Legion Partners Reinforces the Need for Additional Board Change at Genesco Following the Company’s Latest Attempt to Distra...
July 01 2021 - 4:00PM
Business Wire
Legion Partners Asset Management, LLC (together with its
affiliates, “Legion Partners” or “we”), which collectively with the
other participants in its solicitation beneficially owns
approximately 5.9% of the outstanding common shares of Genesco,
Inc. (NYSE: GCO) (“Genesco” or the “Company”), today issued the
below statement in an effort to address the Company’s July 1st
press release and focus shareholders’ attention on the need for
boardroom change. Legion Partners is seeking to elect four
highly-qualified and independent candidates – Marjorie L. Bowen,
Margenett Moore-Roberts, Dawn H. Robertson and Hobart P. Sichel –
to Genesco’s nine-member Board of Directors (the “Board”) at the
upcoming Annual Meeting of Shareholders (the “Annual Meeting”) on
July 20, 2021. Learn about how to vote on the WHITE proxy card by visiting
www.GCOForward.com.
Chris Kiper and Ted White, Legion Partners’ Managing Directors,
commented:
“We urge our fellow shareholders to see through the smoke screen
that Genesco is trying to create as this contest enters the home
stretch. Rather than acknowledge the Company’s many years of
underperformance and commit to enacting long-overdue governance
enhancements and necessary operational improvements, the current
Board is trying to divert attention away from substantive issues by
disseminating an array of self-serving misrepresentations.
The reality is that Legion Partners sought to engage in good
faith with Genesco prior to publicly announcing our nominations and
we made multiple attempts to reach a settlement for one designee,
provided that twenty-year director Matthew C. Diamond step down in
2022. In addition, we have worked with our nominees to share
thoughtful, value-enhancing ideas pertaining to capital allocation,
governance practices, operations, e-commerce and marketing, the
supply chain and Genesco’s ideal areas of focus. We believe the
current Board has continually impugned its credibility by
stating we have not engaged to avert an election contest and we
have not set forth a clear potential strategy. The incumbents are
spending $8.5 million of shareholders’ resources on external
advisors in order to craft and promote these distortions,
representing a blatant misallocation of capital.
The current Board’s second press release today, which
includes seemingly absurd arguments about Genesco’s share price
movements, may be the most damning instance of its apparent
desperation. The fact is Genesco’s shares have been
appreciating over the course of the past several months as the
pandemic has eased. We suspect Genesco’s most recent share price
appreciation is largely the result of shareholders anticipating
more boardroom changes and expressing enthusiasm for our slate’s
vision for reversing years of underperformance.
In our view, shareholders should simply be focused on answering
the following question at this point in time: Is change needed
in Genesco’s highly interconnected boardroom and are our expert
nominees the right change agents? We believe change is clearly
needed based on the following:
- Chronic Underperformance - The Company has dramatically
underperformed relative to its peers and relevant indices over an
array of time horizons. We suspect long-term shareholders are well
aware that a dollar invested in Genesco a decade ago has barely
appreciated and that a dollar invested five years ago is actually
worth less today. This is because Genesco’s management is not
executing a winning strategy.
- Concerning Corporate Governance - We believe the Company
has exhibited a fundamental disregard for sound corporate
governance by keeping stale directors in place, maintaining a
combined Chairman and Chief Executive Officer position, and
sustaining a misaligned executive compensation program supported by
a flawed conglomerate structure. Although the Company has unveiled
a newfound interest in environmental, social and governance (“ESG”)
principles following our nomination, we have exposed this as a
reactionary ploy and our nominees have outlined much more specific
initiatives.
- Considerable Interlocks Among Insiders - The Board has
been consistently comprised of individuals with direct connections
to other directors and Company executives, creating an apparent
lack of independent and diverse perspectives. This is especially
glaring when considering that McKinsey veteran Joanna Barsh, who is
currently Chair of Genesco’s Compensation Committee, has presided
over millions of dollars in pay to her fellow McKinsey alumni.
- Deep Undervaluation - The Company’s shares have traded
at a persistent discount to both footwear retailers and footwear
brands for years, signaling to us the chilling effect of the
Company’s existing value-destroying conglomerate structure.
