FORT MYERS, Fla., June 16, 2016 /PRNewswire/ -- Chico's FAS,
Inc. (NYSE:CHS) today mailed a letter to shareholders in connection
with its upcoming Annual Meeting of Shareholders to be held on
July 21, 2016.
Highlights from the letter include:
- Under the direction of a new CEO, Shelley Broader, Chico's FAS is successfully
executing on its strategic plan to deliver enhanced shareholder
value;
- Within just 180 days of Ms. Broader's appointment, the Company
has taken significant actions and is making substantive progress in
virtually all areas – leadership, strategy, operations, finance and
governance;
- Barington is misleading Chico's FAS shareholders about the
changes that have been made and the progress underway; and
- The Chico's FAS Board of Directors believes Barington has
failed to demonstrate any ideas, vision or expertise that would
warrant Board representation in place of the Chico's FAS
highly-qualified director nominees.
The full text of the letter being mailed to shareholders
follows:
UNDER THE DIRECTION OF A NEW CEO, WE ARE
SUCCESSFULLY EXECUTING ON OUR STRATEGIC PLAN TO DELIVER ENHANCED
SHAREHOLDER VALUE
SUPPORT OUR PROGRESS – VOTE "FOR" ON THE WHITE
PROXY CARD TODAY
June 16, 2016
Dear Fellow Shareholder:
Over the past several months, we have been pleased to report the
positive changes underway at Chico's FAS. Our new Chief
Executive Officer and President, Shelley
Broader, and her management team have been successfully
executing on a new strategic plan that we believe will enable us to
fully capitalize on the Company's many strengths, enhance
shareholder value and drive profitable growth.
Within just 180 days of Ms. Broader's appointment, the
Company has taken significant actions and is making substantive
progress on implementing its new plan.
- In December 2015, following
her appointment, Ms. Broader launched a comprehensive review of the
Company's operations. This review affirmed our view that
Chico's FAS has a powerful, industry-leading portfolio of brands
that provides a strong platform for profitable growth and value
creation. Ms. Broader also determined that there were
operating improvement opportunities, and she developed new focus
areas for the organization to address these opportunities.
- In January 2016, Ms. Broader
began a search for new leaders who bring skills and expertise to
support and accelerate the Company's progress. As a
result of this search, Ms. Broader has made important new hires
across the Company, including in real estate and construction,
planning and allocation, legal and human resources.
- In February 2016, Ms. Broader
publicly introduced her four new focus areas to help drive
better and more consistent growth and performance across our brand
portfolio, accelerate our ability to achieve double-digit operating
margins, and fortify our brands' relationships with new and
existing customers.
- In April 2016, the Company
announced the first of many planned strategic, operating, and
financial initiatives as part of Ms. Broader's new focus
areas. In particular, we announced a realignment of the
Company's Marketing and Digital Commerce functions, placing the
decision makers directly into the Company's three brands, thereby
reducing complexity and resulting in approximately $14 million of expected annualized cost
savings.
- In May 2016, the Company
announced three additional initiatives, which together are expected
to result in incremental annual cost savings between $50 million and $70 million. By
improving our supply chain, non-merchandise procurement and
marketing, these initiatives are also expected to fundamentally
change and improve our operating model and the cadence in which we
go to market.
- In May 2016, the Company
announced positive and important changes to the composition of your
Board of Directors as a result of a search for new, independent
directors that we began in February
2016 with the assistance of Herbert Mines
Associates. After a thorough review of the field of
candidates, the Chico's FAS Board unanimously determined that
Bonnie Brooks and William "Bill"
Simon, together with other members of your Board and new CEO, have
the most current and relevant skill sets and experience to support
the Company and the actions being taken to improve performance and
drive value. With the election of Ms. Brooks and Mr. Simon,
four of the Company's nine directors, or almost half of the Board,
will have been new to the Board in the past three years.
- In addition, the Company also recently announced governance
enhancements that further exemplify our desire to embrace change as
we seek to improve all aspects of our business and
organization. As discussed in our proxy materials, the
Board is recommending "FOR" a Company-sponsored proposal to
declassify the Board over a three-year period, such that the entire
Board would stand for election at the 2019 Annual Meeting. We
have also adopted a formal policy limiting directors to service on
four public company Boards of Directors, in addition to the Chico's
FAS Board.
These actions demonstrate substantial change and meaningful
progress in virtually all areas – leadership, strategy, operations,
finance and governance. Notably, this progress is just
beginning, as we expect to announce additional initiatives in the
coming weeks as part of Ms. Broader's
plan.
