Legion Partners Highlights the Opportunity to Modernize & Transform Genesco by Adding Shareholder-Nominated Directors to the ...
July 16 2021 - 8:00AM
Business Wire
Believes the Legion Partners’ Slate
Possesses the Experience, Passion and Vision to Refocus Genesco’s
Resources on Journeys and High-Growth Opportunities
Highlights Legion Partners’ Strong Track
Record of Installing Diverse Directors that Have Helped Struggling
Retailers Realize Enduring Value
Reminds Investors that Leading Independent
Proxy Advisory Firm Glass Lewis Recommended Shareholders
Vote on the WHITE Proxy Card at
Genesco’s Annual Meeting on July 20th
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 open letter to shareholders highlighting the opportunity to
modernize and transform Genesco by adding shareholder-nominated
directors to the Board of Directors (the “Board”). Legion has
nominated four highly-qualified candidates for election to
Genesco’s Board at the upcoming Annual Meeting of Shareholders (the
“Annual Meeting”) on Tuesday, July 20, 2021. Learn about how to
vote on the WHITE proxy card by
visiting www.GCOForward.com.
***
July 16, 2021
Fellow Shareholders,
As we approach the final days of this election contest, Legion
Partners wants to underscore that there is
a tremendous opportunity to help strengthen Genesco and position
the Company for long-term success at next week’s Annual
Meeting. We firmly believe that electing our slate of
highly-qualified and independent director candidates – Marjorie L.
Bowen, Margenett Moore-Roberts, Dawn H. Robertson and Hobart P.
Sichel – will help Genesco improve its lagging corporate
governance, modernize its stale operations and support its customer
acquisition and employee engagement efforts. In addition to
possessing a diverse mix of retail, footwear and turnaround
experience, our slate has put in the work to identify Genesco’s
fixable deficiencies and spot readily obtainable value creation
opportunities.
It is important to note that Legion Partners has helped appoint
27 diverse director candidates to public company boards since 2014.
We maintain strong conviction that corporate success is directly
tied to having diverse perspectives throughout all levels of an
organization, which is why we assembled a slate of candidates that
is 75% female and includes an expert in Diversity, Equity and
Inclusion (“DEI”) initiatives. We believe Genesco needs directors
who can reach younger generations, solidify customer loyalty and
unlock new markets and opportunities.
We are pleased that leading independent proxy advisory firm
Glass, Lewis & Co. (“Glass Lewis”) appears to have taken the
aforementioned context into account when assessing our case for
change and nominees at Genesco. Glass Lewis recommended that
shareholders vote on our WHITE
proxy card and for the election of Ms. Robertson and Mr.
Sichel. We simply believe shareholders should go a step further by
electing all four of our nominees in order to get the collective
benefits presented by our diverse, highly-experienced slate.
It is also important to stress that our
slate is focused on the next four years as much as the next four
quarters. We suspect that Genesco’s long-term
shareholders, who have endured many years of relative
underperformance and stagnation, recognize that structural changes
are needed at Genesco. Those are exactly the type of changes we
believe our nominees can facilitate in the boardroom.
If elected, our slate has a practical agenda that it will work
to drive in collaboration with the remaining incumbents:
Priority #1 - Refocus Genesco’s
resources on Journeys and transform the corporate
culture.
- Conduct a strategic review and identify options for divesting
of non-core, non-synergistic businesses;
- Realign executive compensation, including performance-based
equity vesting, to tangible key performance indicators and value
creation metrics;
- Initiate a culture assessment in order to establish a more
innovative, vibrant and accountable work environment up and down
the organization;
- Develop tangible public plans and goals for both Environmental,
Social and Governance and DEI programs, which will be increasingly
important as Journeys competes for a younger, more socially-engaged
consumer; and
- Task the management team with preparing a growth-focused
strategy for the business, with a specific emphasis on penetrating
high-growth consumer categories and upgrading digital and
e-commerce capabilities.
We believe these steps can yield annual
savings of $20 million to $30 million, with non-core business
divestitures potentially producing approximately $350
million.1
Priority #2 - Streamline the Company’s
cost structure and increase capital efficiency.
- Identify paths to improving seemingly lagging inventory turns
at the operating business level;
- Implement cost reduction priorities across the organization,
including apparently off-market sales, general and administrative
expenses;
- Pursue sale-leaseback opportunities as a means of unlocking
material value trapped in real estate; and
- Enhance sustainability and supply chain practices to remedy
financial and environmental inefficiencies, including split
shipments.
We believe these types of initiatives can
help grow Journeys’ segment EBITDA margin by 2%, resulting in an
increase from 8% to 10%.2
Priority #3 - Reignite growth by
positioning Journeys as a strategic retail partner in the
sector and the preferred consumer
destination for modern footwear.
- Enhance online customer engagement by implementing a loyalty
program, building a mobile app and improving the website;
- Drive new customer acquisition via improved digital marketing
and social engagement;
- Establish customer and brand partner value propositions to
deepen strategic relationships within the industry; and
- Increase share of wallet with improved product offerings and
basic offerings that include buy online and pick-up in store
options, curbside pick-up and same-day delivery.
We believe these steps could help grow
sales by 4%-6% annually.3
Despite Genesco’s attempts to miscast Legion Partners’
intentions and track record, the reality is that we have helped
many struggling retail companies improve operations and financial
performance, resulting in the creation of enduring value for
shareholders. Our recent engagements at companies such as Bed Bath
& Beyond Inc. and Kohl’s Corporation have been followed by
tangible governance enhancements and material share price
appreciation. We suspect Genesco’s most recent share price
appreciation is largely the result of shareholders anticipating
that our nominees can help create similar value if elected.
In closing, we encourage all shareholders seeking to protect
their investment to vote on the WHITE proxy card for our full slate. We also
want to take this opportunity to thank all shareholders for their
willingness to assess our viewpoints and consider our slate’s
viability. If you have any questions or require assistance as you
consider how to vote, please contact our proxy solicitor (Kingsdale
Advisors) at GCO@kingsdaleadvisors.com.
Sincerely,
Chris Kiper
Managing Director
Legion Partners Asset Management
Ted White
Managing Director
Legion Partners Asset Management
***
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.
______________________________
1 Annual savings projections based on (i) $15 million in annual
corporate costs reduction, which assumes corporate spending as % of
net sales returning to 1.1% from the pre-COVID 1.8% and (ii) $8-10
million annual store rent savings, which assumes 20% of leases
renewal and 20% reduction in renewed leases. Non-core asset sale
assumes $282mm in total proceeds from the divestiture of Schuh and
J&M based on multiples to Adj. EBITDA of 4x and 10x,
respectively. $141mm of real estate value realized through outright
sales and sale-leaseback transactions based on implied $105 per sq.
ft on average.
2 Journeys’ margin expansion assumes 100bps expansion vs FY 2020
(pre-COVID level) and also incorporates $40mm of cash free up
assuming Journeys’ inventory turns improvement of 0.5x.
3 Journeys’ sales growth assumes 5% annual growth for 3 years
vs. FY 2020 level.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210716005041/en/
For Investors: Kingsdale Advisors Michael Fein / Lydia Mulyk,
646-651-1640 mfein@kingsdaleadvisors.com /
lmulyk@kingsdaleadvisors.com For Media: MKA Greg Marose / Charlotte
Kiaie, 646-386-0091 gmarose@mkacomms.com / ckiaie@mkacomms.com
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