Citi Trends, Inc. Sends Letter to Stockholders Regarding Upcoming Annual Meeting
Recommends Stockholders Vote on the BLUE Proxy Card "FOR" each of
Trends' Highly Qualified and Experienced Directors
Reviews Board's History of Protecting and Growing Stockholder Value
Citi Trends has the Right Strategy for the Future in Place Now
Urges Stockholders to Ignore Dissident Attempts to Upend the Board
SAVANNAH, Ga.--(BUSINESS WIRE)--
Citi Trends, Inc. ("Citi Trends" or the "Company") (NASDAQ:CTRN)
announced today that it has sent a letter to its stockholders in
connection with the Annual Meeting of Stockholders of Citi Trends, Inc.,
which will be held at 9:00 a.m. on Wednesday, May 24, 2017, at the
Embassy Suites Airport, 145 West Mulberry Boulevard, Savannah, Georgia
31322. The letter urges stockholders to vote "FOR" Citi Trends' highly
qualified slate of nominees - Barbara Levy, Lawrence E. Hyatt and R.
Edward Anderson - by signing, dating and returning the BLUE proxy card
sent by the Company.
The full text of the letter follows:
VOTE FOR ALL
OF THE CITI TRENDS DIRECTOR NOMINEES
ON THE BLUE
PROXY CARD TODAY
April 11, 2017
Dear Fellow Stockholders:
The 2017 Annual Meeting of Stockholders will be held on Wednesday, May
24, 2017. This year's annual meeting is a particularly important one, as
you will be asked to make a critical decision regarding the future of
Citi Trends. We urge you to protect the value of your investment by
voting 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 R. Edward
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
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 Advisors GP, LLC, and certain affiliated
entities (collectively, "Macellum"), has nominated two individuals in
opposition to two of the Company's three incumbent director nominees.
Macellum only began acquiring our stock in November 2016 and owns 3.92%
of the outstanding common stock of the Company.
Macellum, led by its Portfolio Manager Jonathan Duskin, has initiated a
costly and distracting proxy fight, after rejecting the numerous,
reasonable settlement attempts we set forth. Macellum proposes to
replace two of your accomplished directors with individuals that either
have a history of value destruction as a board member of retail
companies, or no public director history whatsoever. If you should
receive a White proxy card from Macellum, we urge you to completely
disregard it and take no action.
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 $30 million to its
stockholders over the next 12 months. The program includes the following:
A 33.3% increase in its quarterly dividend, from $0.06 to $0.08,
A new share repurchase program of up to $25 million,
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 $15
million repurchase program in 2015.
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 R. Edward Anderson, who returned
to the CEO position to lead the turnaround efforts, and your Board
developed and began executing a plan to shift Citi Trends' merchandising
strategy. This change in direction was made necessary by the precipitous
change in fashion preferences by its customers.
The History of Urban Brands
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 Citi Trends.
The Board's Shift in Strategy has allowed the Company to Outperform
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
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
Over the last five years, Citi Trends has 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'
From January 1, 2012 - March 8, 2017, Citi Trends has 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, Citi Trends may have met a similar
fate as retailers and brands that did not alter course, such as Payless
(bankrupt in 2017), PacSun (bankrupt in 2016), Aeropostale (bankrupt in
2016) and The Wet Seal (bankrupt in 2015). Since 2012, Ashley Stewart,
Body Central, Conway Stores, CW Price, Dots, Simply Fashion and other
retailers filed for bankruptcy or were liquidated.
The Board's Strategy is Showing Results and Creating Positive
After successfully pivoting out of a downturn that claimed some of its
specialty retail peers, Citi Trends has a proven, well-defined strategy
to position the Company for higher growth and higher value. The Company
continues to provide its customers with on-trend, off-price, private
label, urban, fashion apparel. And more recently, efforts to drive even
more fashion into the important ladies' apparel business have resulted
in positive sales in the fourth quarter of 2016. Non-apparel categories,
which have been a significant source of revenue growth, are being
expanded, and additional upgrades to the Company's planning and
allocation systems will be implemented in mid-2017.
Your Board and management team will continue working hard to deliver
results and create value for all stockholders. Together, we are
confident that Citi Trends will continue to reap the benefits of our
strategic initiatives through 2017 and beyond to drive stockholder value.
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
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.
Barbara Levy as a new independent director and member of the Audit
Committee, the Compensation Committee and the Nominating and Corporate
Governance Committee. As an accomplished merchandising executive in the
off-price retail industry, Ms. Levy has brought 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
in the off-price retail industry.
