Contrasts Relevant Skills and Experience of Directors with those of Macellum submitted nominees
Highlights Macellum's Distorted Financial Analyses, Misleading Comparisons and False Assumptions
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
As you may know,
Most recently, Macellum made baseless and speculative comments about
former Citi Trends CEO Mr. Mazzola's recent departure to pursue a new
opportunity. The firm questioned whether or not the decision resulted
from "frustration" with the current Board and
In another distortion of the facts, Macellum claimed that the "The Board Had No Intention of Settling with Us" when in fact the Board made five attempts to settle with Macellum and agreed to appoint two qualified independent and mutually agreed upon individuals from a list of names provided by Macellum. It was Macellum that was not interested in settling because it demanded that Duskin be put on our board - making it clear that this proxy contest is all about him - not creating stockholder value.
Against this backdrop, we ask that you fully consider the facts and ignore the fake narrative advanced by Macellum in determining how to cast your vote.
DESPITE DRAMATIC CHANGES IN FASHION PREFERENCE, YOUR BOARD HAS DELIVERED SUPERIOR TOTAL RETURNS
Originally, the Company executed a highly successful strategy that
capitalized on the popularity of urban apparel brands. Merchandise
decisions were informed by, and the Company's product assortment
reflected, the considerable demand for brands like RocaWear and Apple
Bottoms. Fueled by robust urban brand sales,
Urban Brands' Decline
A sudden and rapid decline in the fashion relevance of these urban
brands with Citi Trends' core customer base brought about a new period
in the Company's corporate history. From
Citi Trends' Decisive and Successful Pivot
Faced with the challenge of quickly and effectively adapting to the
changing external environment, your Board took decisive action to both
de-emphasize branded apparel and expand complementary product lines.
This began the current, third phase of the Company's history in
The Company's new positioning as an urban fashion, off-price retailer
with offerings in both apparel and non-apparel has generated significant
momentum. Under the leadership of Executive Chairman and incumbent
CITI TRENDS IN 2005 VS. 2017: DIFFERENT BUSINESS, MERCHANDISE AND STRATEGY
Your Board has proactively managed out of a declining business, and its new strategy is driving substantially improved performance. Given changes in the retail environment, the branded urban apparel market and Citi Trends' business model, it is far less relevant to compare our business today to that of ten years ago. As such, Macellum's insistence on gauging Citi Trends' current success solely in relation to its financial results from prior to the 2012 turnaround and strategic shift is curious. The firm's allegations of ‘cherry picking' the timing of our comparisons for the sake of performance is patently false: as outlined above, the Company's initial success, broader industry downturn, and subsequent transformation provide natural delineations of three distinct phases in the Company's history.
Macellum has attempted to advance a self-serving, false narrative that misrepresents the Company's financial position and neglects the transformative action undertaken by your Board. We can only conclude that this line of attack from Macellum is either disingenuous or indicative of the firm's troubling ignorance of Citi Trends' new positioning, merchandise categories, and product margins.
Regardless of the true motivation behind Macellum's factually inaccurate
depiction of Citi Trends' history, the reality is that the 2012
transformation has enabled the Company to survive, evolve and outperform
its peers over the subsequent five years. The merchandising strategy
responsible for this success was designed, implemented and currently
overseen by your Board. Do not let Macellum's nominees disrupt this
process, vote FOR ALL
YOUR BOARD HAS A TRACK RECORD OF RETURNING CAPITAL TO STOCKHOLDERS
AND ANNOUNCED PLANS TO RETURN
As part of the successful strategic pivot orchestrated in 2012, the
Board's focus on cutting capital expenditures and conserving cash
successfully restored the Company's profitability, growth and stability
to levels that warranted a prudent return to Company stockholders. Thus,
in 2015, your Board announced and successfully completed a
This year, your Board announced an expanded capital return program,
which aims to return approximately
The fact that your Board authorized a buyback and quarterly dividend in
2015, well before this contested election, refutes Macellum's false
claim that "the Board was previously resistant to returning capital to
stockholders until we came along." In reality, your Board regularly
evaluates the Company's balance sheet, in which share repurchases and
dividend programs are weighed against a bevy of other operational and
structural considerations that would necessitate liquidity. Having
generated a cumulative total of
Macellum, on the other hand, does not appear to have reached a definitive conclusion regarding how they wish to critique our 2017 capital return program. In their most recent public communication, Macellum questions the timing of the program while simultaneously criticizing the dollar amount of the program as too low AND attempting to take credit for the announcement. Unfortunately, the inconsistent, haphazard nature of Macellum's attacks are not limited to this single domain.
MACELLUM'S DISTORTED FINANCIAL ANALYSES AND COMPARISONS FAIL TO CAPTURE THE TURNAROUND THAT THE BOARD HAS ENGINEERED
Macellum's three separate attempts at defining a peer group and time periods to measure our results demonstrate a lack of understanding of the business and the industry. The firm's misleading claims regarding our stock price and operating performance are based on distorted comparisons rather than truly representative peers of the Company.
One of the various irrelevant peer groups that Macellum attempts to
Macellum has hand selected TJX, Ross Stores and Burlington to compare
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: REFUSED SETTLEMENT OFFERS, DEMANDED MR. DUSKIN'S APPOINTMENT TO BOARD
Macellum has attempted to portray itself as amenable to a constructive
settlement outcome, but the truth is that the firm has rejected every
offer provided by the Company that would have allowed for potential
Board appointments for two individuals provided by Macellum after a
routine vetting process. Instead,
This attempt by Macellum to suggest that the Board does not value constructive conversations with stockholder or investor feedback is at odds with the facts. In reality, your Board reaches out to and engages with its stockholders on various topics, including corporate governance, compensation, performance, strategy and other matters. The recent decisions to appoint a lead independent director, implement a clawback and anti-hedging policies and propose the majority voting requirement for directors in uncontested elections at the upcoming annual meeting were informed by our stockholders' view on the Company's policies and practices and your Board's commitment to good corporate governance.
MACELLUM WOULD REPLACE TWO OF YOUR QUALIFIED DIRECTORS WITH INDIVIDUALS WHO WOULD ADD NO INCREMENTAL VALUE TO OUR BOARD
Despite claiming to be a "retail expert",
Do not let
Macellum's second nominee,
Together, Macellum's nominees have yet to articulate a strategic view
regarding how to create stockholder value at
As our turnaround progressed, we have refreshed your Board with new, highly-qualified independent directors. 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.
Your Company's strategy is working but it requires careful stewardship by a highly qualified Board and management team - stewardship that is now at risk.
PROTECT THE VALUE OF YOUR INVESTMENT IN CITI TRENDS:
VOTE THE BLUE PROXY CARD TODAY
Don't allow Macellum's nominees to replace your talented directors. Both
incumbent nominees played pivotal roles in the design and implementation
of the turnaround plan, and as Executive Chairman, Mr. Anderson's
intimate knowledge of the Company's operations make him an invaluable
participant in the process to select a permanent CEO. Your Board members
possess superb skillsets in retail operations (including merchandising /
off-price experience), strategic leadership, as well as finance /
accounting: all domains that are highly relevant to
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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