BARINGTON IS MISLEADING CHICO'S FAS
SHAREHOLDERS ABOUT THE CHANGES THAT HAVE BEEN MADE AND THE PROGRESS
UNDERWAY
"Susan
Anderson, an analyst with FBR Capital, said Chico's was
making progress before feeling any pressure from Barington.
Barington, she said, seems to be taking credit for changes it had
nothing to do with…"1
We are already making great progress in the areas where
Barington is focused. In our conversations with Chico's
FAS shareholders, many recognize the positive change underway and
that Ms. Broader is the catalyst for this change. Rather than
work constructively with us, Barington has chosen to launch an
unnecessary solicitation in opposition to our director nominees and
is attempting to take credit for changes we have already made,
considered and/or have underway, as discussed
above.
While we expect to announce further cost reductions,
Barington's suggested cuts ignore reductions that have already been
accomplished and risk harming the very brand differentiators that
have supported our success. Already, Ms. Broader has
announced initiatives that are estimated to reduce costs by between
$65 million and $85 million
annually. The Company's cost review is ongoing, and we expect
to identify additional opportunities for savings and
efficiencies. Unlike the levels proposed by Barington, the
associated Chico's FAS operating improvements are carefully
structured in order to drive savings without compromising the
customer service that has long differentiated the Company's brands
and fostered customer loyalty.
Further, Barington's estimates for advertising costs include
Boston Proper, which the Company sold in fiscal 2015. The
marketing savings from Boston Proper, in addition to the
$25 million expected savings from
recently announced initiatives, exceed the reduction in advertising
costs that Barington targets. Barington's estimates also
ignore the $10 million to $20 million
of non-merchandise procurement savings that we have already
identified and announced.
Barington's proposed bricks & mortar store growth
strategy for Soma represents a lack of understanding of the current
dynamics of the apparel sector, with a consumer base that is
increasingly interacting with brands through digital channels as
well as in-store. Chico's FAS management remains
committed to the profitable growth of its brand portfolio,
including Soma, but will exercise discipline in the allocation of
capital. Whereas Barington suggests opening 200 to 300
additional stores over the next five years, shareholders have
praised Chico's FAS management for its measured store growth plans
and decisions to close underperforming stores.
Barington ignores the fact that "strengthening the position
of each Chico's FAS brand" was announced in February as a key
component of our profitable growth plan, and we are already
executing on it with new marketing, supply chain and merchandising
initiatives. As discussed above, we have moved the
marketing function within each brand and have launched actions to
improve our supply chain and speed to market. Examples of new
merchandising initiatives underway include testing petites in
Chico's stores after a successful online test, a renewed focus on
special occasion at White House Black Market, and a rollout of swim
to all Soma stores after a successful test. There is nothing
to suggest that either of Barington's director candidates have
experience that would enhance the merchandising improvements
already underway or planned, especially in light of the fact that
neither of Barington's candidates has recent merchandising
experience and both lack digital experience.
Contrary to Barington's assertion, capital returns to
shareholders through quarterly dividends and our share repurchase
program have been and will remain a priority. Since 2010,
more than $1.1 billion, or
approximately 131% of free cash flow, has been returned to
shareholders through quarterly dividends and share repurchases.
This is significantly higher than the median of our peers as
defined in our 2015 proxy statement, who have returned only 103% of
their free cash flow to shareholders through dividends and share
repurchases over the same time period. Chico's FAS has
returned $398 million, or
approximately 302% of free cash flow, to shareholders through
dividends and share repurchases since the beginning of
2015.
Barington's proxy materials misleadingly portray our
discussions with them. We seek to maintain a constructive
and open dialogue with all of our shareholders, Barington
included. Members of the Company's Board and management team
have had numerous discussions with Barington, including four
separate phone calls between the Company's CEO and Mr. Mitarotonda.
Barington was also invited to present to the full Board, an
invitation to which Barington failed to respond. While we
have already given Barington ample opportunity to present its
views, we are of course open to further meetings with Barington as
we are with any shareholder.
Contrary to Barington's assertions, the Board carefully
considered all five of the director candidates Barington suggested
– and the Board determined to reject them because they were
not the best qualified individuals to represent shareholders'
interests. Notably, of the five potential candidates
Barington originally named, it is seeking to elect only two, which
may indicate that Barington also recognizes the flaws in its
candidates. After considering their qualifications and input
from Herbert Mines Associates, members of the Board met with one of
Barington's candidates, invited a second to an in-person meeting
(whereupon she immediately withdrew from the process) and spoke
with Mr. Mitarotonda by phone. The fourth and fifth
candidates were not interviewed for the reasons discussed
below.
