Citi Trends Inc. has an activist investor to contend with — Macellum Capital Management.
The activist investor, which sent a letter to the retailer’s board, had nominated four director candidates for election at the firm’s 2017 annual meeting of shareholders on May 24.
The nominees are Jonathan Duskin, Macellum’s chief executive officer; Dyan Jozwick, former president and chief merchandising officer of Kitson; Lana Cain Krauter, former president of apparel at Sears, former chief merchandising officer at Bealls Florida Department Stores and at Goody’s Family Clothing Inc., and former executive vice president at J.C. Penney Co. Inc., and Paul Metcalf, owner of retail consulting firm BEL Retail Advisors, former chief merchandising officer at Burlington Stores Inc. and former chief merchandising officer at TJX Cos. for women’s apparel and general merchandise manager for men’s apparel. Further, Duskin currently serves on the board of Christopher & Banks. He was previously on the boards of The Wet Seal Inc. and Whitehall Jewelers Inc.
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Macellum is concerned with the retailer’s “prolonged” underperformance, board oversight and corporate governance issues. It said it believes that with the right board oversight and governance, Citi Trends’ stock price can more than double.
Shares of Citi Trends have been trading in the $17.11 range. The 52-week high is $22.73 and the low at $14.01. 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. The company’s products are sold primarily to African-Americans and the retailer operates 526 stores across 31 states. The company opened its first store in 1958 and became a publicly traded firm May 18, 2005, selling 2.7 million shares of common stock at $14 a share. According to an regulatory filing with the Securities and Exchange Commission, the company received $41.2 million in net proceeds from its initial public offering. The company used $1.5 million from the net proceeds to repay in full the mortgage on its Fahm Street headquarters and distribution center.
In Macellum’s letter to the Citi Trends board, it said it beneficially owns 3.9 percent of the outstanding common stock of the retailer. The activist investor also said in the letter, “At a time when off-price retailers have taken material share from the rest of the apparel industry, Citi Trends has struggled to deliver results and value to stockholders.”
Macellum’s past investments include Collective Brands, G-III Apparel Group, Hot Topic and Charming Shoppes. More recent activist plays include The Children’s Place and Christopher & Banks.
Citi Trends acknowledged receipt of Macellum’s letter, noting that it met with Duskin multiple times over the last few years. The retailer also said Macellum approached it in February regarding the addition of two independent directors to the board, and that the board determined that “changing the board as Mr. Duskin had proposed was not in the best interest of Citi Trends and its stockholders….”
The retailer further said that it spoke with Duskin and said it was willing to consider adding one new independent director not affiliated with Macellum who would be mutually agreed upon by Duskin and the company, but that the offer was rejected. The retailer also said there were subsequent discussions in connection with settlement of the board nominee matter, but any suggestion from Citi Trends were also rejected by Macellum.