FORT MYERS, Fla., June 29, 2016 /PRNewswire/ -- Chico's FAS, Inc.
(NYSE: CHS) today issued the following statement in response to a
letter published by Barington Capital Group, L.P. ("Barington") on
June 28, 2016:
Barington is not a long-term investor in Chico's FAS and
almost half of its claimed current ownership is made up of
derivative contracts. Barington and its affiliates
own approximately 0.92% of the Company's outstanding shares and own
derivatives potentially convertible into another approximately
0.64% of the Company's outstanding shares, the majority of which
were purchased within the past six months. Further, as shown
in its proxy materials, between September
2014 and September 2015,
Barington sold down its entire prior ownership position in the
Company's common stock.
When compared to Chico's FAS world-class director nominees,
we believe Barington's less-qualified candidates are simply not as
well positioned to represent shareholders' interests.
Although Barington cites its investments in various retailers as a
qualification justifying the election of Jim Mitarotonda, according to Barington's own
proxy materials and website, Mr. Mitarotonda has served on only
one apparel retail Board of Directors and that company was sold
just months after he joined – for a less than 10% premium. We
do not believe that a quick-sale, low-premium transaction
represents a "meaningful improvement in shareholder value" as
Barington claims. Further, as noted below, Barington's
attempt to take credit for improvements at other companies is
misplaced as those improvements were reportedly also already
underway1,2:
"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 and she saw it
do the same with retailer The Children's Place. 'Children's
Place did more of the work. It's pretty typical,' Anderson
said."
Janet Grove, Barington's other
director candidate, is similarly lacking in relevant skills and
expertise. Indeed, her retail and merchandising experience is
so outdated that she lacks current experience in digital, which is
a primary growth avenue for Chico's FAS and almost every retailer
today. Further, while Barington claims she has experience
"improving" shareholder value, Ms. Grove has actually overseen
value destruction in her director roles. Aeropostale went
bankrupt. After being criticized by another activist
investor, Safeway was sold to a private equity firm in
a transaction that resulted in many shareholders exercising
their appraisal rights and an ultimate settlement that provided
shareholders with up to 26% more in cash per Safeway
share than Ms. Grove obtained as a member of the Safeway Board when
the grocery chain was sold.3
In this regard, after a comprehensive review that included input
from Herbert Mines Associates, the Chico's FAS Board rejected
Barington's nominees solely because they were less qualified, not
because they were Barington's nominees.
Chico's FAS would prefer to engage constructively with
Barington; however, Barington has not engaged constructively with
the Company. 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 new CEO and Mr. Mitarotonda. In
addition, Barington was invited to present to the full Board, an
invitation to which Barington has thus far failed to respond.
Given its dismissal of our invitation and its demand instead
for personal Board representation, we believe Barington has been
pre-disposed to launching its self-serving proxy contest in an
attempt to secure Mr. Mitarotonda's election regardless of the
progress we are making or the actions we are taking.
We believe that electing either of Barington's less qualified
nominees would harm shareholder value and the significant progress
we are making. We believe Barington has failed to
demonstrate any ideas, vision or expertise that would warrant
election of its nominees. Neither of Barington's candidates
can match the unique and relevant skill-sets provided by each of
the Company's director nominees. Further, replacing any one
of the Board's director nominees with either of Barington's
candidates would leave us without the relevant and current skills
and experience that we believe are critical to supporting continued
success under our new strategic plan. While we would prefer
not to be incurring the costs associated with this proxy campaign,
we believe those costs are justified by the substantial risk to
shareholder value posed by Barington's unwarranted, self-serving
campaign.
Contrary to Barington's assertions, the Board and management
team of Chico's FAS has been substantially reconstituted in the
past three years. In an attempt to gain votes, Barington
misleadingly associates decisions made more than five years ago
with your Board's current leadership and director nominees.
However, since the 2011 acquisition that Barington cites, Chico's
FAS has appointed a new independent Chairman, a new CEO and
President, a new Chief Financial Officer, a new General Counsel, a
new Chief Human Resources Officer, among other new executives, and
will have added four new directors – representing almost half of
the Board – assuming your Board's two new independent nominees are
elected. We note that none of Chico's FAS' four director
nominees were on the Board at the time of the Boston Proper
acquisition.
