Chico’s Activist Barington Ramps Up Proxy Fight With Letter

  • Activist publicly releases letter to retailer with proposals
  • Proposed measures include cost cuts, expanding Soma brand

Chico’s FAS Inc. activist investor Barington Capital Group ratcheted up its campaign for two board seats at the retailer, publicly releasing a letter expanding on proposals it outlined last month.

Barington’s recommendations to Chico’s include cutting costs more aggressively; repurchasing stock; expanding its Soma brand while boosting sales at its Chico’s and White House Black Market stores; and better aligning compensation with performance targets.

Such measures could “more than double its earnings per share in three years,” Barington, which has a stake of more than 1.5 percent of Chico’s, wrote in the letter.

Chico’s said that the company has been making changes, including naming Shelley Broader as chief executive officer in December. Many of the changes Barington suggests are already being considered or enacted, the company said in an e-mailed statement.

“Chico’s FAS already has a catalyst for change with Ms. Broader, and, with her new team and our new board candidates, we are confident that Chico’s FAS has leaders with the most relevant skills, expertise and record to continue executing on our new plan to fully realize the value of the company and enhance value for shareholders,” the company said.

Chico’s shares dropped 34 percent in the 12 months through Wednesday’s close. The shares closed at $11 Wednesday, giving the Fort Myers, Florida-based company a market value of about $1.5 billion. The stock climbed 2.2 percent to $11.24 at 1:28 p.m. in New York on Thursday.

Barington Candidates

Barington said May 24 it will seek to have two directors -- its chief executive officer, James Mitarotonda, and former Macy’s Inc. executive Janet Grove -- elected at Chico’s shareholder meeting on July 21. Chico’s announced the same day a reshuffling of its board, nominating retail veteran Bonnie Brooks and former Wal-Mart Stores Inc. executive Bill Simon as independent directors to replace David Dyer and Verna Gibson, who will step down.

Chico’s said at the time it reviewed five candidates proposed by Barington, but decided on Brooks and Simon. Barington has been meeting with Chico’s management since March.

Last year, Chico’s explored a sale and was in talks over a leveraged buyout, people familiar said at the time. The women’s apparel group has encountered an activist investor before. Blue Harbour Group worked with the company behind the scenes from 2013 and reduced its stake this year.

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