Citi Trends Agrees with ISS Recommendation of Director Barbara Levy
Corrects Flawed Business Analysis Presented in ISS Report
Urges Stockholders to Vote "FOR" All Three of Its Highly-Qualified
and Experienced Director Nominees on the BLUE Proxy Card; Disregard
SAVANNAH, Ga.--(BUSINESS WIRE)--
Citi Trends, Inc. ("Citi Trends" or the "Company") (NASDAQ:CTRN) today
issued the following statement in response to a May 11, 2017 report from
Institutional Stockholder Services ("ISS") relating to the election of
directors to Citi Trends' Board of Directors at the Company's May 24,
2017 Annual Meeting of Stockholders. Citi Trends urges stockholders to
vote on the BLUE proxy card "FOR" the reelection of its
highly-qualified and experienced director nominees: Barbara Levy,
Lawrence E. Hyatt and R. Edward Anderson.
"While we strongly disagree with ISS' failure to recommend the full
slate of Citi Trends' highly-qualified Director nominees, we are pleased
ISS recognizes the importance of Barbara Levy's Board membership to Citi
Trends' future growth plans and continued success. Independent of ISS'
recommendations, we are confident stockholders will reach the conclusion
that Citi Trends' nominees have the experience and expertise necessary
to continue successfully driving value at the Company, as evidenced by
the strong results the Board has overseen in a very difficult retail
We believe the two nominees proposed by Macellum Advisors GP, LLC and
certain affiliated entities (collectively, "Macellum") - Jonathan Duskin
and Paul Metcalf - are ill-suited and poorly equipped to serve on the
Company's Board. Macellum and its dissident nominees have offered no new
ideas or strategic direction for the Company. If successful in its
activist campaign, Macellum would supplant two of your qualified and
experienced directors - one of whom serves as your Executive Chairman -
with individuals that either have a history of significant value
destruction as a board member of retail companies, or no public director
Compared to Executive Chairman Ed Anderson and Lawrence Hyatt, the two
highly qualified directors Macellum seeks to replace, Macellum's
candidates do not have the qualifications necessary to deliver superior
returns for Citi Trends stockholders. Mr. Duskin has NO retail
operating experience, NO understanding of urban fashion market
and has repeatedly destroyed stockholder value as a Director.
Every company where Mr. Duskin has served as a director has gone bankrupt,
been liquidated, or experienced a significant loss in
stockholder value. Paul Metcalf, Macellum's other nominee, has NO public
board experience, extremely limited public company management experience
and NO experience focused on the urban fashion market.
In contrast, Mr. Anderson, Mr. Hyatt and Ms. Levy provide important
perspective, expertise, and guidance to our management team, which will
benefit all Citi Trends stockholders. Unlike the dissident nominees, the
Company's incumbent Directors possess the business experience and
shareholder representation and perspective necessary to act in the best
interests of all Citi Trends stockholders:
Mr. Anderson has in-depth knowledge of Citi Trends and its target
customers, attained from his tenure of more than 11 years as CEO and
15 years as a director. In addition, Mr. Anderson has 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 Barrel and Cole National
Corporation and service on your Board. Mr. Hyatt currently serves as
the chairman of the Audit Committee.
Ms. Levy is a recently installed independent director, and as an
accomplished merchandising executive in the off-price retail industry,
she brings a relevant and valuable perspective to the Board. Ms.
Levy's significant experience devising product strategies and ensuring
alignment between the overall merchandising function and a company's
strategic direction provides her with a unique understanding of how to
enhance Citi Trends' competitiveness.
In its report, ISS said:
The company's ability to rebound its share price and recover some
operational footing following its 2011 trough levels should not go
without credit; and,
Citi Trends' recent gains are correlated with and seem
attributable, in part, to a positive earnings surprise announced Mar.
10, 2017 as well as the company's $0.02 dividend increase and $25
million share buyback authorization announced Apr. 10, 2017.
It is encouraging that ISS notes the recent actions taken by Citi
Trends' Board to enhance stockholder value, and the resulting positive
reaction shown by investors. However, this makes it all the more
puzzling that ISS simultaneously faults the Company for failing to turn
its back on its core customer. The report criticizes the Board for what
it sees as a "[failure] to exercise a potentially lucrative option to
recalibrate" and for not electing a "different set of strategy and
merchandising choices to re-position and protect or expand the off-price
side of the business" following the collapse of the urban branded
apparel phenomenon. This suggested course of action and the
inappropriate ‘peer' comparisons made by ISS call into question the
foundation of the report's business analysis. It also highlights an
apparent lack of understanding of Citi Trends' unique, underserved core
shopping base, predominately lower income African-Americans.
