UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Christopher & Banks Corporation
(Name of Issuer)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
171046105
(CUSIP number)
Jonathan Duskin
c/o Macellum Capital Management, LLC
99 Hudson Street, 5th Floor
New York, New York 10013
(212) 956-3008
Jeffrey L. Kochian
Akin Gump Strauss Hauer & Feld LLP
One Bryant Park
New York, New York 10036
(212) 872-8069
(Name, address and telephone number of person authorized to receive notices and communications)
March 27, 2015
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the following box. ¨
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.
* | The remainder of this cover page shall be filled out for a reporting persons initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. |
The information required on the remainder of this cover page shall not be deemed to be filed for the purpose of Section 18 of the Securities Exchange Act of 1934 (Act) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP No. 171046105
1. | NAMES OF REPORTING PERSONS
Macellum Retail Opportunity Fund, LP | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ¨ (b) ¨
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
WC | |||||
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
¨ | |||||
6. | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7. | SOLE VOTING POWER:
1,880,006 (1) | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
1,880,006 (1) | |||||
10. | SHARED DISPOSITIVE POWER:
0 | |||||
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
1,880,006 (1) | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1% (2) | |||||
14. | TYPE OF REPORTING PERSON*
PN |
(1) | Includes 140,000 shares of Common Stock underlying options. |
(2) | Based on 36,929,420 shares of common stock outstanding as of November 28, 2014, as disclosed in the Issuers Form 10-Q filed with the SEC on December 5, 2014. |
CUSIP No. 171046105
1. | NAMES OF REPORTING PERSONS
Macellum Capital Management, LLC | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ¨ (b) ¨
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
WC | |||||
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
¨ | |||||
6. | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7. | SOLE VOTING POWER:
32,582 | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
32,582 | |||||
10. | SHARED DISPOSITIVE POWER:
0 | |||||
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
32,582 | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than 1% (1) | |||||
14. | TYPE OF REPORTING PERSON*
OO |
(1) | Based on 36,929,420 shares of common stock outstanding as of November 28, 2014, as disclosed in the Issuers Form 10-Q filed with the SEC on December 5, 2014. |
CUSIP No. 171046105
1. | NAMES OF REPORTING PERSONS
Macellum Advisors GP, LLC | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ¨ (b) ¨
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
OO | |||||
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
¨ | |||||
6. | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7. | SOLE VOTING POWER:
1,880,006 (1) | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
1,880,006 (1) | |||||
10. | SHARED DISPOSITIVE POWER:
0 | |||||
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
1,880,006 (1) | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1% (2) | |||||
14. | TYPE OF REPORTING PERSON*
OO |
(1) | Includes 140,000 shares of Common Stock underlying options. |
(2) | Based on 36,929,420 shares of common stock outstanding as of November 28, 2014, as disclosed in the Issuers Form 10-Q filed with the SEC on December 5, 2014. |
CUSIP No. 171046105
1. | NAMES OF REPORTING PERSONS
Macellum Management, LP | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ¨ (b) ¨
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
OO | |||||
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
¨ | |||||
6. | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7. | SOLE VOTING POWER:
1,880,006 (1) | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
1,880,006 (1) | |||||
10. | SHARED DISPOSITIVE POWER:
0 | |||||
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
1,880,006 (1) | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1% (2) | |||||
14. | TYPE OF REPORTING PERSON*
PN |
(1) | Includes 140,000 shares of Common Stock underlying options. |
(2) | Based on 36,929,420 shares of common stock outstanding as of November 28, 2014, as disclosed in the Issuers Form 10-Q filed with the SEC on December 5, 2014. |
CUSIP No. 171046105
1. | NAMES OF REPORTING PERSONS
MCM Managers, LLC | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ¨ (b) ¨
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
OO | |||||
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
¨ | |||||
6. | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7. | SOLE VOTING POWER:
32,582 | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
32,582 | |||||
10. | SHARED DISPOSITIVE POWER:
0 | |||||
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
32,582 | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than 1% (1) | |||||
