Posted on Tue, Apr. 8, 2008
The activist investors trying to gain influence over the Lane Bryant and Fashion Bug chains intensified their attacks yesterday with a sharp-tongued letter urging shareholders to make changes at the top.
The firms, who are waging a proxy fight since amassing an 8.2 percent stake in Charming Shoppes Inc., of Bensalem, criticized the board and senior management for overseeing "a dramatic and precipitous decline" in stock performance and profits.
The New York investment firms urged shareholders to replace board chairman and chief executive officer Dorrit J. Bern and two other incumbents with their own slate of nominees at next month's annual shareholder meeting.
"The reality is that the current Board has presided over disastrous operating performance, poor capital allocation decisions and misguided business strategies," said the letter from the Charming Shoppes Full Value Committee, whose investors have snapped up company stock as its value has plunged over the last year.
"We cannot sit idly by and accept the status quo," the committee wrote.
Just last week, Charming Shoppes distributed letters asking shareholders to reelect the three incumbents whose board terms expire. One is Bern, chief executive for 12 years now.
In definitive proxy materials, the retailer of plus-size and other women's apparel said that shareholders had "benefited immensely" from the board's leadership and that the activists had a self-serving agenda that would destabilize the company.
The agitators, Crescendo Partners and Myca Partners, lashed back by saying the company's resistance to its nominees was motivated by self-preservation.
"It seems apparent to us that the only people who have 'benefited immensely' are the senior executives who have been handsomely rewarded despite having implemented a flawed business strategy that has led to substantial underperformance and significant erosion to shareholder value," their letter to shareholders said.
If their nominees were to be elected, the investors said, they would work with the board to explore the sale of "noncore" assets and "re-evaluate senior management's plan."
Charming Shoppes' profits and sales have plummeted over the last year. Shares have lost more than half their value over the last year. They closed yesterday at $4.98, down one cent. The company recently pulled back store-expansion plans and announced layoffs and store closures to stem further losses.
The company also is suing Crescendo and Myca in federal court, claiming the firms violated securities laws in their efforts to nominate board members.
"Their initiation of a disruptive and costly proxy contest in the current retail environment, only serves to interfere with the important progress we are making to enhance the company's prospects and profitability," the company said in a statement yesterday.
Contact staff writer Maria Panaritis at 215-854-2431 or mpanaritis@phillynews.com.