- Janet Grove has executive retail
and merchandising experience, but her executive experience is dated
by five years, a significant gap in an industry as dynamic as
retail. She also lacks recent digital and ecommerce
expertise, which are essential components of the Company's strategy
and drivers of success in the current retail environment.
- Jim Mitarotonda, according to
his own proxy materials and website, has served on only one
apparel retail company Board, and that company was sold just seven
months later for barely a 10% premium. He also lacks digital
expertise, and the experience and skills he does offer are already
represented by current Chico's FAS directors and/or Ms. Brooks and
Mr. Simon.
- Shan Atkins withdrew her name
and declined to meet with the Company or any of its Board members,
despite an invitation to do so.
- Most of Frank Mori's retail
experience is over ten years old, and he appears to have gained
much of his more recent Board experience by serving as a regular
Barington representative and director candidate.
- The Deloitte & Touche LLP consulting and accounting firm
experience that Noel Spiegel would
provide is already well-represented on the Chico's FAS Board by
John J. Mahoney, a former partner at
Ernst & Young LLP, who also provides significant retail
experience as the former Vice Chair and Chief Financial Officer of
Staples, Inc. and current director at Bloomin' Brands, Inc.,
Michael's Stores and Burlington Stores.
Barington wrongly claims that there is a lack of
merchandising expertise represented on the Chico's FAS
Board. Including our new nominees, five of the Board's
nine directors, specifically Shelley
Broader, Bonnie Brooks,
Bill Simon, Stephen Watson and Andrea Weiss, would have more than 90 years of
merchandising experience in the aggregate.
Barington misleadingly portrays the Company's actual
compensation practices. Barington includes in its compensation
calculations customary, one-time "make whole" payments designed to
address economic losses Ms. Broader incurred as a result of leaving
her prior employment. In fact, Ms. Broader's
compensation is in-line with peers, directly tied to performance,
and includes equity components to align her interests with the
interests of all Chico's FAS shareholders and to incentivize
enhanced value creation. Ms. Broader's compensation was
established following a detailed competitive analysis conducted by
an independent compensation consultant, Frederic W. Cook & Co. The analysis,
which considered a comparative peer group of 20 U.S.-based,
publicly-traded retailers, shows that Ms. Broader's target total
direct compensation is approximately 10% above the median, with a
pay mix that is consistent with median competitive practice.
Further, beyond fiscal 2016, more than 50% of total compensation is
performance based and at risk, as detailed in previous public
materials.
Neither Hudson's Bay Company
nor any of the department stores within its portfolio, including
Saks Fifth Avenue and Lord & Taylor, are competitors in any
practical sense to Chico's FAS or any of its brands, as Barington
has claimed. Our brands serve different price points,
different geographic areas and different consumer
demographics.
WE BELIEVE BARINGTON HAS FAILED TO DEMONSTRATE
ANY IDEAS, VISION OR EXPERTISE THAT WOULD WARRANT BOARD
REPRESENTATION IN PLACE OF THE BOARD'S HIGHLY-QUALIFIED
NOMINEES
When searching for new, independent director candidates earlier
this year, the Board considered the need for specific expertise in
the areas of merchandising, cost efficiency, supply chain and
retail operations to help support Ms. Broader's focus areas.
The Board has also long recognized the fact that digital commerce
is reshaping the retail landscape. We believe that with our
new CEO and refreshed Board, we have world-class leaders – and the
right four director nominees – with the skills and expertise to
continue executing on our new plan and support the Company given
the digital demands in our industry:
- Shelley Broader, our new
CEO and President, brings to Chico's FAS a remarkable track record
that includes more than 25 years of experience leading premier
retail businesses. We believe the actions she has taken in
just the few months since her appointment demonstrate that she has
a keen understanding of how to drive value in a competitive retail
environment. We believe Ms. Broader's service on the Board is
critical to the continued successful execution of our new strategic
plan.
