The Children’s Place has a new play in its battle with activist shareholders Barington Capital Group and Macellum Advisors: going on the offensive in the proxy fight.
In several moves that could be seen as drumming up support for its slate of board nominees at the upcoming annual meeting of shareholders on May 22, the company preannounced first-quarter results, disclosed projected fiscal 2015 diluted earnings per share and continued with its quarterly dividend, the next one payable on July 9.
The moves are what could be the first in a series of actions leading up to the annual shareholders’ meeting, and are believed to be part of a game plan structured by financial adviser Goldman Sachs and legal counsel Paul, Weiss, Rifkind, Wharton & Garrison. The Wall Street behemoth was hired last month specifically to advise the children’s retailer in the proxy battle with the activists.
For the first quarter ended May 2, The Children’s Place said it expects first-quarter adjusted EPS in the range of 81 cent to 83 cents, compared with a guidance range of 60 cents to 65 cents. In comparison, adjusted EPS in the first quarter of 2014 was 68 cents.
Jane Elfers, president and chief executive officer, said, “Our customers responded very positively to our spring product offering. Our business picked up meaningfully in the second half of the quarter, driving positive comparable retail sales and a robust gross margin.”
Elfers also noted that inventories are in excellent shape, down 7 percent at the quarter’s end versus what it was a year ago. “We successfully navigated the recent yearlong labor disruption at the West Coast ports without incurring any additional costs and ensuring 100 percent on-time delivery of merchandise,” she added.
The company also emphasized that comparable-store sales rose 0.7 percent in the quarter, representing the fourth consecutive quarter of positive comps and noted that it “further demonstrates the continuing momentum in our business.” It also said that total sales are expected at $405 million, with adjusted gross margin forecast to rise by 130 to 150 basis points — compared with the initial guidance range of down 20 to up 10 basis points.
The company guided diluted EPS for fiscal 2015 to a $3.30 to $3.45 range, which includes 15 cents in negative impact from foreign exchange. Adjusted diluted EPS for fiscal 2014 was $3.05.
Separately the company said it has “increased the pace of its share repurchase program in the first quarter, returning $43 million to shareholders through the repurchase of 647,700 shares and its quarterly dividend payment. The company has said it has returned more than $500 million to shareholders through share repurchases — which began in 2009 — and dividends. The company has $100 million remaining on its January 2015 share buyback authorization.
Elfers concluded, “Our ongoing business transformation is generating strong momentum across the board, and we expect to continue to drive substantial, sustainable improvements in 2015 and over the long term.”
The proxy battle between the two began in March when the activists sent a letter to the retailer’s board agitating for change. About a month later, the retailer responded and said it was rejecting the proposed nominees by the activists. Since then, each side has filed its own proxy statements urging shareholders to vote a particular slate, as well as corresponding investor presentations highlighting what’s right or what’s wrong at The Children’s Place.
Shares of The Children’s Place on Wednesday rose 7.8 percent to $67.12.