14. | TYPE OF REPORTING PERSON*
OO |
(1) | Based on 36,929,420 shares of common stock outstanding as of November 28, 2014, as disclosed in the Issuers Form 10-Q filed with the SEC on December 5, 2014. |
CUSIP No. 171046105
1. | NAMES OF REPORTING PERSONS
MCM Management, LLC | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ¨ (b) ¨
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
OO | |||||
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
¨ | |||||
6. | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7. | SOLE VOTING POWER:
32,582 | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
32,582 | |||||
10. | SHARED DISPOSITIVE POWER:
0 | |||||
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
32,582 | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than 1% (1) | |||||
14. | TYPE OF REPORTING PERSON*
OO |
(1) | Based on 36,929,420 shares of common stock outstanding as of November 28, 2014, as disclosed in the Issuers Form 10-Q filed with the SEC on December 5, 2014. |
CUSIP No. 171046105
1. | NAMES OF REPORTING PERSONS
Jonathan Duskin | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ¨ (b) ¨
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
OO | |||||
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
¨ | |||||
6. | CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7. | SOLE VOTING POWER:
1,912,588 (1) | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
1,912,588 (1) | |||||
10. | SHARED DISPOSITIVE POWER:
0 | |||||
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
1,912,588 (1) | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.2% (2) | |||||
14. | TYPE OF REPORTING PERSON*
IN |
(1) | Includes 140,000 shares of Common Stock underlying options. |
(2) | Based on 36,929,420 shares of common stock outstanding as of November 28, 2014, as disclosed in the Issuers Form 10-Q filed with the SEC on December 5, 2014. |
ITEM 1. | Security and Issuer. |
The class of equity security to which this statement on Schedule 13D relates is the common stock, par value $0.01 per share (the Common Stock) of Christopher & Banks Corporation (the Issuer). The address of the principal executive offices of the Issuer is 2400 Xenium Lane North, Plymouth Minnesota 55441. Information given in response to each item shall be deemed incorporated by reference in all other items, as applicable.
ITEM 2. | Identity and Background. |
a) The Reporting Persons are:
1. Macellum Retail Opportunity Fund, LP
2. Macellum Capital Management, LLC
3. Macellum Advisors GP, LLC
4. Macellum Management, LP
5. MCM Managers, LLC
6. MCM Management, LLC
7. Jonathan Duskin
(b) The business address of each of the Reporting Persons is:
99 Hudson Street, 5th Floor
New York, New York 10013
(c) Each of the Reporting Persons is engaged in the business of investment. Each of Macellum Retail Opportunity Fund, LP (Opportunity Fund) and Macellum Capital Management, LLC (Macellum Capital Management) was formed for the purpose of making equity investments. Macellum Management, LP (Macellum Management) serves as the investment manager for Opportunity Fund. Macellum Advisors GP, LLC (Macellum GP) serves as the general partner of Opportunity Fund and Macellum Management. MCM Managers, LLC (MCM Managers) serves as the managing member of Macellum Capital Management and MCM Management, LLC (MCM Management) serves as the managing member of MCM Managers. Jonathan Duskin (Mr. Duskin) is the sole member of Macellum GP and is the managing member of MCM Management. Mr. Duskin may be deemed to indirectly beneficially own the securities directly held by Opportunity Fund and Macellum Capital Management because Mr. Duskin may be deemed to have voting and investment power over such securities by virtue of his relationship with Macellum GP and MCM Management. Each of Macellum Management, Macellum GP, MCM Managers, MCM Management and Mr. Duskin disclaims beneficial ownership of the Issuers securities as to which this Schedule 13D relates, and this Schedule 13D shall not be deemed an admission that any of Macellum Management, Macellum GP, MCM Managers, MCM Management or Mr. Duskin is the beneficial owner of such securities for purposes of Schedule 13(d) or for any other purpose, except to the extent that any such Reporting Person actually exercises voting or dispositive power with respect to such securities.
(d) The Reporting persons have not during the last five years been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) The Reporting Persons have not during the last five years been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction nor are the Reporting Persons subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
(f) The Citizenship of the Reporting Persons is as follows:
1. Macellum Retail Opportunity Fund, LP Delaware
2. Macellum Capital Management, LLC Delaware
3. Macellum Advisors GP, LLC Delaware
4. Macellum Management, LP Delaware
5. MCM Managers, LLC Delaware
6. MCM Management, LLC Delaware
7. Jonathan Duskin United States of America
The Reporting Persons have agreed to jointly file this Schedule 13D. A Joint Filing Agreement is filed herewith.
