DAZZLING NEW OUTFIT
Activist shareholders in Dillard’s demanded the ouster of the regional department-store chain’s CEO and his family-led management team, calling their performance “atrocious.”
In a letter to the Arkansas-based retailer’s independent directors, Barington Capital and Clinton Group said Dillard’s management is “overpaid and under-qualified for the positions they hold and can be readily replaced with more talented retailers.”
In addition to CEO Bill Dillard Jr., the accused includes his brother Alex Dillard, the company’s long-time president. Both “must be replaced,” the hedge funds said in a letter made public yesterday.
The harsh rebuke comes despite four new board members who were seated at the company’s annual meeting in May, following months of goading by the same two hedge funds.
“In our opinion, a management team with a comparable record of poor performance at any other company would have been fired long ago,” the letter stated.
Shares of Arkansas-based Dillard’s surged 35 percent – their biggest one-day percentage gain in at least 28 years – as investors cheered the prospect of ousting Bill Dillard, who has presided over 10 straight years of annual declines in comparable sales that have left Dillard’s shares down 90 percent.
Ironically, Bill Dillard profited from the push to oust him, as he along with Alex Dillard and CFO James Freeman bought more than 400,000 shares of Dillard’s last week, filings show.
Dillard’s, which operates about 300 stores across the Southeast and Midwest, has been closing laggard stores to shore up dwindling cash flows.
But a bid this year to sell pricier merchandise to well-heeled shoppers has failed to juice sales. The company’s same-store sales – or sales at stores open at least a year – have declined for six straight quarters.
Dillard’s circumstances are particularly acute because it’s a regional retailer competing with nationwide chains like Macy’s and JC Penney, said Matthew Katz of consulting firm AlixPartners.
A Dillard’s spokeswoman responded that the company’s management is “committed to improving shareholder value,” noting store closures, merchandise upgrades and cost cuts “as we weather the most challenging economic time in modern history.”