Perry Ellis International Inc. has a leadership succession plan in place, and new board nominees — all in a nod to better corporate governance.
The moves come at a time when Perry Ellis is headed toward a proxy fight by two activist investors, Legion Partners Holdings LLC and the California State Teacher’s Retirement System, at the company’s annual shareholders’ meeting in July. The activist group has its own board slate in mind – Robert Mettler, Darrell Ross and Joshua Schechter — and two shareholder proposals. The first proposal seeks the separation of the chairman and chief executive officer and the second is for the declassification of the board into a single class.
Perry Ellis, perhaps in a bid to head off the fight, plans to separate the chairman and ceo roles come Jan. 30, with George Feldenkreis relinquishing his ceo post when his employment contract expires. He will stay on as company chairman. His son Oscar, who is president and chief operating officer, will become ceo in February.
According to George Feldenkreis in an interview, “We think we have good governance at Perry Ellis. Right now, different metrics are in fashion for governance. Because we are concentrating on our business, we have not looked at governance. Now that [the issue] has been raised, and because we have been always shareholder friendly, it is time to get up with what is today considered good governance. We have made the changes that are necessary for the health of the company.”
As for his future role, the chairman said he would continue to keep an eye on acquisitions, although right now the focus is more on organic growth. “The last couple of years — 2012 and 2013 — have not been kind to us. Many retailers have been going toward [having their own] private brands, and we lost a lot of our private label business. We are now more focused on our brands, such as Perry Ellis and Original Penguin. We are trying to make our brands bigger. There’s more room to grow.”
He said the international business has been strong in Canada, Mexico and Europe, all of which are regions where there are still opportunities for growth. And “when good opportunities come up [for an acquisition], we will do it,” the chairman said.
As for the chief operating officer position currently held by his son, Feldenkreis said the company will hire a search firm to vet possible candidates. “We have to be fair to everybody, although we will include some insiders as candidates and then let the board decide. Obviously, outside people will have a different view of the company. Sometimes an insider can see the trees and not the forest.”
Feldenkreis is looking forward to spending some more time on his boat, noting that when he does that, “Oscar will need some help. Internally, we were already looking anyway.”
While the planned changes may be a move toward better corporate governance, Feldenkreis expects there will still be a proxy fight: “I think there will be a proxy fight because Legion is a very small fund. It needs a victory to show that it can perform…. I’m not sure that the changes we made will change their mind.”
Oscar Feldenkreis, said, “We have made considerable progress over the past years to drive revenues and improve profitability, and I believe there is more to be accomplished.” He added that going forward, the company will be focused on continuing to meet the changing needs of its consumers and building value for shareholders.
The company has also disclosed its slate of board nominees: Oscar Feldenkreis; Bruce J. Klatsky, former ceo and chairman of Phillips-Van Heusen Corp., now PVH Corp., and Michael W. Rayden, former president and ceo of Tween Brands Inc. and a director of Ascena Retail Group.
Feldenkreis is seeking re-election to the board; Klatsky and Rayden are the nominees to replace the open positions on the board.
Two board members, Joseph P. Lacher and Joe Arriola, will retire after the 2015 annual meeting. Lacher was the lead independent director and has been succeeded, effective immediately, by Jane E. DeFlorio, a director of Perry Ellis since December 2014.