- Neglect for the Core Business - Journeys, which is the
Company’s largest segment, has been substantially under-managed for
years based on a review of management’s inaction and inability to
implement modern retailing practices.
- Bloated Costs - Costs have remained elevated at
excessive levels even as margins have shrunk and while there have
been years of promises about cost cuts, selling, general and
administrative costs are well above peers.
- Illusory Synergies - The Company’s underlying footwear
businesses have weak synergies and low strategic value to one
another, as evidenced by years of operating margins below
peers.
- Seemingly Misleading Attacks on Our Nominees - The
Company’s June 18th letter includes disingenuous side-by-side
comparisons of the incumbents versus our nominees. We believe it
impugns the Board’s credibility for it to mischaracterize our
nominees’ backgrounds and omit important details pertaining to
their successful track records.
We firmly believe our nominees are the right individuals to
address these issues and help Genesco transform into a footwear
business that thrives in the highly-competitive,
increasingly-digital retail environment:
- Marjorie L. Bowen - In addition to possessing
considerable capital markets expertise and corporate governance
acumen, Ms. Bowen has a proven record of applying her experience to
deliver value-enhancing outcomes for Genesco shareholders. When Ms.
Bowen was a Genesco director in 2018, she applied her capital
markets background and transaction experience to the Company’s
strategic alternatives process – which resulted in the sale of the
non-synergistic Lids business and provided a runway for
value-enhancing share repurchases. This experience would be
invaluable if the Board were to consider new ways to refine the
Company’s costly and cumbersome conglomerate model.
- Margenett Moore-Roberts - We believe Ms.
Moore-Roberts possesses a rare blend of customer engagement,
digital marketing, ESG and DEI experience and a vision for helping
Genesco develop value-generating relationships with key
stakeholders, including younger and socially-engaged consumers.
When Ms. Moore-Roberts served as Vice President and Global Head of
Inclusive Diversity at Yahoo!, she established the company’s first
Office of Inclusive Diversity and a global Center of Excellence.
She oversaw the implementation of a number of policies and
procedures that filtered into business lines and operations during
a period of strong top-line growth at Yahoo!
- Dawn H. Robertson - Ms. Robertson is a proven retail
leader with deep experience across merchandising, marketing,
e-commerce and operations from her time at companies such as Old
Navy, OCM, May Dept Stores and Macy’s. When Ms. Robertson was
President of Macys.com, she led the development, launch and growth
of its e-commerce sales. As President of Old Navy, she drove
significant sales and improved EBITDA, including strong e-commerce
performance. This is exactly the type of experience Genesco’s
brands need given the large younger customer shift to digital.
- Hobart P. Sichel - Mr. Sichel has the analytical
background of a retail-focused consultant and the practical
experience of a highly-successful operator, positioning him to help
Genesco find operational efficiencies while still targeting growth
at the operating brand level. Mr. Sichel previously worked at
Burlington Stores from 2011 to 2019, where he served as Executive
Vice President and Chief Marketing Officer. He was a key member of
the leadership team that turned the business around and ignited
sales growth prior to an initial public offering. He has the ideal
background for helping Genesco identify efficiencies while still
pursuing growth – especially e-commerce growth – during a
transformation period.
We believe when all the facts and nominee qualifications are
objectively assessed, it will be clear that our director candidates
are best suited to build a stronger Genesco inside and outside of
the boardroom.”
***
Please visit www.GCOForward.com to view
important materials.
If you have any questions or require
assistance as you consider how to vote, please contact Legion
Partners’ proxy solicitor Kingsdale Advisors at
GCO@kingsdaleadvisors.com.
***
About Legion Partners
Legion Partners is a value-oriented investment manager based in
Los Angeles, with a satellite office in Sacramento, California.
Legion Partners seeks to invest in high-quality businesses that are
temporarily trading at a discount, utilizing deep fundamental
research and long-term shareholder engagement. Legion Partners
manages a concentrated portfolio of North American small-cap
equities on behalf of some of the world’s largest institutional and
high-net-worth investors. Learn more at www.LegionPartners.com.
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