Activist investor Macellum Capital Management stepped up its attack against the board of Citi Trends Inc. and clarified past discussions with the company.Last week, the fund group sent a letter to the retailer’s board of directors stating that it had nominated four director candidates for election at the firm’s 2017 annual meeting of shareholders on May 24. The letter spoke about Macellum’s concern over the retailer’s “prolonged” underperformance, board oversight and corporate governance issues.One of the nominees was Jonathan Duskin, Macellum’s chief executive officer. The other three have held various senior level positions at different retail chains: Dyan Jozwick, Lana Cain Krauter and Paul Metcalf.Citi Trends last week said its had discussions with Duskin multiple times regarding the addition of independent directors, and that the company’s board had determined that a change “as Mr. Duskin had proposed was not in the best interest of Citi Trends and its stockholders….” Further, the retailer said it proposed adding one new independent director not connected with Macellum and who also would be mutually agreed upon by the two, but that the “offer was rejected,” as were other proposed suggestions by Citi Trends.In trying to set the record straight, Macellum’s stance was that the retailer would only “consider” the addition of up to two new independent candidates. Further, it said the retailer’s board was unwilling to consider any issue other than an expansion of the board. The activist investor on Wednesday also disclosed that the retailer “demanded that Macellum agree to a non-market, two-year standstill.” Macellum said it was willing to agree, but only on certain terms and that the parties couldn’t reach an agreement on what metrics would govern the standstill.Shares of Citi Trends last week were trading in the $17.11 range when Macellum sent the letter to the retailer’s board. Shares of Citi Trends closed on Tuesday at $18.64, higher than a week ago and likely boosted by the firm’s fourth-quarter results that were posted on Friday.The company said net income for the quarter ended Jan. 28 spiked 59.5 percent to $5.6 million, or 38 cents a diluted share, on a net sales gain of 5.4 percent to $185.5 million. Comparable-store sales for the quarter rose 3.4 percent.Bruce D. Smith, chief operating officer and chief financial officer, on a conference call to Wall Street analysts on Friday, touted how apparel sales improved in the quarter, with men’s up 6 percent after declining 7 percent in the year-ago quarter and women’s gaining 3 percent after an 8 percent decline a year ago.Jason T. Mazzola, the company’s president and ceo, said comp sales to date were down 7 percent, but attributed that to a delay in the timing of tax refunds.In Macellum’s statement on Wednesday, it took issue with the quarter-to-date comps decline, noting that inventory levels that were down 1.7 percent heading into the first quarter might mean not enough spring inventory for consumers when they get their tax refunds. The activist also said lower tax rate and a one-time insurance settlement helped the fourth quarter, not an improvement in operations. It also noted that the women’s apparel performance in the fourth quarter was lackluster, given that since “2010, total ladies same-store sales have declined an estimated 37 percent.”The retailer’s cfo did not return a call for comment.Based in Savannah, Ga., the off-price retailer sells urban fashion apparel and accessories for men, women and children, as well as decorative home products, beauty and toys. It operates 526 stores across 31 states.The company opened its first store in 1958 and became a publicly traded firm in 2005.
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