ITEM 3. | Source and Amount of Funds or Other Consideration. |
The shares of Common Stock and options to purchase shares of Common Stock purchased by Opportunity Fund and the shares of Common Stock purchased by Macellum Capital Management were purchased with working capital (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) in open market purchases through brokers. The aggregate purchase price of the 1,740,006 shares of Common Stock and the options to purchase 140,000 shares of Common Stock beneficially owned by Opportunity Fund was approximately $9,563,837.92, excluding brokerage commissions. The aggregate purchase price of the 32,582 shares of Common Stock beneficially owned by Macellum Capital Management was approximately $178,095.31, excluding brokerage commissions.
ITEM 4. | Purpose of Transaction. |
On April 1, 2015, Macellem GP sent a letter (the Letter) to Paul L. Snyder, the Chairman of the Board of the Issuer, regarding leadership and operational weaknesses that have contributed to the Issuers underperformance. The foregoing description of the Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Letter, which is filed as Exhibit 99.1 and is incorporated herein by reference.
The Reporting Persons continuously assess the Issuers business, financial condition, results of operations and prospects, general economic conditions, other developments and additional investment opportunities. Depending on such assessments, the Reporting Persons and/or their affiliates may acquire additional securities of the Issuer, including but not limited to Common Stock, existing preferred securities or new securities of the Issuer or may determine to purchase, sell or otherwise dispose of all or some of the Issuers securities in the open market, as applicable, in privately negotiated transactions, in transactions directly with the Issuer or otherwise. Such actions will depend upon a variety of factors, including, without limitation, current and anticipated future trading prices, the financial condition, results of operations and prospects of the Issuer, alternative investment opportunities, general economic, financial market and industry conditions and other factors that the Reporting Persons and/or their affiliates may deem material to their investment decision. Also, the Reporting Persons and/or their affiliates intend to have discussions with management regarding the operations of the Issuer and matters of mutual interest, which could include the items in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. | Interest in Securities of the Issuer. |
(a) and (b) Items 7 through 11 and 13 of each of the cover pages of this Schedule 13D are incorporated herein by reference. Such information is based on 36,929,420 shares of Common Stock outstanding as of November 28, 2014, as disclosed in the Issuers Form 10-Q filed with the SEC on December 5, 2014.
(c) The transactions by the Reporting Persons in the securities of the Issuer during the past sixty days are set forth in Exhibit 99.1, which is incorporated herein by reference.
d) The disclosure regarding the relationship between the Reporting Persons in Item 2(c) of this Schedule 13D is incorporated by reference herein.
(e) Not applicable
ITEM 6. | Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. |
The disclosure regarding the Reporting Persons contained in Item 2 is incorporated herein by reference.
On March 27, 2015, Opportunity Fund purchased American-style call options referencing 140,000 shares of the Issuers Common Stock with a strike price of $5 which are exercisable through May 15, 2015.
On April 1, 2015, the Reporting Persons entered into a Joint Filing Agreement (the Joint Filing Agreement) in which the Reporting Persons agreed to the joint filing on behalf of each of them of statements on Schedule 13D with respect to the securities of the Issuer to the extent required by applicable law. The Joint Filing Agreement is filed as Exhibit 99.3 and is incorporated herein by reference.
Item 7. | Material to Be Filed as Exhibits. |
Exhibit | Description | |
99.1 | Letter to Paul L. Snyder, Chairman of the Board of Christopher & Banks Corporation, dated April 1, 2015. | |
99.2 | Transactions in securities of Christopher & Banks Corporation effected in the past sixty days. | |
99.3 | Agreement Regarding the Joint Filing of Schedule 13D by and among the Reporting Persons. |
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
April 1, 2015
MACELLUM RETAIL OPPORTUNITY FUND, LP | ||
By: | Macellum Advisors GP, LLC, | |
its general partner | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Sole Member | |
MACELLUM CAPITAL MANAGEMENT, LLC | ||
By: | MCM Managers, LLC, | |
its managing member | ||
By: | MCM Management, LLC, | |
its managing member | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Managing Member | |
MACELLUM ADVISORS GP, LLC | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Sole Member | |
MACELLUM MANAGEMENT, LP | ||
By: | Macellum Advisors GP, LLC, | |
its general partner | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Sole Member | |
MCM MANAGERS, LLC | ||
By: | MCM Management, LLC, | |
its managing member |
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Managing Member | |
MCM MANAGEMENT, LLC | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Managing Member | |
/s/ Jonathan Duskin | ||
JONATHAN DUSKIN |
Exhibit 99.1
April 1, 2015
Paul L. Snyder
Chairman of the Board
Christopher & Banks Corporation
2400 Xenium Lane North
Plymouth, MN 55441
Dear Mr. Snyder,
Macellum Advisors GP, LLC and its affiliated funds (Macellum) own approximately 5.2% of the outstanding common stock of Christopher & Banks Corporation (the Company or Christopher & Banks). Macellum and its partners have substantial experience investing in consumer and retail companies and helping companies improve their long-term financial and share price performance. Macellums historical investments include: The Childrens Place, Collective Brands, GIII Apparel Group, Hot Topic, Charming Shoppes and Warnaco.