Even if the Board concluded it was prudent to fundamentally change Citi
Trends identity - which it did not - there are also a number of
structural, financial and operational hurdles to overcome in
transforming the Company to that extent. Real estate leases, for
example, are long-term commitments that have been carefully selected
based on the specific demographics of our customer base.
We are disappointed that the ISS recommendation appears to be based
on the assertion that, in the difficult aftermath of the branded urban
apparel implosion, Citi Trends should have moved away from the
geographic markets and unique customer base it serves, despite
representing key anchors of the brand DNA. We do not believe that a
different market environment warrants a completely different company
altogether. This unrealistic and unwise recommendation - that the Board
should have abandoned its customer base in an attempt to emulate
Burlington or TJX - has been advanced throughout this campaign by
Macellum, and it is the same sort of misguided analysis of our business
that we fear Mr. Duskin will bring to the Citi Trends Board. Given Mr.
Duskin's extremely poor track record described above, we do not believe
this fear is unwarranted."
As the Annual Meeting date is rapidly approaching, Citi Trends strongly
urges stockholders to protect the value in their investment by voting
today "FOR" ALL of our experienced and highly qualified director
nominees on the BLUE proxy card: Barbara
Levy, Lawrence E. Hyatt, and R. Edward Anderson.
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 Okapi
Partners LLC, our proxy solicitor, at (212) 297-0720 or toll-free at
About Citi Trends
Citi Trends, Inc. is a value-priced retailer of urban fashion apparel
and accessories for the entire family. The Company operates 538 stores
located in 31 states. Citi Trends' website address is www.cititrends.com.
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 Citi Trends, are
intended to identify forward-looking statements. Investors are cautioned
that any such forward-looking statements are not guarantees of future
performance or results and are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Actual
results or developments may differ materially from those included in the
forward-looking statements as a result of various factors which are
discussed in Citi Trends filings with the Securities and Exchange
Commission. These risks and uncertainties include, but are not limited
to, uncertainties relating to economic conditions, growth risks,
consumer spending patterns, competition within the industry, competition
in our markets, the ability to anticipate and respond to fashion trends
and the outcome of our current proxy fight and any other actions of
activist stockholders. Any forward-looking statements by the Company with
respect to the Company's intention to declare and pay dividends,
repurchase shares pursuant to the share repurchase program, or
otherwise, are intended to speak only as of the date such statements are
made. Except as required by applicable law, including the securities
laws of the United States and the rules and regulations of the
Securities and Exchange Commission, Citi Trends does not undertake to
publicly update any forward-looking statements in this news release or
with respect to matters described herein, whether as a result of any new
information, future events or otherwise.
Important Additional Information
Citi Trends, its directors and certain of its executive officers may be
deemed to be participants in the solicitation of proxies from Citi
Trends stockholders in connection with the matters to be considered at
Citi Trends' 2017 Annual Meeting to be held on May 24, 2017. On April 3,
2017, Citi Trends filed a definitive proxy statement (the "Proxy
Statement") with the U.S. Securities and Exchange Commission (the "SEC")
in connection with any such solicitation of proxies from Citi Trends
stockholders. INVESTORS AND STOCKHOLDERS ARE STRONGLY ENCOURAGED TO
READ THE PROXY STATEMENT AND ACCOMPANYING BLUE PROXY CARD WITH RESPECT
TO THE 2017 ANNUAL MEETING, AND OTHER DOCUMENTS FILED WITH THE SEC,
CAREFULLY AND IN THEIR ENTIRETY AS THEY CONTAIN IMPORTANT INFORMATION.
Detailed information regarding the identity of potential participants,
and their direct or indirect interests, by security holdings or
otherwise, is set forth in the Proxy Statement and other materials to be
filed with the SEC in connection with Citi Trends' 2017 Annual Meeting.
Stockholders may obtain the Proxy Statement, any amendments or
supplements to the Proxy Statement and other documents filed by Citi
Trends with the SEC for no charge at the SEC's website at www.sec.gov.
Copies will also be available at no charge at the Investor Relations
section of our corporate website at www.cititrends.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170512005549/en/
Phil Denning, 646-277-1258
Bruce Goldfarb, Chuck Garske and Teresa Huang
Source: Citi Trends, Inc.
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