Six directors are on their way out and four new ones will take their place on the board of embattled retailer Christopher & Banks.
The board shake-up — which was announced Thursday after the Plymouth-based company reported another quarterly drop in sales and profits — includes the addition of an activist shareholder who has been agitating for new board members with more retail expertise.
Following the news, Christopher & Banks' shares jumped 41 percent to close Thursday's session at $2.67 a share.
The retailer had been in the midst of a turnaround under LuAnn Via, who became chief executive in November 2012. But its momentum stalled more than a year ago after merchandising misfires and inventory issues, compounded by a tough retail environment for apparel companies.
The changes to the board are part of a "support agreement" reached between Christopher & Banks and New York-based Macellum Capital Management, which owns about 8 percent of the company's shares.
"We appreciate the constructive working relationship we have built with LuAnn and the team at Christopher & Banks over the last year and believe this agreement is a great outcome for all stockholders," Jonathan Duskin, the activist shareholder with Macellum, said in a statement. "Macellum believes that adding multiple independent directors with specialty retail industry experience will help drive growth, enhance profitability and increase stockholder returns."
Duskin and three others will be up for election at the retailer's annual meeting in June. The other proposed additions are Kent Kleeberger, a former executive at Chico's, and Laura Weil, a former executive with New York & Company. The fourth new director, to be picked by Duskin subject to the company's approval, has not yet been selected.
In the process, Christopher & Banks is shrinking the size of its board to seven members from nine. So the new members will constitute a majority.
Remaining on the board are Via, William Sharpe and Lisa Wardell, who will continue to serve as chairwoman.
The six directors exiting the board are Mark Cohn, Edwin Holman, Anne Jones, David Levin, Paul Snyder and Patricia Stensrud.
In their statements on Wednesday, company officials struck a conciliatory tone about the agreement while also noting they will spend about $1.6 million in the first quarter in legal and other fees related to dealing with Duskin. (The company also spent about $1 million last year on this issue.)
"We are really pleased with the outcome and with this agreement we have reached," Via told analysts during a conference call on Thursday. "We, as a company, look forward to working together as we move toward our new growth pattern for the next several years."
Its fourth-quarter results, though, showed that the company still has a lot of work to do. Christopher & Banks' net sales dropped nearly 4 percent to $94.6 million from the same quarter a year ago. It also reported a net loss of $46.6 million, or $1.26 a share, for the quarter ended Jan. 30, compared with a profit a year ago of $32.2 million, or 86 cents a share.
Via blamed some of the results on the unseasonably warm weather, which during the holidays also socked a number of other retailers. But she also acknowledged larger issues hanging over the company that led comparable store sales to drop 8.3 percent in the last fiscal year.
One of the problems, she told analysts, is that some of its customers, who are mostly middle-aged and boomer-aged women, are spending less money in general. On top of that, the brand is still suffering from a reputation of being a bit old-fashioned, which is keeping those customers who are still shopping going to department stores instead.
"Once she comes in the store, she's surprised and, a lot of times, delighted," Via said.
But without enough of those customers walking in the door, the increasingly trendy and fast-fashion oriented product the company is now stocking is languishing on shelves and leading to markdowns. To help combat that, Via said Christopher & Banks will work to change out its store displays more often to highlight the new products coming into the store every week.
In the second half of this year, the retailer also will embark on a campaign to relaunch its brand.
Via added that a recent top-to-bottom evaluation of its business, with the help of an outside consultant, revealed some of these issues and validated the company's current strategy to get back on track.
Executives were optimistic the company would again see sales growth this year, noting that sales so far are up over last year as some of its merchandising changes take hold. The retailer forecast first-quarter sales to rise between 2 and 7 percent.
At the same time, it continues to merge plus-sized clothing from its CJ Banks stores into a one-store concept with petite and misses merchandise at Christopher & Banks. Most of its 518 stores have already changed to this format in the last couple of years. Executives said they plan to complete the transition in the remaining 130 or so stores within the next two years, though of some of those locations will be closed instead.
Meanwhile, Christopher & Banks' online sales have been rapidly growing as the retailer has improved the functionality and visual appeal of its website. In the fourth quarter, online sales soared 45 percent, accounting for about 16 percent of its overall sales.
It plans to build on that this year by adding in-store pickup for items ordered online, a service already offered at a number of other retailers.