Citi Trends, Inc. Sends Letter to Stockholders Regarding Upcoming Annual Meeting
Recommends Stockholders Vote on the BLUE Proxy Card "FOR" each of
Citi Trends' Highly Qualified and Experienced Directors
Reviews Board's History of Protecting and Growing Stockholder Value
Urges Stockholders to Ignore Dissident Attempts to Upend the Board
The full text of the letter follows:
VOTE FOR ALL
OF THE CITI TRENDS DIRECTOR NOMINEES
ON THE BLUE PROXY CARD TODAY
Dear Fellow Stockholders:
The 2017 Annual Meeting of Stockholders will be held on
Following the Company's successful turnaround against the backdrop of a challenging retail environment, the management team and your Board of Directors are confident that the current initiatives being implemented will drive sustained growth and profitability. The strategic shift set in motion by your Board and management team in 2012 has enabled the Company to adapt to a rapidly changing apparel industry. The Company has generated a total stockholder return of 50.3% over the past five years, a period during which many of our small-cap, specialty retail peers experienced significant declines or financial restructurings.
YOUR BOARD IS THE RIGHT LEADERSHIP TO DRIVE
CONTINUED GROWTH AND VALUE CREATION
To ensure the Company's forward momentum continues uninterrupted, we encourage you to elect Citi Trends' Board nominees by voting the enclosed BLUE proxy card.
As you may know,
Macellum, led by its Portfolio Manager
YOUR BOARD IS COMMITTED TO RETURNING VALUE TO ITS STOCKHOLDERS
Your Board is committed to creating, enhancing and responsibly returning
value to its stockholders. This commitment is reflected most recently in
your Board's approval of an expanded capital return program, by which
the Company expects to return approximately
A 33.3% increase in its quarterly dividend, from
A new share repurchase program of up to
Maintaining a minimum cash balance of
$80 million, and
- A commitment to return excess cash to the Company's stockholders through additional dividends and buybacks.
This expanded capital return program is the next logical step to your
Board proactively instituting a regular quarterly dividend and a
YOUR BOARD HAS PROACTIVELY MANAGED CITI TRENDS OUT OF A DECLINING BUSINESS, TRANSFORMING IT INTO A LEADING OFF-PRICE RETAILER
In 2012, your management team, led by
The History of
After a host of urban apparel brands grew to become multi-million dollar enterprises in the mid-2000s, consumer tastes, the economic environment and the retail landscape shifted such that demand for urban branded apparel imploded. Sales of formerly iconic urban brands that made up the core of the Company's offerings declined significantly. This sudden and significant decline of urban brands, which had comprised nearly 50% of the Company's merchandise, necessitated a significant strategy change.
The Board's Proactive Shift in Strategy
Your management team and Board conducted a review of the options available to offset the impact of these dramatic shifts in urban fashion apparel. It was agreed that Citi Trends' best means of ensuring its continued viability was to pivot its focus from branded urban apparel to off-price, private-label (non-branded) urban fashion apparel; this move returned the Company to the merchandising strategy on which it was founded. Selling urban fashions, whether branded or unbranded, at compelling prices has always been the heart of the Company's merchandising strategy. Urban brands for a time were synonymous with fashion. That time had passed and the time for offering great, unbranded fashions was back.
Another key component of the Board's strategic shift was significantly
expanding Citi Trends' offerings of non-apparel merchandise:
accessories, including footwear, and home goods. This broadening of the
merchandise mix gave customers even more reasons to shop
The Board's Shift in Strategy has allowed the Company to Outperform its Peers
The successful design and execution of this strategic pivot, led by Mr. Anderson, can be seen in Citi Trends' performance over the last five years, as the Company has rebuilt its sales and gross margins. Consider the following:
- Benchmarked against other small-cap retail apparel companies, Citi Trends' total stockholder returns have consistently outperformed its peers on a 1-, 3- and 5-year basis.
