NEW YORK, May 15, 2017 /PRNewswire/ -- Macellum SPV
III, LP, Macellum Advisors GP, LLC, and certain of their affiliates
(collectively, "Macellum"), a large stockholder of Citi Trends,
Inc. (NASDAQ: CTRN) (the "Company" or "Citi Trends") that has
nominated two highly qualified candidates for election at the
Company's upcoming annual meeting of stockholders, announced today
that Institutional Shareholder Services ("ISS"), the leading
independent proxy voting advisory firm, has recommended that
stockholders vote on Macellum's WHITE proxy card FOR the
election of Macellum nominee Jonathan
Duskin at the upcoming annual meeting of
stockholders.
Jonathan Duskin, the CEO of
Macellum, responded to the ISS report, stating, "We are gratified
that ISS recognized the need for direct stockholder representation
on Citi Trends' Board. We believe the current Board, under
the helm of Executive Chairman Ed
Anderson, has presided over a period of significant
destruction of stockholder value. The Board must be held
accountable for the material deterioration of Citi Trends' share
price and operating performance and its disruptive CEO
turnover. We are hopeful that after reviewing the ISS report,
stockholders will agree with us that the Board's assertions that
their strategy is working and their most recent claim that they
began a purported company-saving "strategic pivot" in 2012 under
Chairman Anderson simply have no merit."
Mr. Duskin also commented on ISS' failure to recommend the
election of Macellum nominee Paul
Metcalf, stating, "While we are pleased with ISS' vote of
confidence in me and desire for change, we believe it is critical
for stockholders to vote for the election of both myself and
Paul Metcalf to the Board at the
annual meeting. We believe the election of both of us and the
removal of Chairman Anderson represents the best means for
significant value creation at the Company. Unless Chairman
Anderson is removed, we are concerned that the current Board may
not act independently to ensure the best interests of all
stockholders are fulfilled. We are also extremely concerned
that high quality, prospective CEO candidates are reluctant to
consider the opportunity to join the Company given former CEO
Jason Mazzola's departure for a
substantially lesser role. Our biggest fear is that the Board
will promote current CFO Bruce
Smith, who has no merchandising experience, to the role of
permanent CEO. Nevertheless, we believe the recommendation
from ISS validates our strong belief that change is required now to
deliver much needed accountability and fresh perspective to the
boardroom. To that end, Mr. Metcalf has over 30 years of
operating and merchandising experience, including significant
operational turnaround expertise in off-price retail and would be
significantly valuable in recruiting and vetting potential
candidates. We welcome the ISS endorsement and urge our
fellow Citi Trends stockholders to vote their WHITE proxy
today to elect both Macellum nominees."
In recommending that Citi Trends stockholders elect Macellum
nominee Jonathan Duskin, ISS
stated1:
"As a direct and significant shareholder, dissident nominee
Jonathan Duskin is positioned to
provide the additional perspective of a significant shareholder as
the board oversees the critical tasks outlined above."
While Citi Trends has blamed its
poor operating results on the declining demand for urban brands,
ISS concurred with Macellum that these results were
self-inflicted:
"However, by management's own account, these results are also
due to successive missteps in merchandising, namely in identifying
and procuring compelling, on-trend merchandise that would drive
sales in Citi Trends' target market. Whether these
merchandising missteps were due to missing trends in-season, or
attributable to being locked into stale inventory from pre-ordering
as a cost-control strategy, they resulted in the same
effect."
"Thus, it appears the issue was not that the target market
was not buying apparel in 2011 and 2012; it's that the target
market was not buying Citi Trends' apparel in 2011 and 2012, and
instead chose to spend those dollars elsewhere."
"Brands disappearing in rapid succession would certainly be
challenging to a retailer that specializes in selling those brands.
However, this occurrence has enough precedent in the urban
branded space to perhaps be considered a cyclicality . . . It has
also previously been the case that the target market has pivoted
toward adapting mainstream brands, for instance: Polo, Guess,
Nautica, Girbaud, and Tommy
Hilfiger, to name a few. Why the board was not able to
recognize one iteration of said cyclicality early on is an open
question."
"While the exact degree to which off-price retail is truly
comparable to the company is debatable, the company's series of
damaging missteps in merchandising—discernable from management's
own account during quarterly updates as well as from demographic
and company data—is not."
ISS was particularly critical of Citi Trends' lack of succession
planning for the CEO position:
"The CEO role has changed hands four times within the last
eight years . . . In the case of the Mazzola departure, the
decision to call Anderson out of retirement for a second time in
eight years while also tasking Smith (who was already serving as
COO, CFO, and corporate secretary) with the role of CEO is a
conspicuous indication of a lack of forward planning."
ISS echoed Macellum's concerns regarding Citi Trends' uncertain
future strategy and business direction, which led to ISS'
conclusion that change on the Board is warranted (and which is why
we believe it is so important for both Jonathan Duskin and Paul
Metcalf to be elected to the Board):
"However, the company's messaging regarding its business
strategy going forward remains muddled, and many investors remain
unclear as to whether the company's future direction will bend
towards off-price retail or economy-priced, private label fashion.
With this in mind, it is clear that the board can benefit
from additional perspectives, most critically perspectives relating
to the board's immediate task of finding a permanent CEO. On
balance, the dissident has made a compelling case that some level
of change at the board level is warranted."
In conclusion, ISS stated:
"As a direct and significant shareholder, dissident nominee
Jonathan Duskin is positioned to
provide the additional perspective of a significant shareholder as
the board oversees the critical tasks outlined above."
ISS HAS RECOMMENDED CITI TRENDS STOCKHOLDERS VOTE THE WHITE
PROXY CARD
VOTE THE WHITE PROXY CARD TODAY TO ELECT BOTH OF OUR
HIGHLY-QUALIFIED NOMINEES — JONATHAN DUSKIN AND PAUL METCALF — TO
THE BOARD AT THE COMPANY'S UPCOMING ANNUAL MEETING
If you have already voted Citi Trends' blue proxy card, a later
dated WHITE proxy card will revoke your previously cast
vote.
Investor Contact:
Jonathan
Duskin
Macellum Capital Management, LLC
(212)-956-3008
Jduskin@macellumcap.com
John Ferguson
Saratoga Proxy Consulting LLC
(212) 257-1311 or (888) 368-0379
Info@saratogaproxy.com
1 Permission to quote from the ISS report in this
press release was neither sought nor obtained.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/iss-recommends-citi-trends-stockholders-vote-macellums-white-proxy-card-300457241.html
SOURCE Macellum Capital Management, LLC