The Children's Place, Inc. (Nasdaq:PLCE) today announced that its Board
of Directors has sent a letter to shareholders of The Children’s Place
in connection with the Company’s Annual Meeting on May 22, 2015. The
letter outlines why the Board believes shareholders should support the
Company’s experienced and dedicated nominees over those of Macellum SPV
II, L.P. (“Macellum”) and Barington Companies Equity Partners, L.P.
(“Barington”), which together own approximately two percent of the
Company’s shares.
Norman Matthews, Chairman of the Board of The Children’s Place, stated,
“The Board and management team are effecting meaningful, positive change
through the execution of the Company’s multi-year transformation plan,
which is driving tangible results for shareholders, as evidenced by the
excellent first quarter financial results we announced yesterday. We
have achieved four consecutive quarters of positive comparative store
sales, returned $535 million in cash to investors since 2009, and our
stock is currently trading at an eight-year high. We believe we will
unlock substantial additional value through the execution of our plan,
and that it would be detrimental to shareholder value to introduce
uncertainty about the business strategy by adding the dissidents’
nominees to the Board at this critical time.”
Mr. Matthews added, “Our first quarter performance – including expected
adjusted EPS of $0.81 to $0.83 and an expected increase in gross margin
of 130 to 150 basis points compared to last year – is the result of our
transformation strategy coupled with strong execution, and strongly
validates our growth strategy. As the benefits of our transformation
strategy continue, we look forward to driving more outperformance at The
Children’s Place for the benefit of all of our shareholders.”
The text of the letter follows:
May 7, 2015
Dear Shareholders,
The 2015 Annual Meeting of Stockholders of The Children’s Place, Inc.
(“The Children’s Place”) will be held on May 22, 2015. Your vote in
support of the Company’s three nominees is crucial to help ensure that
the value-enhancing transformation currently underway at The Children’s
Place continues without interruption. We urge shareholders to carefully
consider the destabilizing impact that a change in our strategy could
have on the value of your shares of The Children’s Place.
The Company’s nominees for whom we are asking your support are Norman
Matthews (Chairman of the Board), Kenneth Reiss (Chair of the Audit
Committee) and Stanley W. Reynolds (member of the Audit Committee).
As you likely have seen, Macellum SPV II, L.P. (“Macellum”) and
Barington Companies Equity Partners, L.P. (“Barington” and collectively
with Macellum, the “Dissidents”), which together own approximately two
percent of the Company’s shares, have nominated a dissident slate
comprised of two individuals. Based on their lack of direct relevant
experience, the Board has concluded that the Dissidents’ nominees would
not be additive to the Board of a global, omni-channel children’s
specialty apparel retailer. We believe that the Company’s three nominees
and our five other current Directors collectively have the right
combination of expertise, experience and independence to continue the
strong progress at The Children’s Place.
YOUR BOARD AND MANAGEMENT TEAM ARE EFFECTING SWEEPING, POSITIVE
CHANGE THAT IS YIELDING RESULTS AND DRIVING STRONG PERFORMANCE… VOTE
FOR THE COMPANY SLATE TO CONTINUE THAT MOMENTUM
Yesterday we pre-announced what we believe are excellent first quarter
results, continuing the strong momentum we generated in fiscal 2014,
particularly in the fourth quarter. Some
highlights include:
-
Q1 Adjusted EPS expected to be $0.81 to $0.83, Far Exceeding
Guidance and Last Year’s Results
-
Increased Fiscal 2015 Adjusted Guidance to $3.30 to $3.45 per Share
-
Generated Fourth Consecutive Quarter of Positive Comparative Retail
Sales
-
Increased Gross Margin by an expected 130 to 150 Basis Points
-
Returned Another $43M of Capital to Shareholders in Q1
We believe this very strong first quarter performance demonstrates
the power of our transformation strategy, the strength of management’s
execution, and the Board’s keen oversight of the many strategic
initiatives that are driving outperformance at The Children’s Place.