Despite recent declines in profitability over the last several quarters, we believe that Christopher & Banks is an attractive investment opportunity due to its exceptional brand recognition within its targeted demographic audience and its loyal customer base. We also believe that the Company has a significant opportunity to expand margins through its Missy, Petites and Womans (MPW) conversion program as well as by utilizing its new inventory management tools to improve sales and gross margins. The Company is unique in its approach of utilizing customers in local fashion shows to highlight each seasons apparel trends. We understand the Company generates a significant portion of its sales during these fashion shows and from the models themselves.
Unfortunately, the Company trades at a depressed valuation and has dramatically underperformed its peers as well as retail and consumer indexes over the short and long term. We believe this low valuation and underperformance is a reflection of shareholders loss of confidence in the Companys ability to execute its plans and achieve its long term profitability targets. There has been a revolving door of CEOs and we believe that, in aggregate, the Companys Board of Directors (the Board) is not providing the proper oversight and does not have the requisite skill set to lead Christopher & Banks to achieve its full potential. We also believe that the Board is insular and would benefit from greater diversity in its composition. Its current makeup is heavily skewed toward Minneapolis-based business people who, we believe, do not have the specialty apparel retailing background required to lift the Company from its current state of decline.
99 Hudson Street 5th Floor New York, NY 10013
Stock Price Performance | 10YR | 5YR | 1YR | YTD | ||||
(3/31/05-3/26/15) | (3/31/10-3/26/15) | (3/31/14-3/26/15) | (12/31/14-3/26/15) | |||||
CBK1 |
(66%) | (33%) | (10%) | (12%) | ||||
S&P 500 Retail Index1 |
221% | 157% | 19% | 4% | ||||
S&P 500 Index1 |
115% | 95% | 12% | 0% | ||||
Russell 200 Index1 |
129% | 94% | 6% | 3% | ||||
Peer Group Average1,2 |
142% | 103% | 21% | 11% |
Source: Bloomberg L.P.
One of the few bright spots in the Companys history over the last decade occurred during the leadership of Mr. Joel Waller. Under Mr. Wallers leadership same store sales, margins and EBITDA improved dramatically. As you are well aware, we recently approached the Company on a friendly basis to offer assistance in the form of expertise and advice from Mr. Waller and other highly qualified potential Board members, to help improve the operations of the business and were rebuffed. Rather than consider other well-qualified directors, the Board informed us that it would aggressively fight any nominations. As investors interested in helping create long term value we chose to give the Board the chance to do the right thing on its own and not to pursue a protracted and costly proxy battle, at least for the 2015 annual meeting. However, we intend to do everything within our ability to enhance the value of our investment and as part of that process will be intently focused on the Companys results and the Boards performance.
Further, we are dismayed by the most recent addition to the Board. We approached the Company on a friendly basis on Friday March 27th. The Board refused to listen to one of their largest shareholders and we were summarily dismissed. Instead of taking input from an investor with a material economic interest in the Company, extensive experience in the sector and past success with the Company the Board decided to add to its ranks someone else with no vested interest in the Company. This type of Board behavior is further evidence to us that the Board is composed of an insular group of Directors uninterested in listening to its shareholders. Unfortunately, we think that, while the Board is aware of its weaknesses, the current Board lacks the fortitude to make the tough choices that are required of fiduciaries. Instead it increases the number of directors to nine, a number too large for a Company of this size, at the additional expense to the shareholders.