The actions we are pursuing under Shelley Broader's new plan are aimed at driving
growth on the top and bottom line – and we are making significant
progress, as many analysts and shareholders have observed. We
believe it is disingenuous for Barington to attack Ms. Broader's
plan, our new Board and her new team, and the progress we are
making yet claim it is not a referendum on Ms. Broader's
leadership. Since Ms. Broader joined the Company six
months ago, we have announced four new focus areas aimed at driving
growth on the top and bottom line, launched multiple new
initiatives to enhance operating efficiencies and customer focus,
made numerous key hires and governance enhancements, and identified
$65 million to $85 million in
expected annual costs savings. These actions bolster the
Company's foundation and are just the beginning of the improvements
Ms. Broader expects to make under her new plan. The Chico's
FAS Board unanimously believes Ms. Broader should be allowed the
opportunity to continue the progress we are making. We
believe Barington's decision to attack Ms. Broader's plan just
months into its launch underscores that Barington's interests are
quite different than all other Chico's FAS shareholders.
Neither Hudson's Bay Company
nor any of the department stores within its portfolio are
competitors in any practical sense to Chico's FAS or any of its
brands. Chico's FAS brands serve different price points,
different geographic areas and different consumer
demographics. Barington's claim to the contrary is another
proof point that shows Barington doesn't understand Chico's FAS and
apparel retail today.
Chico's FAS customers overwhelmingly do not shop at Hudson's Bay
stores. The Company's estimate of its customers'
apparel spend at these department stores is so small that it has
traditionally not even appeared on the Company's market share
analysis. In fact, only 1.3% of our customers' apparel spend
is at any of these individual stores, based on Company estimates
from customer surveys.
We believe Barington's focus on this issue is intended to
distract shareholders from the significant experience that
Bonnie Brooks brings to our Board,
particularly when compared to the Barington nominees. Ms.
Brooks' experience includes substantial, current retail,
merchandising, digital and turnaround expertise and a strong track
record across several leading global apparel retailers – all
relevant skill sets to support the Company and the actions being
taken to improve performance and drive value.
We believe Barington is also wrong to oppose Janice Fields, one of the Company's newest
independent directors, whose work has been widely applauded by
shareholders and industry analysts. Barington's
criticisms of Ms. Fields ignore her many contributions and relevant
qualifications. She brings to Chico's FAS a proven track
record in consumer marketing and brand building, multi-unit real
estate and franchising – a skill-set that is highly relevant to our
new strategic plan and that cannot be replaced by either of
Barington's nominees. Moreover, as Chair of the Corporate
Governance & Nominating Committee, Ms. Fields successfully
oversaw the succession planning for the Company's most important
executive leadership position, specifically the search and
selection of Ms. Broader as our new Chief Executive Officer and
President. Numerous shareholders and industry analysts have
applauded the Chico's FAS Board for this selection. For
example1:
"…we are pleased that company was able to attract a strong,
proven leader in a relatively short period of time...we believe CHS
should benefit from a fresh perspective, coupled with her strong
operational experience." Jefferies, 28
October 2015
"Ms. Broader brings impressive retail leadership experience
to the table. We believe the company made a solid choice in hiring
Ms. Broader who comes to CHS with over 25 years of experience
leading global and regional retail businesses." SunTrust Robinson
Humphrey, 28 October 2015
"We believe Ms. Broader will bring a differentiated skill set
to the Chico's organization; she will bring a fresh eye to running
an apparel retailer and will likely use her operational expertise
to improve the company's speed to market." Stifel, 28 October 2015
"Solid CEO Hire with Expertise in Operations/Finance to Take
CHS to Next Omni Era of Retail" FBR & Co., 29 October
2015
In addition, during her tenure, Ms. Fields has also participated
in the search and nomination of four new directors, including Ms.
Brooks and William "Bill" Simon, who are standing for
election. We believe that Ms. Fields' combination of
knowledge and contributions makes her an essential part of our
Board, our new strategic plan and the actions underway to enhance
shareholder value.
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 can 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 Permission to use quotation neither sought nor
obtained
2 Naples Daily News, "Chico's fires back at activist
investor Barington," 06/03/16
3 Wall Street Journal, "Safeway to Pay Hedge Funds
$44 a Share to Settle Buyout Suits,"
06/02/15
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SOURCE Chico's FAS, Inc.