- Bonnie Brooks, as
detailed in materials previously sent to you, brings substantial
retail, merchandising, and turnaround skills from some of the
world's leading retailers. She is currently the Vice Chairman
of Hudson's Bay Company and has
more than 30 years of global executive leadership experience in
retail and merchandising, including having led three major
international department store turnarounds, including at
Hudson's Bay Company and the Lane
Crawford Group in Asia. The Lane Crawford Group is one of the
world's leading fashion specialty department stores and one of the
largest distributors of American and European contemporary and
luxury brands in Asia. In her most recent executive role as
Chief Executive Officer and President of Hudson's Bay
department stores, the Company's digital platform was completely
overhauled resulting in an entirely new ecommerce site and digital
marketing capability. Digital marketing and ecommerce have
been major elements of her formula for success and turnaround work
over the past decade.
- Janice Fields is one of
the Company's newest independent directors, having joined the Board
in 2013. As Chair of the Board's Corporate Governance and
Nominating Committee since 2013, she has made important
contributions to Chico's FAS, in the areas of driving Board
refreshment, including identifying our two new independent director
nominees, overseeing the succession planning and executive search
process that resulted in Ms. Broader's appointment, and
implementing numerous corporate governance enhancements, such as
those recently announced as well as the rotation of the Company's
independent Chair role.
You may also be interested to know that, in addition to her
contributions at Chico's FAS, Ms. Fields is an accomplished
executive recognized by both Forbes and Fortune for her
leadership. As the former President of McDonald's
USA, LLC, she developed and
oversaw consumer marketing strategies and drove improvements in
McDonald's supply chain and multi-unit operations, reinforcing
McDonald's world-renowned consumer brand and its reputation for
being a lean, highly-efficient company, just as Chico's FAS is
working to be. In addition, Ms. Fields brings valuable
perspective serving as an independent director of Monsanto Company,
which is also well regarded for its highly-efficient operations and
global supply chain.
We believe Ms. Fields' contributions to the Company's leadership
and governance, her current governance expertise, unique marketing,
consumer brand and supply chain insights, and her experience
managing multi-unit operations and franchise growth are essential
to executing our strategic plan, particularly as we seek to drive
consumer engagement and further optimize our own multi-unit real
estate footprint.
- Bill Simon, as detailed
in materials previously sent to you, brings substantial cost
efficiency and supply chain expertise. As the former
President and Chief Executive Officer of Walmart U.S., he is a
seasoned executive with a proven track record leading large,
complex global retailers with best-in-class cost structures and
premier consumer brands. Mr. Simon's vision and execution
placed Walmart on a path to future growth with the expansion of
small format stores and the integration of the digital and physical
retail experience.
Neither of Barington's proposed candidates has expertise
equivalent to any of the Board's four nominees. We believe
that replacing any of your Board's superior nominees with any one
of Barington's less qualified candidates would jeopardize the
progress we are making. Accordingly, your Board unanimously
recommends that shareholders vote "FOR" all four of its
experienced and highly qualified director candidates – Shelley Broader, Bonnie
Brooks, Janice Fields and
Bill Simon – on the enclosed
WHITE proxy card.
SUPPORT THE IMPORTANT PROGRESS UNDERWAY BY
VOTING "FOR" ON THE ENCLOSED WHITE PROXY CARD TODAY
We strongly believe that Barington's actions are undermining the
future of Chico's FAS and its ability to continue driving
profitable growth and value creation. Barington's ideas are
not new; its candidates lack key skills; and its opposition
campaign is misguided, given the significant progress already in
process under new leadership.
We urge you to reject Barington's self-serving campaign and
protect the value of your investment. Please simply discard
any Blue proxy card that you may receive from Barington and use the
enclosed WHITE proxy card to vote "FOR" your Board's nominees TODAY
– by telephone, by Internet, or by signing, dating and
returning the WHITE proxy card in the postage-paid envelope
provided.
On behalf of your Board of Directors, we thank you for your
continued support.
Sincerely,
/s/ David. F. Walker
David F. Walker
Chair of the Chico's FAS
Board
If you have any
questions or require any assistance with voting your shares,
please contact the Company's proxy solicitor:
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Innisfree M&A
Incorporated
|
|
Toll-free at (877)
825-8971 (from the U.S. or Canada)
|
|
or
|
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(412) 232-3651 (from
other locations)
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ABOUT CHICO'S FAS, INC.
The Company, through its brands – Chico's, White House Black
Market, and Soma is a leading omni-channel specialty retailer of
women's private branded, sophisticated, casual-to-dressy clothing,
intimates, complementary accessories, and other non-clothing
items.
