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 Macellum’s Nominees
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
environment.
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 experience
whatsoever.
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 (877) 566-1922.
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. CTRN-G
Forward-Looking
Statements
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/
Media:ICRPhil Denning,
646-277-1258phil.denning@icrinc.comorInvestors:Okapi
PartnersBruce Goldfarb, Chuck Garske and Teresa
Huang212-297-0720
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