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The
New York-based hedge fund, which owns a 1.5 percent stake in the
retailer, said it wants Chico's to slash selling, general and
administrative costs by $100 million, improve merchandising and
grow its Soma intimate apparel brand by 200 to 300 stores over
the next five years.
It also warned the company against making new acquisitions and
urged it to keep buying back stock now that the share price has
fallen.
After weeks of private discussions, Barington went public with
its demands to ratchet up pressure on a company it thinks can
perform better.
"Chico's could more than double its earnings per share in three
years, which we estimate could translate to a stock price of
approximately $25 to $27 per share," Barington's founder, James
Mitarotonda, wrote to Chico's board chairman, David Walker, in a
letter attached to a public filing.
Shares of Chico's, which caters to older women, have fallen 33
percent over the last 12 months while the S&P 500 apparel retail
index has dropped 0.2 percent in the same period. The stock
closed at $11 on Wednesday.
Barington nominated Mitarotonda, who started his career at
Bloomingdale's and has made successful retail investments
before, plus former Macy's executive Janet Grove as directors.
Chico's nominated retail executives Bonnie Brooks, vice chairman
of Hudson's Bay Company, and Bill Simon.
Chico's last year hired Shelley Broader as its chief executive,
and Mitarotonda criticized the current board for her generous
pay. Broader's pay package is almost twice as large as what some
rival CEOs earn, Mitarotonda wrote, complaining that the bulk of
the $13.5 million package is not tied to performance goals.
Chico's plans shareholder-friendly changes by proposing that
directors be elected every year, and Broader disclosed more cost
cuts when the company reported earnings last week.
Mitarotonda took aim at Chico's board nominees saying Brooks
might have a conflict since she works for a competitor.
While Broader may like having friends in the board room,
Mitarotonda wrote, "It is more important that she be surrounded
with experienced directors that are solely focused on creating
long-term value for shareholders and will not feel constrained
to challenge the CEO if necessary."
(Reporting by Svea Herbst-Bayliss; Editing by Leslie Adler)
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