As of April 30, 2016, the Company
operated 1,517 stores in the US and Canada and sold merchandise through franchise
locations in Mexico. The Company's
merchandise is also available at www.chicos.com, www.whbm.com, and
www.soma.com. For more detailed information on Chico's FAS, Inc.,
please go to our corporate website at www.chicosfas.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Certain statements contained herein may contain certain
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which reflect our
current views with respect to certain events that could have an
effect on our future financial performance, including but without
limitation, statements regarding our plans, objectives, and future
success of our store concepts, the implementation of our previously
announced restructuring program, and implementation of our program
to increase the sales volume and profitability of our existing
brands through four previously announced focus areas. These
statements may address items such as future sales, gross margin
expectations, SG&A expectations, operating margin expectations,
planned store openings, closings and expansions, future comparable
sales, inventory levels, and future cash needs. These statements
relate to expectations concerning matters that are not historical
fact and may include the words or phrases such as "expects,"
"believes," "anticipates," "plans," "estimates,"
"approximately," "our planning assumptions," "future outlook," and
similar expressions. Except for historical information, matters
discussed in such oral and written statements are forward-looking
statements. These forward-looking statements are based largely on
information currently available to our management and on our
current expectations, assumptions, plans, estimates, judgments and
projections about our business and our industry, and are subject to
various risks and uncertainties that could cause actual results to
differ materially from historical results or those currently
anticipated. Although we believe our expectations are based on
reasonable estimates and assumptions, they are not guarantees of
performance and there are a number of known and unknown risks,
uncertainties, contingencies, and other factors (many of which are
outside our control) that could cause actual results to differ
materially from those expressed or implied by such forward-looking
statements. Accordingly, there is no assurance that our
expectations will, in fact, occur or that our estimates or
assumptions will be correct, and we caution investors and all
others not to place undue reliance on such forward-looking
statements. Factors that could cause or contribute to such
differences include, but are not limited to, general economic and
business conditions, conditions in the specialty retail industry,
the availability of quality store sites, the ability to
successfully execute our business strategies, the ability to
achieve the results of our restructuring program, the ability to
achieve the results of our four focus areas, the integration of our
new management team, and those described in Item 1A, "Risk Factors"
and in the "Forward-Looking Statements" disclosure in Item 7.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" of our Form 10-K. There can be no assurance
that the actual future results, performance, or achievements
expressed or implied by such forward-looking statements will occur.
Investors using forward-looking statements are encouraged to review
the Company's latest annual report on Form 10-K, its filings on
Form 10-Q, management's discussion and analysis in the Company's
latest annual report to stockholders, the Company's filings on Form
8-K, and other federal securities law filings for a description of
other important factors that may affect the Company's business,
results of operations and financial condition. All written or oral
forward-looking statements that are made or attributable to us are
expressly qualified in their entirety by this cautionary notice.
The Company does not undertake to publicly update or revise its
forward looking statements even if experience or future changes
make it clear that projected results expressed or implied in such
statements will not be realized.
Additional Information
Chico's FAS, its directors and certain of its executive officers
are participants in the solicitation of proxies from Company
shareholders in connection with the matters to be considered at the
Company's 2016 Annual Meeting. The Company has filed a definitive
proxy statement and WHITE proxy card with the U.S. Securities and
Exchange Commission (the "SEC") in connection with any such
solicitation of proxies from Company shareholders. COMPANY
SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY
STATEMENT AND ACCOMPANYING WHITE PROXY CARD AS THEY CONTAIN
IMPORTANT INFORMATION. Information regarding the identity of the
participants, and their direct or indirect interests, by security
holdings or otherwise, is set forth in the proxy statement and
other materials filed with the SEC. Shareholders will be able
to obtain any proxy statement, any amendments or supplements to the
proxy statement and other documents filed by the Company with the
SEC for no charge at the SEC's website at www.sec.gov. Copies
are also available at no charge at the Company's website at
www.chicosfas.com, by writing to Chico's FAS at 11215 Metro
Parkway, Fort Myers, FL 33966, or
by calling the Company's proxy solicitor, Innisfree, toll-free at
(877) 825-8971.
Contacts:
Investors:
Jennifer Powers
Vice President - Investor
Relations
Chico's FAS, Inc.
(239) 346-4199
Arthur B. Crozier / Jennifer M. Shotwell / Jonathan E. Salzberger
Innisfree M&A Incorporated
(212) 750-5833
Media:
Barrett Golden / Leigh Parrish / Joseph
Sala
Joele Frank, Wilkinson Brimmer
Katcher
(212) 355-4449
1 Naples Daily News, "Chico's fires back at
activist investor Barington," 06/03/16; permission to use
quotation neither sought nor obtained
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SOURCE Chico's FAS, Inc.