Citi Trends Issues Open Letter to Shareholders
Company Notes Progress on Strategic Plan and Driving Shareholder
Value; Highlights Commitment to
Macellum is Not Aligned with Other Shareholders and is Attempting to Gain Control of the Board without Paying a Premium
Macellum Has Rejected Every Attempt the Board Has Made to Reach a Constructive Outcome and Avoid a Prolonged Proxy Contest
Mr. Duskin Does Not Bring Retail Operating Experience to
The Board's recommendation regarding director nominees will be made in
the Company's definitive proxy materials, which will be filed with the
Following Macellum’s recent nomination of Board candidates, we are taking this opportunity to present the facts regarding Citi Trends’ plan to drive value, describe the Board’s attempts to reach a constructive resolution and avoid a prolonged proxy contest with Macellum, and correct the misinformation Macellum has put into the market.
CITI TRENDS IS MAKING PROGRESS ON ITS STRATEGIC PLAN, AND WE ARE DELIVERING RESULTS
During fiscal 2018, we made significant progress on a number of strategic initiatives, including completing the roll-out of our store-level merchandise planning system, successfully opening 19 new stores, relocating or expanding eight stores and closing six stores. Over the last 10 years, we have completed 100 opportunistic store relocations and expansions, and we will continue to evaluate and optimize our store footprint.
We have many other exciting projects and initiatives underway that are expected to unlock value in 2019 and beyond. This includes our efforts to better allocate merchandise on a store-by-store basis, our initiatives to reduce freight costs and other expenses, our enhanced warehouse packing system that will drive efficiencies, and the implementation of a markdown optimization system.
Importantly, we are delivering results. In 2018, the Company reported comparable store sales increases in every quarter and delivered a full year comparable store sales increase of 1.6%. This increase was on top of a 4.5% increase the previous year. Additionally, the Company tightly managed its expenses, leading to an increase in adjusted earnings per diluted share of 59% in 2018 following a 13.2% increase in 2017.
We also continued to execute our capital return program in 2018 by
We remain focused on achieving our goal of reaching
WE ARE EXECUTING ON OUR MISSION
Our stores are typically located in neighborhood shopping centers that
are convenient to low and moderate income customers. As of
We are also proud of the jobs we provide to our diverse group of valued associates who are often from the same communities we serve. We are committed to treating all of our associates with dignity and respect, providing them with valuable training and promoting from within the Company so they have opportunities to develop their careers.
MACELLUM HAS A RELATIVELY SMALL OWNERSHIP STAKE, IS NOT ALIGNED WITH OTHER SHAREHOLDERS AND IS ATTEMPTING TO GAIN BOARD CONTROL WITHOUT PAYING A PREMIUM
Despite the Company’s positive momentum, Macellum has provided its
notice of intent to nominate at least three individuals to stand for
election at the Company’s 2019 Annual Meeting. This effort is being led
by Macellum’s founder,
We believe Macellum’s actions are a clear attempt to take control of
Citi Trends’ Board, despite only holding approximately 3.8% of the
outstanding shares of the Company. Consistent with his tactics in his
previous proxy fight against
It is worth noting that Macellum has sold approximately 38,000 shares
MACELLUM HAS REJECTED EVERY OVERTURE FOR A CONSTRUCTIVE OUTCOME
In order to preclude Mr. Duskin from waging yet another costly and distracting proxy contest, the Citi Trends Board has held numerous discussions over the last few weeks with Mr. Duskin regarding board composition and the Board’s commitment to regular refreshment.
The Board has attempted to reach a resolution that benefits all
shareholders, but Mr. Duskin has refused our offers. In fact, the
Board had agreed to consider nominating one of Macellum’s nominees,
As part of the Board’s annual review process, Mr. Duskin indicated that he believes the Board is meeting or exceeding expectations. It makes it difficult to trust Mr. Duskin when he says one thing but does another. We believe his nomination of his own candidates illustrates that his goal is to gain control of the Board, rather than enhance the quality of the Citi Trends Board to benefit all shareholders.
MR. DUSKIN DOES NOT BRING ANY RETAIL OPERATING EXPERIENCE TO CITI TRENDS AND HAS VOTED FOR ALL INITIATIVES BROUGHT BEFORE THE BOARD
Macellum claims that it is “deeply concerned by the Board's lack of
urgency in addressing many of the issues facing the Company …
notwithstanding Mr. Duskin's considerable efforts to drive change for
the past two years.”2In reality, Mr. Duskin does not
bring any retail operating experience to
Further, since joining the Citi Trends Board, Mr. Duskin has also voted for every initiative brought before the Board. Mr. Duskin has served as a member of every standing committee of the Board, and currently serves as a member of the Audit Committee and Compensation Committee, which has provided him the opportunity to participate in all board decisions.
During his tenure, the Board has found Mr. Duskin’s short-term focus to have inhibited and slowed the Board’s ability to have productive discussions regarding initiatives to drive long-term value for the Company and our shareholders.
MR. DUSKIN’S TRACK RECORD CONTRADICTS HIS CLAIM THAT HE CAN DRIVE MEANINGFUL, POSITIVE CHANGE
Mr. Duskin has a track record of being involved in companies that have declared bankruptcy, liquidated or experienced significant declines in share price.
Mr. Duskin’s board experience includes serving on the boards of
Mr. Duskin’s poor track record is also evident at
CITI TRENDS HAS A BOARD WITH OPERATIONAL AND STRATEGIC EXPERTISE THAT IS DRIVING VALUE FOR SHAREHOLDERS; WE BELIEVE GIVING CONTROL OF OUR BOARD TO MACELLUM WILL HINDER OUR MOMENTUM
The Citi Trends Board, excluding Mr. Duskin, comprises six highly qualified directors, five of whom are independent, and all of whom are actively engaged in the execution of the Company’s plan. Four new directors, two of whom are women, were added to the Board in the past four years and the Board has reduced the average tenure of its independent board members to approximately six and a half years. These directors, other than Mr. Duskin, have a wide range of relevant and critical experiences, including in the areas of finance, merchandising, retail operations, distribution, marketing and advertising.
The Board and management team are executing our value-creation plan and making necessary adjustments to our merchandise and operations to deliver stronger results and enhanced value for our shareholders in the short- and long-term. The Citi Trends Board believes letting a 3.8% shareholder, who we believe solely has short-term interests, control 57% of the Board would be destructive to the Company’s future.
We appreciate the interest and support of all
The Citi Trends Board of Directors
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 repurchase authorizations, 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
1 Macellum has nominated more individuals than are up for
election at the 2019 Annual Meeting and has indicated that it will
withdraw one nominee in the event there are not additional vacancies
beyond the three Class II directors whose terms serving on the Board
expire at the 2019 Annual Meeting.
3 Comparable sales decreased 2.5% in fiscal year 2017 and decreased 2.6% in fiscal year 2018; Net loss totaled
4 As of
President and Chief Executive Officer
Andy Brimmer / Greg Klassen / Jill Kary
Joele Frank, Wilkinson Brimmer Katcher
Bruce Goldfarb / Chuck Garske / Teresa Huang
Okapi Partners LLC