Barington Capital to Start a Proxy Fight at Retailer Chico's
May 23 2016 - 8:35PM
Dow Jones News
By Suzanne Kapner and David Benoit
It's hard enough to be an apparel retailer these days without
contending with an activist shareholder, but Chico's FAS Inc. faces
the prospect of a proxy fight at its upcoming annual meeting,
according to people familiar with the situation.
Barington Capital Group LP is nominating two directors to serve
on the company's nine-person board, including a former high-ranking
Macy's Inc. executive, the people said. The move comes just a few
months after the women's clothing retailer hired a new chief
executive.
The activist fund, which owns a 1.4% stake in Chico's, isn't
agitating for a leadership change or sale of the business. Instead,
it is arguing that company's expenses are too high relative to its
peers and its centralized structure is inefficient, the people
said.
People familiar with the situation said Chico's has been
cooperating with Barington and has already begun addressing some of
the activist's concerns. The retailer has separately been seeking
new members to strengthen its board, they said.
Chico's recruited Shelley Broader away from Wal-Mart Stores Inc.
to be its CEO in December. Ms. Broader, who ran Wal-Mart's Europe,
Middle East and Africa region, previously held executive roles at
crafts chain Michaels Stores and grocer Delhaize Group.
In April, she realigned Chico's marketing and digital functions
by placing more decision making at the brand level in a move
expected to save $14 million a year. While Barington supported that
reorganization, it believes more significant cost cuts are
necessary, the people said.
Chico's stock price has dropped 36% over the past 12 months to
$10.90, compared with a 4.7% decline in S&P 500 apparel retail
sub industry index. The company has a market value of $1.45 billion
as of Monday's close.
Apparel retailers ranging from Gap Inc. to department stores
like Macy's have been struggling as shoppers make more of their
purchases online and allocate more of their disposable income to
dining out and travel.
Chico's is one of the few brands that targets older women, which
analysts say is an under-served group. In addition to its namesake
stores, its brands include White House Black Market and lingerie
label Soma. The company operated more than 1,500 stores and
employed 22,700 people as of Jan. 30.
Revenue fell to $2.64 billion last fiscal year, as sales at
stores open at least a year declined 1.5%. The company's profit
tumbled to $1.9 million, weighed down by more than $100 million in
charges largely tied to the closing of another chain of stores
called Boston Proper.
According to people familiar with her strategy, Ms. Broader
plans to improve the company's financial performance through cost
cutting and more effective marketing, by making more use of data in
decision making, and by better integrating the online and offline
operations.
In early 2015, Chico's held talks with buyout firm Sycamore
Partners, according to people familiar with the matter. Sycamore
dropped its pursuit after failing to line up financing for the
deal, these people said.
Barington has had success in the retail space before, including
a proxy fight last year at Children's Place Inc. that led to one
seat for Barington and a say in selecting a second director. This
year, the fund settled a pending fight with Avon Products Inc.,
helping to appoint a new director at the beauty-products company.
In 2013, it kickstarted the fight over Darden Restaurants Inc.,
calling for that conglomerate to break up.
The fund's founder, James Mitarotonda, started his business
career at department store giant Bloomingdale's and has long
invested in retail companies, often seeking board representations.
In addition to Mr. Mitarotonda, Barington has nominated Janet
Grove, a former Macy's vice chairman, to Chico's board, according
to the people familiar with the matter.
Chico's had previously reached out to Ms. Grove about joining
its board, but those conversations didn't lead to her being
nominated, one of the people said.
(END) Dow Jones Newswires
May 23, 2016 20:20 ET (00:20 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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