- The Company's gross margin, operating margin and adjusted EBITDA have all showed significant growth compared to its small-cap retail apparel peers.
Over the last five years,
Citi Trendshas delivered a total stockholder return of 50.3%, compared to 25.1% from the S&P 600 Retailing Index and a negative 34.3% from Citi Trends' peers.
January 1, 2012- March 8, 2017, Citi Trendshas delivered a total stockholder return of 99.1%, while three of the Company's proxy statement peers have declared bankruptcy, three have been acquired and 9 of the remaining 10 peers have had negative returns.
- As of the most recent quarter, the Company recorded positive comparable store sales of 3.4%.
Had your Board not acted decisively,
The Board's Strategy is Showing Results and Creating Positive Stockholder Returns
After successfully pivoting out of a downturn that claimed some of its
specialty retail peers,
Your Board and management team will continue working hard to deliver
results and create value for all stockholders. Together, we are
Now is not the time for a change in direction. The Board believes that the best path to maximize value for all stockholders is to continue to execute on its strategic plan, which is clearly working, as reflected in the Board's approval of the expanded capital return program. Don't let Macellum derail this progress.
YOUR BOARD HAS A STRONG TRACK RECORD OF CORPORATE GOVERNANCE
To effectively oversee Citi Trends' strategic direction, ensure management accountability and advance stockholders' interests, your Board requires a specific mix of skills and backgrounds that align with our industry and business plan. The directors currently sitting on your Board have each been carefully selected to ensure their collective expertise spans the range of retail merchandising, operations and finance domains.
Simultaneously, your Board understands the importance of maintaining
fresh perspectives and new viewpoints, and is committed to regularly
evaluating its composition. Just last year, your Board appointed Ms.
Your Board is committed to corporate governance practices that promote the long term success of the Company. To that end, below are some corporate governance highlights:
- All but one of the directors are independent,
- Recent board refreshment,
- The CEO and Chairman roles are separate,
- The Board appointed a Lead Independent Director,
- The Audit, Compensation and Nominating and Corporate Governance Committees are composed entirely of independent directors,
- The Board has adopted enhanced stock ownership guidelines, and
- The Board and its committees complete annual self-evaluations.
YOUR BOARD IS INDEPENDENT, HIGHLY QUALIFIED AND UNIQUELY POSITIONED TO ENSURE THE COMPANY'S SUCCESS DURING THE CURRENT CEO TRANSITION
Furthermore, your Board is highly engaged with and oversees Citi Trends' experienced senior management team, providing oversight and accountability in all key aspects of the business. We are confident our incumbent directors comprise the right governance body to continue to advance the Company's strategic initiatives. Your Board has a deep understanding of the off-price apparel and specialty retail industries in which we operate, and they are motivated by a commitment to enhance value for all stockholders.
The Board's role in ensuring the Company's continued forward momentum is
even more important during the current search for a permanent CEO to
In the meantime, the Company's strong merchandising team will continue to execute their plan as they have done the past several years. The buyers on this team have, on average, more than 15 years of experience in the retail business and have developed long-standing relationships with many of our vendors.
Mr. Anderson's institutional knowledge, intimate familiarity with
THE COMPANY ATTEMPTED TO AVOID A DISRUPTIVE PROXY CONTEST;
MR. DUSKIN IS INTENT ON BECOMING A CITI TRENDS DIRECTOR AT ALL COSTS
Your Board appreciates and values the views of Citi Trends'
stockholders, and regularly solicits their input on matters such as
compensation, board composition, and other governance matters.
Consistent with our culture of open stockholder engagement and good
corporate governance, your Board has attempted to engage with
These half-hearted negotiations clearly highlight where Mr. Duskin's true interests lie: he has prioritized serving as a member of your Board above and beyond any other concern, such as enhancing value for Citi Trends' stockholders or avoiding a costly, disruptive proxy contest.
