Jun 3, 2016
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Chico's hits back at Barington's claim on company improvements

Jun 3, 2016

Chico's FAS Inc hit back at activist investor Barington Capital's claims of being behind the retailer's progress, saying its operating improvements began well before the hedge fund started "substantively engaging" with the company.

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The women's apparel retailer said in a statement on Friday that its improvements began last year following the appointment of a new chief financial officer and accelerated after it named Shelley Broader as chief executive in December 2015. Barrington said on Thursday that it was pleased the company has begun to adopt some of the measures it recommended in private talks.

Tensions between the retailer and the hedge fund have steadily escalated over the last week when Barington, which owns a 1.5 percent stake in Chico's and has been invested since 2013, launched a proxy contest for two board seats.

Barington nominated its founder, James Mitarotonda, who began his career at Bloomingdale's, and Janet Grove, a former Macy's executive. The company picked Bonnie Brooks, vice chairman of Canadian retailer Hudson's Bay Co, which owns department stores Lord & Taylor and Saks Fifth Avenue, and Bill Simon, a former Wal-Mart executive.

The two sides are disagreeing most vocally over Brooks' ability to serve on the board. Barington said on Thursday that she would have a conflict of interest and possibly be violating the Clayton Antitrust Act. The company dismissed the argument on Friday, saying that Hudson's Bay and its portfolio of department stores are not "significant competitors to Chico's FAS or any of its brands."

Barington shot back on Friday, calling the company's statement "extremely disingenuous" and saying Hudson's Bay and the department stories in its portfolio "directly compete with Chico's three brands in virtually every product category."

Barington wants Chico's to slash selling, general and administrative costs by $100 million, improve merchandising and grow its Soma intimate apparel brand by 200-300 stores over the next five years.

Chico's said it has already identified potential cost savings of $65 million to $85 million annually. It said "pursuing the bricks and mortar strategy" suggested by Barington would conflict with its "disciplined store growth plan," which includes closure of 170-175 underperforming stores through 2017.

Chico's also defended Broader's compensation saying it was in line with those of her peers and was tied to performance. Mitarotonda had said Broader's $13.5 million package was nearly twice as large as what some rival CEOs earned and a bulk of it was not tied to performance goals.


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