In the first quarter, 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. As a result, we announced that we expect our
first quarter adjusted EPS to be in the range of $0.81 to $0.83, vs. our
guidance range of $0.60 to $0.65, and a substantial increase from our
adjusted EPS of $0.68 in the first quarter of 2014.
Our inventories are in excellent shape – down 7% at quarter-end compared
to last year. And unlike almost all domestic retailers, we successfully
navigated the recent year-long labor disruption at the West Coast ports
without incurring any additional costs and ensuring 100% on-time
delivery of merchandise, experiencing zero disruption to our inventory
flow as a result of the foresight and experience of the logistics team.
Our management team continues to make significant progress on the
systems transformation we have been discussing with you and it is
yielding meaningful results. The initial insights from the
implementation of our assortment planning tool have enabled us to
significantly improve our inventory management capabilities by adding
enhanced data driven analytical rigor to our internal processes. This
has resulted in improved inventory metrics and significantly improved
gross margin in the first quarter. Importantly, our state of the art
inventory allocation and replenishment tool will go live very soon for
the critical Back to School 2015 season. Our digital initiatives
continue to gain traction and are focused on driving improvements in
customer acquisition, retention and engagement.
Comparable store sales increased 0.7% during the first quarter despite
adverse weather in many parts of the country. This
represents The Children’s Place’s fourth consecutive quarter of positive
comps and further demonstrates the continuing momentum in our business.
We now expect adjusted gross margin to increase by 130 to 150 basis
points compared to last year, significantly above the previously
announced guidance range of down 20 to up 10 basis points. These
estimated results reflect merchandise margin leverage and a higher AUR
compared to last year, driven by strong product acceptance and
well-managed inventories. We expect adjusted SG&A to be flat,
deleveraging 20 to 40 basis points compared to last year. This would
result in an expected increase in adjusted operating margin of
approximately 100 to 110 basis points.
Yesterday we also provided guidance for fiscal 2015. We now expect
adjusted net income per diluted share to be in the range of $3.30 to
$3.45, inclusive of a $0.15 negative impact from foreign exchange. This
compares to adjusted net income per diluted share of $3.05 in fiscal
2014. Our guidance assumes an increase in comparable retail sales for
the year of approximately 1%.
Wall Street also has recognized the growing strength of The Children’s
Place. A May 6, 2015 report issued by Topeka Capital Markets stated:
“PLCE's strong 1Q beat is yet more testimony that management is
executing on its strategic initiatives, with benefits coming sooner than
expected. Strong product acceptance coupled with tight inventory
management and with help from new planning tools provided the upside in
1Q, allowing PLCE to overcome less than ideal weather for Spring
selling. Such performance, in our view, deserves kudos, not a wasteful
proxy battle. We reiterate our Buy, raising PT from $68 to $72.”
OUR STRATEGIC TRANSFORMATION OF THE CHILDREN’S PLACE CONTINUES TO
DRIVE ROBUST OPERATIONAL AND FINANCIAL PERFORMANCE
This excellent first quarter performance is the continued result of many
years of hard work effecting a full and badly needed transformation of
The Children’s Place. We are confident that the tough decisions and
strategic investments made by our Board and management team over the
last five years are bearing fruit. When Jane Elfers joined the Company
at the beginning of 2010, we recognized that many aspects of The
Children’s Place were in disarray. The Company lacked effective
leadership, had no growth strategy, and inventory management, financial
systems and supply chain technologies were antiquated or simply did not
exist.
We drew on Jane’s experience and expertise and developed a
transformation plan to drive shareholder value. The Board and
management team have implemented that plan, and it has greatly improved
the Company, as evidenced by our strong momentum and outstanding first
quarter numbers. Our investors have also embraced our strategy and our
stock is currently trading at an eight-year high.
Our plan includes critical investments in four key operational
initiatives: product focus, business transformation through technology,
global growth through alternate channels of distribution, and store
fleet optimization – and our efforts in each of these areas are yielding
positive results.
