Prince Charming these investors are not, but en garde, a proxy fight has begun.
A group of investors in Charming Shoppes Inc. has nominated three people for election to the board of the Bensalem-based apparel retailer this spring. In response, Charming Shoppes issued a statement saying its current board will not be distracted by the "threat of a proxy contest from a dissident shareholder group."
And dissidents they are, led by Crescendo Partners L.P., a New York investment firm headed by Eric Rosenfeld. Described by Barron's as an activist hedge fund, Crescendo began buying Charming Shoppes shares in early December. Together with some other investors, the group now controls 9,276,805 shares, or about 8 percent of the shares outstanding.
Crescendo agitated the board of Topps Co., the baseball card maker last spring, when it was in a deal to be acquired by private-equity funds. And Crescendo is currently pressuring O'Charley's Inc., a restaurant chain, by nominating four people for election to its board.
On Monday, the group, calling itself the Charming Shoppes Full Value Committee (rolls right off the tongue), notified the company it was nominating:
* Michael Appel, a managing director of Quest Turnaround Advisors
* Arnaud Ajdler, a managing director of Crescendo Partners II L.P.
* Robert Frankfurt, president of Myca Partners.
Then today, the committee sent a letter to the board blistering its current strategy, how it allocates capital and its low stock price. The dissidents say they would encourage exploring the sale of real estate, credit card operations and Charming's catalog business; slow its store expansion; cut overhead; and buy back shares.
To make their case, the investors say Charming's stock price is 6 percent lower than it was more than 12 years ago when Dorrit J. Bern became CEO. Over the same period, the S&P 500 index was up 154 percent, they say.
Given that retail stocks in general have been beaten up over the last year, it was only a matter of time that someone might rattle Charming's cage. Last Thursday, Charming updated its earnings outlook and it wasn't pretty. Net sales for the nine weeks ended Jan. 5 were down 5 percent.
"Throughout the holiday season, we continued to be challenged by decreases in traffic levels to the stores, compounded by lackluster consumer spending," Bern said then.
But if Crescendo, which has invested more than $40 million in Charming, hoped to get a bump in the stock price on its announcement today, it had to be disappointed. Charming shares closed at $4.44, up 9 cents. Maybe that counts as high-flying on a down day on Wall Street.
