Activist investors ratcheted up the pressure on Dillard’s Inc. on Monday, invoking Delaware state law to try to force the retailer to detail, among other records, board deliberations on compensation and perks for top executives.
The latest salvo in the fight to get the Dillard family to loosen its grip on control of the regional department store chain revisits a strategy the investors, Barington Capital Group and Clinton Group, first employed in March. That initial effort to crack open Dillard’s books was dropped after the company cut a deal to rejigger its board.
“The purpose of this demand is to enable Barington and Clinton to investigate and communicate with the company’s stockholders regarding matters relating to their mutual interests,” said James A. Mitarotonda, chief executive officer of Barington, and George Hall, ceo of Clinton, in a letter to the company. The letter was dated Monday and filed with the Securities and Exchange Commission.
Investors reacted positively to the news and pushed shares of the firm up 10.1 percent to $4.47. Still, the stock is down 80.7 percent from its 52-week high.
All retailers have been hurt by the collapse in consumer spending this fall, but Dillard’s has been hit especially hard, registering losses of $56 million for the quarter ended Nov. 1.
Specifically, the investors are looking for information on the board’s decision to not form a corporate governance committee; consideration of any service performed by CDI Contractors Inc., Bragg’s Electric Construction Co., or any other construction firm affiliated with the company, and compensation paid to the company’s top executives.
They are also after information on anything the company might have bought that was used by executives, including residences, aircraft, watercraft, tickets to sports events and country club memberships. They’re seeking travel logs and other documentation on the company’s corporate aircraft.
The letter requests access to records concerning the company’s retirement trust, which ranks Dillard’s largest shareholder.
The investors gave Dillard’s until Dec. 16 to make the information available under section 220 of Delaware General Corporation Law. Barington and Clinton lead a group of investors that together own 3.5 million shares of the company’s common stock, or almost 5 percent of the shares outstanding.
This fall, Barington and Clinton called for the ouster of ceo William Dillard 2nd and sought to have top executives sell their Class B stock back to the firm. The Dillard family controls the company by virtue of its Class B shares, which choose who will fill eight of the firm’s 12 board seats.
Ed Henderson, vice president and senior analyst at Moody’s Investors Service, said Dillard’s has taken some of the steps suggested by the activists, such as cutting capital expenditures, but that removing management could be harder to pull off.
“If you look at [the company’s] performance, you can see it’s pretty spotty,” Henderson said. “They tried to go a little bit more upscale in their offering, getting designer names, and I just don’t know as though that’s worked that well. It’s not showing up in their numbers, that’s for sure.”