The Children’s Place has excelled on both a relative and absolute
basis, and in an intensely competitive, highly promotional and
over-stored children’s retail apparel environment. Our operating
margins exceed those of our true peers and our positive comparable
retail sales for a number of consecutive quarters demonstrate that our
strategic plan is working.
At the same time, we generated meaningful free cash flow, and we
deployed our capital thoughtfully. The Children’s Place has returned
$535 million to our shareholders through stock repurchases and dividends
since the Board authorized the capital return program in 2009 and the
payment of dividends starting in 2014. The pace of our share repurchase
program accelerated in the first quarter as we returned approximately
$43 million to shareholders through the repurchase of 647,700 shares and
our quarterly dividend payment. The Board of Directors declared another
quarterly dividend of $0.15 per share, payable on July 9, 2015 to
shareholders of record on June 18, 2015.
These programs reflect our continued confidence in our growth strategy
and our ongoing commitment to return excess capital to shareholders. We
have approximately $100 million remaining under the January 2015 share
buyback authorization, which gives us the flexibility to continue to
return capital to shareholders at a significant rate. Since
2009, we have returned over a half billion dollars to investors through
share repurchases and dividends.
SUBMIT THE WHITE PROXY CARD TODAY AND
KEEP THE RIGHT BOARD IN PLACE
The Company’s multi-year transformation plan is driving tangible
results for shareholders – and we believe we will unlock
substantial additional value through the continued execution of our plan.
We ask that you consider the following:
-
The Children’s Place’s stock is up more than 130% since Jane joined
the Company (based on the closing share price on December 10, 2009,
the day prior to the announcement of her hiring, and the closing share
price on May 6, 2015).
-
Shares of The Children’s Place have out-performed the average price
performance of specialty apparel retailers1 over the last
52 weeks, 44.7% vs. 1.3%, and we are currently trading at an
eight-year high.
-
In 2014, we outperformed our peer group and recorded positive
comparative store sales, including 3.7% for the fourth quarter.
Our transformation plan is delivering on its promise, and the Company’s
momentum is evident in our performance. We urge shareholders to
carefully consider the impact of changing our strategy, which is clearly
working and driving shareholder value.
We strongly believe that The Children’s Place’s three nominees and our
five other current Directors collectively have the right combination of
expertise, experience and independence to continue the strong progress
being made at the Company.
It is important to remember that the Company’s Board has undergone a
dramatic change in recent years. Six of the eight current Board members
were added in the last five years, and two of these new independent
directors joined the Board last year. Except for Jane, all of our
directors are independent. We believe the Board has the appropriate and
effective balance between experienced tenure and fresh perspectives to
guide and oversee the execution of our transformation strategy.
The current Board is well-aligned on the current business strategy
and believes that it would be detrimental to shareholder value to
introduce uncertainty about the business strategy and the Board’s
commitment to continued execution of the transformation plan.
YOUR VOTE IS IMPORTANT – PLEASE SUBMIT THE WHITE
PROXY CARD TODAY
Our upcoming Annual Meeting is an important event in shaping the future
of our Company and its Board of Directors. Your Board unanimously
recommends that you vote for our three highly qualified director
nominees on the WHITE proxy card.
You may vote by telephone, over the internet, or by signing, dating and
returning the enclosed WHITE proxy card in the postage-paid envelope. We
also urge you to discard any proxy card sent to you by Macellum,
Barington or their affiliates. If you have already submitted a proxy
card, you can change your vote by signing, dating and returning a WHITE
proxy card. Only your latest dated proxy card will be counted.
THE CHILDREN’S PLACE BOARD IS COMMITTED TO SERVING YOU, OUR
SHAREHOLDERS
Our Board and management team are very focused on continuing the
successful transformation of The Children’s Place into a leading,
global, omni-channel children’s apparel brand. Shares of The Children’s
Place are currently trading at an eight-year high, and the continuing
execution of our strategic plan has enabled us to outperform our peer
group in an intensely competitive children’s retail apparel environment
and to return over a half billion dollars to shareholders since 2009.
