Citi Trends, Inc. Sends Letter to Stockholders Regarding Upcoming Annual Meeting
Highlights Board's Successful Response to Customers' Preference Shift
Refutes Macellum's Multiple, Inconsistent Attempts to Utilize Unsuitable Peer Groups for the Purposes of Distorted Financial Comparisons
Recommends Stockholders Vote on the BLUE Proxy Card "FOR" each of Citi Trends' Highly Qualified and Experienced Directors
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:
Your vote at this year's Annual Meeting of Stockholders on
This year's meeting is particularly significant as
Macellum is led by its Portfolio Manager
Considering Mr. Duskin's poor track record with companies in the retail industry, a number of which filed for BANKRUPTCY during or immediately following his service on the board, it is not surprising that he has put forth a deeply flawed analysis of Citi Trends' business and repeatedly demonstrated an inaccurate understanding of our peers within the specialty retail sector.
MACELLUM HAS ADVANCED A FALSE, INCOMPLETE NARRATIVE REGARDING CITI
TRENDS AND ITS HISTORIC RELATIONSHIP WITH
Over the course of this ill-advised and unnecessary proxy contest that
Macellum has launched - the Board made five
attempts to settle and agreed to appoint two qualified independent
individuals from a list of names provided by Macellum - the firm has
erroneously suggested that the Board actively elected to forgo the
higher sales and profits made possible by the urban brands popular in
the first decade of the 2000s. Macellum claims that somehow, through
either poor judgement or mismanagement,
This is fundamentally not true -
Even prior to its successful IPO in 2005, offering current urban
fashions at compelling prices has always been at the heart of Citi
Trends' merchandising strategy. This apparel category has always
included both brands as well as unbranded, or private label,
merchandise. The precise distribution of branded vs unbranded apparel
The period of 2002-2009 witnessed the swift rise of a new branded
phenomenon that was unlike anything else to previously occur within the
urban fashion space. These brands - including Rocawear, Apple Bottoms,
and Baby Phat - were either owned by or heavily associated with
successful hip-hop artists and other celebrities, and became immensely
popular with Citi Trends' core base of
However, in 2010-2011, the retail landscape shifted such that these
urban brands lost their fashion relevance with our customers. This
sudden decline in demand was rapid and the effect on our sales, gross
margins and profitability was significant. It necessitated a significant
strategy change to proactively manage out of this declining business,
which your Board successfully designed and implemented. Today, many of
those same urban brands that were previously immensely popular no longer
exist, and to the extent that those brands are still available, they now
generate only negligible sales in our stores, as well as broadly across
the retail sector.
Macellum has also erroneously suggested that as urban brands declined,
Do not allow Macellum's ignorance of the history of branded urban apparel and the current tastes of the Company's core customer destroy the value of your investment. Vote FOR ALL Citi Trends Directors on the BLUE card today.
MACELLUM CONTINUES TO UTILIZE UNSUITABLE PEER GROUPS FOR THE PURPOSES OF DISTORTED FINANCIAL COMPARISONS
Macellum has hand selected TJX, Ross Stores and Burlington to compare
This tremendous disparity in scale is critical when understanding these
are not useful comparisons for
|Demographics||All Ethnic Groups||All Ethnic Groups||All Ethnic Groups||
|Premium and Moderate||Premium and Moderate||Premium and Moderate||Fashion Forward Urban|
|Store Brands||Store Brands||Store Brands|
|Store Size (Square Feet)||28,200||27,200||76,000||13,000|
|Total Gross Square Footage||106.9 Million||42.5 Million||45 Million||7.1 Million|
|Real Estate Locations||
|Annual Capital Expenditures||
|Kors, Nike, Under||Ellis, Nike, Under||Ellis, Timberland,||Trukfit, Parrish,|
|Armour, Nautica,||Armour, Nautica, Calvin||
||Rocawear, Hello Kitty|
The magnitude and diversity of the merchandise offerings and customer
demographics at TJX, Ross Stores and Burlington significantly buffered
their results from being negatively impacted by the urban brand decline
described above to the same degree it did for
In evaluating our performance, Macellum's conclusion that the Company "has not taken full advantage of the significant opportunities to increase its profitability" is demonstrably false. In addition to making distorted comparisons in an attempt to illustrate its claim, Macellum conveniently omits that seismic shifts in the apparel industry created tremendous obstacles to the Company's survival.
If the 99% TSR generated by Citi Trends' since
2012 is characterized by Macellum as a company that "has not taken full
advantage of the significant opportunities to increase its
profitability", we are curious as to how they would describe the 2015
MACELLUM WOULD REPLACE TWO OF YOUR QUALIFIED DIRECTORS WITH INDIVIDUALS WHO WOULD ADD NO INCREMENTAL VALUE TO OUR BOARD
Macellum has launched a proxy fight to replace two of your talented Directors, notwithstanding Citi Trends' track record of delivering strong results in a very difficult retail environment, our plans to drive future value and the experience and expertise of our Board.
As our turnaround progressed, we have refreshed your Board with new, independent directors. The current Board is comprised of highly qualified individuals with compelling backgrounds in retail merchandising, operations and finance. Macellum's nominees offer no relevant experience, skills or perspectives - let alone the perspective of a long-term, significant stockholder - that are not already well-represented in the boardroom.
While investors may at times adopt the view that appointing a
stockholder nominee to the Board is a "harmless" addition, we do not
feel that is the case here. Based on Mr. Duskin's poor history as a
retail company director, it was definitively concluded that his
appointment to serve on your Board would represent a disconcerting
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 - but not before the company's stock price DROPPED 76% versus the S&P 600 Retailing Index during Mr. Duskin's tenure.
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.
Macellum's second nominee,
Consider the credentials and expertise of the two highly qualified
directors, Executive Chairman
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.
The question then for stockholders is clear: Do the two nominees proposed by Macellum possess significant and relevant experience that would be valuable to the Board, and is that experience superior to the two members of the Board they propose to replace?
We believe that by any objective measure the answer to both questions is a clear and convincing "NO."
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. 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
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