Activist Barington Capital Drops Nominees for Chico's Board

Jul 15 2016 | 11:13pm ET

James Mitarotonda’s activist hedge fund Barington Capital Group has abandoned plans to nominate a slate of directors for election to the board of women's apparel retailer Chico's FAS after two proxy advisers announced support for the company's nominees.

Barington owns 1.6% of Chico's shares, according to The Wall Street Journal. The fund stated in a news release in late May that the company was “significantly undervalued and could more than double its earnings per share if more effectively managed.” Around the same time, Barington nominated two directors to sit on Chico’s nine-person board – former Macy’s executive Janet Grove and Mitarotonda’s himself.

Mitarotonda started his career at Bloomingdale’s and has a long history of investing in the retail sector, often with board representation.

However, the investment manager agreed to drop its bid after Institutional Shareholder Services and Glass Lewis, two proxy advisory firms, supported the company’s nominees and said new CEO Shelley Broader should be given time to perform.

Like many activists, Barington credits its pressure for the progress already seen in Chico’s cost structure and operations, something which the company denies. In declaring a victory of sorts, the hedge fund said it was “committed” to its investment in Chicos, expected the best interests of shareholders to be upheld and would be monitoring the company’s progress. 

New York-based Barington was co-founded in 1991 by Mitarotonda. The fund has invested in a wide range of retail and consumer-focused companies, including Dillard's, The Children's Place, Nautica, Avon Products, Lone Star Steakhouse, Darden Restaurants and Harry Winston, among others.

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