Citi Trends, Inc. Sends Letter to Stockholders Regarding Upcoming Annual Meeting
Highlights Strong and Improving Financial Results - the Company's
Strategy is Working
Urges Shareholders to Vote on the BLUE Proxy Card "FOR" each of Citi
Trends' Highly Qualified and Experienced Directors
SAVANNAH, Ga.--(BUSINESS WIRE)--
Citi Trends, Inc. ("Citi Trends" or the "Company") (NASDAQ:CTRN)
announced today that it has sent a letter to stockholders in connection
with the Company's Annual Meeting of Stockholders, to be held on May 24,
2017. The Citi Trends Board of Directors unanimously recommends that
stockholders vote the BLUE proxy card today FOR each of the Company's
three highly qualified and experienced director nominees: Barbara Levy,
Lawrence E. Hyatt and R. Edward Anderson.
The full text of the letter follows:
VOTE FOR ALL
OF THE CITI TRENDS DIRECTOR NOMINEES
ON THE BLUE
PROXY CARD TODAY
May 16, 2017
Dear Fellow Stockholders:
The Citi Trends 2017 Annual Meeting of Stockholders is quickly
approaching, and your vote is critically important in securing the
future of your investment in the Company. Over the last several weeks,
we have outlined the decisive actions the Board has successfully
undertaken in the past five years, including a significant strategic
pivot which has driven improved sales, profits and shareholder value in
a difficult retail environment. To ensure the continuation of this
positive momentum, we urge you to vote today by telephone, online or by
signing and dating the enclosed BLUE
proxy card "FOR" ALL THREE of Citi Trends' highly qualified
incumbent director nominees: Barbara Levy, Lawrence E. Hyatt, and your
Executive Chairman, R. Edward Anderson.
The skills and abilities of your incumbent directors, who have
successfully designed, implemented and overseen the Company's current
strategic plan, stand in stark contrast with those of the individuals
proposed by Macellum Advisors GP, LLC and certain affiliated entities
(collectively, "Macellum"). Their nominees - Jonathan Duskin, Macellum's
Portfolio Manager, and Paul Metcalf - either have a history of value
destruction as a board member of retail companies, or no public director
experience whatsoever. Furthermore, not only has Macellum neglected to
offer any credible plan for the Company's future, its analysis of Citi
Trends and the competitive space in which we operate has demonstrated
the firm's superficial, poor understanding of our business and our
Electing Macellum's nominees puts your Citi Trends
investment at risk - Vote the BLUE proxy card TODAY.
CITI TRENDS' STRATEGIC PLAN IS DELIVERING STRONG AND IMPROVING
Following the dramatic shifts in the urban apparel landscape that
occurred in 2010-2011, your Board responded effectively to a dramatic
change in Citi Trends customers' fashion preferences, and continues to
take important, decisive action to position the Company for long-term
Against the backdrop of a challenging retail environment, this strategy
has enabled Citi Trends to meaningfully outperform its peers and
benchmark index since it was implemented in 2012.
The Company's most recent sales results illustrate that our improved
merchandising strategies are driving better performance, with total
sales in the 13-week period ended April 29, 2017 increasing 3.2% to
$200.0 million, despite the later disbursement of tax refunds by the
IRS. The feedback from shareholders and analysts has been supportive.
For example, Patrick McKeever at MKM Partners noted:
"Comps increased 1.0%... reflecting substantial month-to-month
improvement, while total sales increased more than 3% to $200.0
million... The upside sales, along with a number of recent store checks,
leave us more positive."
"Store Checks Suggest Momentum Has Continued So Far in May. We
visited nine stores in the Detroit area yesterday and saw consistently
strong traffic and conversion" - May 4, 2017
Citi Trends' strategy is working - having
generated a Total Shareholder Return of 99% since 2012 - but it requires
careful stewardship by a highly qualified Board and management team.
Macellum's nominees put that stewardship at risk.
ISS HAS RECOMMENDED CITI TRENDS DIRECTOR BARBARA LEVY, BUT CONDUCTED
A FLAWED BUSINESS ANALYSIS OF THE COMPANY
While your Board is pleased that the May 11, 2017 Institutional
Stockholder Services ("ISS") report related to the upcoming Citi Trends
director election recognized the importance of Barbara Levy's Board
membership to the Company's future growth plans and continued success,
we strongly disagree with ISS' failure to recommend the full slate of
Citi Trends' highly-qualified director nominees. Unfortunately, this
failure appears to stem from a flawed analysis of the Company's business
and a poor appreciation of the apparel and retail realities.
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 geographic markets and demographics of our
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 claim - 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, we do not believe this fear is unwarranted.
MACELLUM'S NOMINEES OFFER NO NEW RELEVANT EXPERIENCE, SKILLS OR
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. We therefore
determined Mr. Metcalf's credentials do not warrant granting him a seat
on your Board, and ISS arrived at the same conclusion, recommending
stockholders vote against his election.
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' competiveness.
Your Board is actively engaged in the oversight of
the Company's strategy, which has delivered years of profitability,
growth and stability - electing your incumbent directors will allow this
strategy and the Company's forward momentum to continue uninterrupted.
PROTECT THE VALUE OF YOUR INVESTMENT IN CITI TRENDS:
THE BLUE PROXY CARD TODAY
Your Board is committed to acting in the best interests of all Citi
Trends stockholders. The current Board, under the leadership of
Executive Chairman Ed Anderson, is well aligned on the current business
strategy and believes that it would be detrimental to stockholder value
to replace two of your qualified incumbent Directors with Macellum's
We believe Citi Trends stockholders can protect the value of 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
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
Very truly yours,
The Citi Trends Board
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/20170516005675/en/
Phil Denning, 646-277-1258
Bruce Goldfarb, Chuck Garske and Teresa Huang, 212-297-0720
Source: Citi Trends, Inc.
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