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
replace Jason Mazzola. Your Board recently appointed Bruce Smith, COO
and CFO of the Company, as the Company's Acting CEO. Mr. Smith has been
a key figure, along with Mr. Anderson, in developing Citi Trends'
operational plan since joining the Company as CFO in 2007. Mr. Smith has
demonstrated an important range of skills and insights during his ten
years with the Company. Mr. Anderson has recently resumed his role as
Executive Chairman during this transition to assist Mr. Smith in his new
role and provide for the orderly succession of management
responsibilities while your Board conducts a search for a permanent CEO.
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 Citi
Trends and previous oversight as CEO of the Company's pivot from branded
urban apparel to off-price, private label urban fashion apparel make him
ideally suited to work together with Mr. Smith in this capacity, as he
will bring continuity and minimize disruptions in helping run the
business, maintain operational consistency, and ensure that the Company
continues to drive results for all stockholders.
THE COMPANY ATTEMPTED TO AVOID A DISRUPTIVE PROXY CONTEST;
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 Mr. Duskin
on multiple occasions to hear his firm's input and suggestions with an
Citi Trends has sought to avoid a disruptive contested election process
by acting reasonably and providing Macellum with numerous proposed
settlement offers over the past couple of months that, following
appropriate interviews and vetting, could have led to Board appointments
for two individuals provided by Macellum. Macellum rejected each of
these offers because it insisted that any settlement must include Mr.
Duskin as a Board member. Additionally, Macellum's demands have
consistently shifted during its engagement with your Board. Most
recently, following the departure of Mr. Mazzola, Macellum stipulated
that any successful negotiation would necessitate Mr. Anderson stepping
down as Chairman of the Board.
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 Mr. Duskin rejected multiple opportunities
provided by the Company to resolve this matter constructively and chose
instead to pursue a path not aligned with the best interests of our
stockholders. If he were truly serious about doing the best for Citi
Trends and enhancing the Board, Mr. Duskin would have made his nominees
available to the Nominating and Corporate Governance Committee and
allowed the vetting process to unfold in a transparent, official manner.
Instead, his personal motivation to serve as a Citi Trends director at
all costs has brought about this proxy contest. 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 development for Citi Trends and its stockholders.
MR. DUSKIN'S TRACK RECORD OF VALUE DESTRUCTION SHOULD TROUBLE CITI
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 Mr. Duskin has
bestowed upon himself, the historic engagements that Macellum and Mr.
Duskin have undertaken with retail companies is less than impressive. In
fact, a number of them filed for BANKRUPTCY during or immediately
following Mr. Duskin's service on the board.
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
contest in March 2016, Mr. Duskin has 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. Duskin joined 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
Whitehall Jewelers Inc.: Mr. Duskin was added to the board in
2006 and resigned weeks before the company filed for BANKRUPTCY
KB Toys: Mr. Duskin was appointed a director in 2005 and served
until KB Toys filed for BANKRUPTCY in 2008.
PLVTZ, Inc.: Mr. Duskin joined the board of PLVTZ, Inc., parent
company of Levitz Home Furnishings, in 2005 - PLVTZ filed for BANKRUPTCY
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 Citi Trends, Macellum seeks to elect
two nominees that have NO track record of creating value on
public company boards to replace two of your highly qualified directors,
R. Edward Anderson and Lawrence R. Hyatt.
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.
Who is Macellum recommending to replace Mr. Anderson and Mr. Hyatt?
Jonathan Duskin, an individual who has a poor track record in the retail
industry as described above, and Paul Metcalf, an individual with zero
public company board experience and limited executive management
experience. Macellum claims that its nominees have "significant
operating experience in retail and merchandising." However, Mr. Duskin
is an activist hedge fund investor who has NO retail operating
experience or understanding of the off-price or urban fashion business,
and Mr. Metcalf has limited executive management experience and NO
experience focused on the urban fashion business.
We strongly believe that neither Mr. Duskin nor Mr. Metcalf would
provide skills additive to our highly qualified and diverse Board.
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 April 6, 2017 are general retail concepts that
show Macellum and Mr. Duskin's lack of understanding of our customers
and our business.
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 Citi Trends consider on a daily basis as they try
to improve their operations. Macellum suggests actions that could apply
to just about any apparel retailer, which indicates that it and its
nominees do not have a true understanding of our business. Additionally,
all of Macellum's operational and merchandising suggestions have
previously been evaluated by your management and Board and certain of
these suggestions have already been implemented, such as establishing a
repurchase program and improving in-store presentations, or are in the
process of implementing, such as improving planning and allocation
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 R. Edward 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 candidates.
We believe Citi Trends stockholders can protect the value of their
investment by voting "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.
On behalf of the Board, thank you for your continued support.
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/20170411005533/en/
Phil Denning, 646-277-1258
Bruce Goldfarb, Chuck Garske and Teresa Huang, 212-297-0720
Source: Citi Trends, Inc.
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