An activist shareholder who has been pushing for change at struggling Christopher & Banks Corp. of Plymouth is now elevating his campaign to an all-out proxy battle.
Jonathan Duskin of Macellum Advisors in New York wrote a letter to the women’s specialty retailer on Thursday saying he will vote against the re-election of every board member at its annual shareholders meeting next week. He added that company should explore a possible sale in light of its inability to turn around declining sales, echoing the same suggestion he made a couple of months earlier.
Christopher & Banks was in the midst of a turnaround until last fall, with its sales stumbling in the past three quarters. Company executives have blamed the sales drops on declining mall traffic, the residual effects of the West Coast port delays, and unseasonably cold weather in some regions of the country.
Earlier this month, Christopher & Banks reported an 11 percent drop in sales and a $1.4 million loss in the first quarter. Its stock price has tumbled from a several-year high of $11.22 in September to $4.17 at the close of trading on Thursday.
“As we feared, these results can no longer be blamed on external variables like the West Coast port strike, and the company must look inward for solutions,” wrote Duskin, who is one of its largest shareholders with 5 percent of its stock. “It appears to us that many of the changes made to the merchandise strategy are failing to resonate with customers, who are voicing their negative reaction through decreased purchases.”
The company declined to comment on Duskin’s letter.
The retailer has struggled since the recession with executive turnover. But it began to report profits under the leadership of LuAnn Via, who became chief executive in November 2012. One of her core strategies has been consolidating stores into a format that includes its C.J. Banks plus sizes as well as missy sizes and petites. She has also refocused the retailer on basics such as pants and denim.
In another challenge for the company, proxy adviser Glass Lewis is recommending that shareholders withhold their votes to re-elect four Christopher & Banks board members who served on the audit committee in the last year. It pointed to a disclosure in the company’s annual report that it had discovered a material weakness in internal controls over financial reporting that led it to use inaccurate information that was corrected in the fourth quarter. The company has said it is taking steps to rectify that situation.
“We believe this material weakness may signal weak internal accounting expertise and poor internal controls at the company,” Glass Lewis wrote in a recent report, adding that the members of the audit committee have not satisfactorily performed their duties.
Monica Dahl, Christopher & Banks’ senior vice president of marketing, noted that another influential proxy adviser, Institutional Shareholder Services, has recommended that all board members be re-elected. That adviser said the audit committee may not have had enough time to fix those financial reporting issues.
Christopher & Banks’ shareholders meeting will be held next Thursday in Minneapolis.
Duskin, the activist shareholder, initially sent a letter to the company in April saying he was concerned about its oversight and suggesting the board was “heavily skewed” to Minneapolis-area business people who he said don’t have enough background in specialty apparel. He has been pushing for the company to add former interim CEO Joel Waller to the board.
In his most recent letter, Duskin said he has had several discussions with the company’s management in the last two weeks and again had his request rebuffed for Waller to join the board.
Earlier this year, Christopher & Banks added Edwin Holman, a former Macy’s executive, to be its ninth board member.