandising
— Includes leading three major international
department store turnarounds, where
digital and ecommerce were instrumental in
revitalizing sales and profitability
— 3 years as Senior VP Merchandising at Lane
Crawford, and 6 years as Global
Merchandise Manager at Holt Renfrew
— Lead all merchandise divisions of HBC
during turnaround years from 2008 to 2013
35
151 / 139 / 125
255 / 172 / 0
86 / 84 / 83
225 / 102 / 51
124 / 161 / 174
110 / 197 / 184
200 / 74 / 55
158 / 183 / 5
63 / 85 / 103
118 / 120 / 108
248 / 244 / 225
244/ / 138 / 32
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Adobe Caslon Pro
Text Font:
Corbel
Our Board Nominees Have the Skills and Experience Needed to Drive
Shareholder Value
Skills and Qualifications
Digital:
Retail: 25+ years of experience leading premier retail businesses
Merchandising: 15 years of merchandising experience through her tenure at
Walmar tand Hannaford Brothers
Turnarounds:
Public Company:
Janice L. Fields
Independent director of Chico’s FAS since
2013
Chair of Chico’s FAS Corporate Governance
and Nominating Committee
Former President of McDonald’s USA
Board Director of Monsanto since 2008
35+ years of experience
Shelley Broader
CEO & President of Chico’s FAS since Q4
2015
Former CEO & President of Walmart EMEA
and former CEO & President of Walmart
Canada
25+ years of retail experience
Skills and Qualifications
Digital:
Retail:
Merchandising:
Real Estate
Turnarounds:
Public Company:
Skills and Qualifications
Retail / Operations: More than 30 years of global executive
leadership experience in retail
Merchandising: 15 years of merchandising experience, including
Chief Merchandising Officer of Walmart Canada and Vice
President of Merchandising at Hannaford Brothers
Operational Cost Cutting: Led financial and operational
turnaround at Kash n’ Karry that included a complete re-
branding into Sweetbay Supermarkets
Skills and Qualifications
Operations: Unique marketing, consumer brand and supply
chain insights; leading expertise in franchising
Multi-unit Real Estate: Experience managing multi-unit
operations essential to executing strategic plan
Public Company: Significant experience in leading public
companies through 35 years at McDonald’s as well as governance
expertise through her tenure as an independent director at
Monsanto