Pressed, Dillard’s engages PR firm
Posted on Thursday, March 20, 2008
URL: http://www.nwanews.com/adg/Business/220299/
A proxy challenge initiated Wednesday by a New Yorkbased activist investor prompted Dillard’s Inc. — known for its reluctance in communicating with the press, analysts and even some investors — to hire a public relations firm.
“Dillard’s remains committed to addressing the challenges of the current retail environment, improving its operational performance and creating sustainable long-term value for all shareholders,” Dillard’s said in response to the challenge, in a release issued by international media-relations firm the Brunswick Group.
The activist group, Barington Capital Group L. P., wants shareholders to elect its four nominees to Dillard’s board of directors in anticipation of the company’s annual shareholders meeting scheduled for May 17.
While the Dillard family still controls election of eight of the 12 directors through its control of Class B shares, having four directors would greatly increase Barington’s influence over the company. Barington and affiliates now own 5. 6 percent of Dillard’s outstanding Class A stock.
Brunswick, Dillard’s public relations firm in New York, is no stranger to handling proxy fights — including those at Arkansas companies.
Little Rock-based Acxiom Corp., a data management company, in 2005 hired Brunswick to help defend itself in a proxy fight from hedge fund ValueAct Capital Partners.
Despite referring questions to Brunswick, Dillard’s on Wednesday wouldn’t address most questions, such as what the company thinks of Barington’s suggestion of monetizing real estate, such as selling and leasing back its stores.
Steve Lipin of Brunswick declined to expand on the press release. On the “broader points, I think we’ll let the release for now kind of speak for itself,” he said.
When asked about the quality of Barington’s four nominees, he said, “I’d respectfully decline to comment on that at this point. The company has put it in front of the nominating committee.”
Barington described the nominees as: James A. Mitarotonda, Barington’s chief executive, who is a director of companies such as The Pep Boys—Manny, Moe & Jack and Griffon Corp. Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware since 2000. Elson also is a board member at AutoZone Inc. and Health-South Corp.
Nick White, a former Wal-Mart executive and a Pep Boys director. Eric S. Salus, who from 1997 to 2005 served in senior executive positions at Federated Department Stores, including president of Macy’s Home Store and president of Bon Macy’s, a department store with 52 stores in five states.
Barington has been hounding Dillard’s since mid-2007, issuing letters demanding changes such as better merchandising.
“The Barington Group believes that the company’s vast value potential is not being realized and lacks confidence in the ability of Dillard’s current board, which is composed of directors with an average tenure of almost 20 years, to improve shareholder value,” a release from Barington said Wednesday.
In the past three years, Dillard’s countered in its releases that the company has worked to improve operations and shareholder value by adding trendier and more upscale items, improving its exclusive merchandise, and using information technology for better inventory management.
The company said in the past fiscal year that it has returned “more than $ 124 million to shareholders through dividends and share repurchases.”
Yet its stock price has fallen by 54 percent since June 30 through the close of the market Tuesday, Barington noted, adding that growth of sales at Dillard’s stores open at least a year trails its peers.
Dillard’s has been given “the third worst governance profile of all the companies in the Standard & Poor’s 500 Index, as measured by Institutional Shareholder Services,” Barington said.
Shares of Dillard’s on Wednesday closed at $ 17. 05 on the New York Stock Exchange, up 44 cents, or 2. 65 percent.