Importantly, we believe there is substantial additional upside.
Our dialogue with you has revealed strong support for our Board,
leadership team and our strategic plan. We very much appreciate the
confidence you have placed in us, and we remain keenly focused on
continuing to deliver substantial shareholder value.
Regards,
Norman Matthews
Chairman of the Board of Directors
The
Children’s Place, Inc.
If you have any questions, please call MacKenzie Partners
at the
phone numbers listed below.
MacKenzie Partners, Inc.
105 Madison Ave.
New York, NY 10016
proxy@mackenziepartners.com
(212) 929-5500 (Call Collect)
Or
TOLL-FREE (800) 322-2885
About The Children's Place, Inc.
The Children's Place is the largest pure-play children's specialty
apparel retailer in North America. The Company designs, contracts to
manufacture, sells and licenses to sell fashionable, high-quality
merchandise at value prices, primarily under the proprietary "The
Children's Place," "Place" and "Baby Place" brand names. As of January
31, 2015, the Company operated 1,097 stores in the United States, Canada
and Puerto Rico, an online store at www.childrensplace.com,
and had 72 international stores open and operated by its franchise
partners.
Forward Looking Statements
This press release may contain certain forward-looking statements
regarding future circumstances. These forward-looking statements are
based upon the Company's current expectations and assumptions and are
subject to various risks and uncertainties that could cause actual
results and performance to differ materially. Some of these risks and
uncertainties are described in the Company's filings with the U.S.
Securities and Exchange Commission (the “SEC”), including in the “Risk
Factors” section of its annual report on Form 10-K for the fiscal year
ended January 31, 2015. Included among the risks and uncertainties that
could cause actual results and performance to differ materially are the
risk that the Company will be unsuccessful in gauging fashion trends and
changing consumer preferences, the risks resulting from the highly
competitive nature of the Company’s business and its dependence on
consumer spending patterns, which may be affected by the weakness in the
economy that continues to affect the Company’s target customer, the risk
that the Company’s strategic initiatives to increase sales and margin
are delayed or do not result in anticipated improvements, the risk that
the cost of raw materials or energy prices will increase beyond current
expectations or that the Company is unable to offset cost increases
through value engineering or price increases, and the uncertainty of
weather patterns. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date they
were made. The Company undertakes no obligation to release publicly any
revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. The inclusion of any statement in
this release does not constitute an admission by the Company or any
other person that the events or circumstances described in such
statement are material.
Important Additional Information
The Company, its directors and certain of its executive officers may be
deemed to be participants in the solicitation of proxies from Company
shareholders in connection with the matters to be considered at the
Company’s 2015 Annual Meeting. The Company has filed a definitive proxy
statement and form of WHITE proxy card with the SEC in connection with
any such solicitation of proxies from Company shareholders. COMPANY
SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY
STATEMENT AND ACCOMPANYING WHITE PROXY CARD AS THEY CONTAIN IMPORTANT
INFORMATION. Information regarding the identity of potential
participants, and their direct or indirect interests, by security
holdings or otherwise, is set forth in the proxy statement and other
materials filed by the Company with the SEC. Shareholders will be able
to obtain any proxy statement, any amendments or supplements to the
proxy statement and other documents filed by the Company with the SEC
for no charge at the SEC’s website at www.sec.gov.
Copies will also be available at no charge at the Company’s website at www.childrensplace.com,
by writing to The Children’s Place, Inc. at 500 Plaza Drive, Secaucus,
NJ 07094, or by calling the Company’s proxy solicitor, MacKenzie
Partners, toll-free at (800) 322-2885.
1 Specialty apparel retailers include: Abercrombie,
Aeropostale, American Eagle, Ann, Ascena, Buckle, Carter's, Chico's and
GAP.
Copyright Business Wire 2015