It is disappointing that
Instead, his personal motivation to serve as a
MR. DUSKIN'S TRACK RECORD OF VALUE DESTRUCTION SHOULD TROUBLE CITI TRENDS' STOCKHOLDERS
Despite Macellum's description of itself as "successful investors that
help improve long-term financial and stock price performance of consumer
and retail companies," and the "retail expert" title that
Consider the following details of Mr. Duskin's board experience:
Christopher & Banks: As a current Board member, a seat
which he gained following a settlement after a threatened proxy
March 2016, Mr. Duskinhas overseen a nearly 50% DECLINE in the company's stock price. During this time, Christopher & Banks has missed EPS and revenue projections on multiple occasions.
The Wet Seal: Mr. Duskinjoined the Board in 2006 and served until a substantial majority of stockholders voted in favor of his removal - the company went BANKRUPT less than three years later in 2015.
Jewelers Inc.: Mr. Duskinwas added to the board in 2006 and resigned weeks before the company filed for BANKRUPTCY in 2008.
Mr. Duskinwas appointed a director in 2005 and served until KB Toys filed for BANKRUPTCY in 2008.
PLVTZ, Inc.: Mr. Duskinjoined the board of PLVTZ, Inc., parent company of Levitz Home Furnishings, in 2005 - PLVTZ filed for BANKRUPTCY in 2007.
Your Board believes that Mr. Duskin's track record of board service for retail companies disqualifies him for service on the Citi Trends Board.
As part of their campaign against
Mr. Andersonhas in-depth knowledge of Citi Trendsand its target customers, attained from his tenure of more than 11 years as CEO and 15 years as a director. In addition, Mr. Andersonhas more than three decades of relevant executive management experience and a distinguished career of leadership in other companies in our industry.
Mr. Hyatt, a former public company CFO, has advised companies in a range of sectors and has particular knowledge of the retail industry from his senior executive roles at Cracker Barreland Cole National Corporationand service on your Board. Mr. Hyattcurrently serves as the chairman of the Audit Committee.
Who is Macellum recommending to replace
We strongly believe that neither
MACELLUM'S PROPOSED STRATEGY FOR CITI TRENDS INDICATES AN UNSOPHISTICATED UNDERSTANDING OF OUR BUSINESS
We believe that the Company's current strategy is the right strategy and
the suggestions for our business set forth by Macellum in its letter to
our stockholders dated
Macellum suggests in its letter a few actions that the Company can take
to improve its merchandising strategy and drive higher sales, margins
and EBITDA; however, these suggestions are basic retail issues that
apparel retailers like
PROTECT THE VALUE OF YOUR INVESTMENT IN CITI TRENDS:
VOTE THE BLUE PROXY CARD TODAY
Your Board is committed to acting in the best interests of all
Your vote is extremely important, no matter how many or how few shares you own. We urge you to vote today by telephone, online or by signing and dating the enclosed BLUE proxy card and returning it in the postage-paid envelope. If you have previously returned a White proxy card you received from Macellum, you have every right to change your vote by using the BLUE proxy card to support the Citi Trends Board. Only your latest dated validly executed proxy card will count. Please do not send back any White proxy cards, even to vote against the Macellum nominees, as doing so may cancel out any votes "FOR" the Citi Trends Board.
If you have any questions or need assistance voting, please call
We are extremely honored to serve on behalf of you, our stockholders. Your Board and management team are committed to acting responsibly and to maximizing the value of your investment.
On behalf of the Board, thank you for your continued support.
Very truly yours,
The Citi Trends Board
All statements other than historical facts contained in this news
release, including statements regarding our future financial results and
position, business policy and plans, objectives of management for future
operations and our intentions and ability to pay dividends and complete
any share repurchases, are forward-looking statements that are subject
to material risks and uncertainties. The words "believe," "may,"
"could," "plans," "estimate," "continue," "anticipate," "intend,"
"expect" and similar expressions, as they relate to
Important Additional Information
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