We believe that, based on our experience with the Company and analysis of its performance, with the proper governance and oversight, the Company should be capable of achieving managements stated long term goal of high single digit operating margins as well as delivering meaningful revenue growth by gaining back lost market share within its target demographic. Lastly, given the heightened interest potential acquirers have shown in the missy segment, we also believe there could be an opportunity to maximize shareholder value through a potential sale.
I. Background
Christopher & Banks developed into a very profitable specialty retailer with a dominant presence in its target demographic under long time CEO William Pranges leadership. At the time of his retirement in 2005 the Company had sales of $490.5mm, EBITDA3 of $66.5mm and operating margins of 9.7%. Unfortunately, after Mr. Pranges departure the Boards short-comings started to become apparent. The Company appointed four CEOs in five years from 2005 to 2010. For the last appointment of that period the Board named its own Chairman, who had no apparel retailing background, as its CEO. Over the tenure of the five different CEOs, EBITDA fell over $100mm to a loss of $(39)mm.
2
II. The Waller Era
Mr. Waller joined the Company as President in December 2011 and, when it became apparent another CEO change was vital for the Companys survival, he was elevated to CEO in February 2012. Under Mr. Wallers leadership same store sales, margins and EBITDA improved dramatically. Once Mr. Waller returned the Company to its historic merchandise leadership, customers returned in large numbers. Mr. Waller was also responsible for implementing the tests that have morphed into the Companys very successful MPW initiative.
(Ending) Wallers Tenure |
Jan-12 4Q11 |
Apr-12 1Q12 |
Jul-12 2Q12 |
Oct-12 3Q12 |
Feb-13 4Q12 |
May-13 1Q13 |
Aug-13 2Q13 |
|||||||||||||||||||||
Same-Store Sales |
(18.0 | %) | (14.6 | %) | 5.5 | % | 13.7 | % | 18.5 | % | 23.4 | % | 7.7 | % | ||||||||||||||
YoY EBITDA Change |
($16 | ) | ($5 | ) | ($2 | ) | $ | 16 | $ | 28 | $ | 13 | $ | 5 | ||||||||||||||
YoY Bp Change |
||||||||||||||||||||||||||||
Gross Margins |
(1,585 | ) | (602 | ) | (462 | ) | 984 | 2,307 | 1,104 | 575 | ||||||||||||||||||
EBIT Margins |
(1,277 | ) | (682 | ) | (68 | ) | 1,530 | 2,718 | 1,504 | 663 |
Source: Bloomberg L.P. and Company filings. Dollars in millions.
III. The Board Hires LuAnn Via
Inexplicably, after a remarkably brief turnaround, the Board decided to remove Mr. Waller as CEO. Furthermore, we believe the Board acted against the will of shareholders, many of whom expressed shock over the decision to make a change at that juncture.
Ms. Vias prior experience was as President and CEO of Payless Shoesource (Payless). During her tenure there Payless struggled and was eventually sold to private equity sponsors in an attempt to maximize shareholder value.
(Ending) |
Jan-09 FY09 |
Jan-10 FY10 |
Jan-11 FY11 |
Jan-12 FY12 |
Jul-12 TTM 2Q13 |
|||||||||||||||
Payless Sales |
2,635.4 | $ | 2,576 | $ | 2,520 | $ | 2,429 | $ | 2,433 | |||||||||||
Payless Adjusted EBIT |
114.2 | $ | 135 | $ | 131 | $ | 10 | $ | 35 | |||||||||||
YoY % Change |
||||||||||||||||||||
Payless Sales |
(3 | %) | (2 | %) | (2 | %) | (4 | %) | (1 | %) | ||||||||||
Payless Adjusted EBIT |
(15 | %) | 18 | % | (3 | %) | (92 | %) | (52 | %) |
Source: Company filings. Dollars in millions. Excluding Performance + Lifestyle segment.
Shortly after Mr. Wallers departure the Companys same store sales again turned negative and the Company began to miss its projections. We are concerned that Ms. Via has undone many of the positive changes Mr. Waller implemented during his tenure that had caused the significant improvement in results.
3
Sales Post Mr. Wallers Tenure (Ending) |
Nov-13 3Q13 |
Feb-14 4Q13 |
May-14 1Q14 |
Aug-14 2Q14 |
Nov-14 3Q14 |
Jan-15 4Q14 |
||||||||||||||||||
Sales |
0.7 | % | (9.5 | %) | (4.7 | %) | 2.3 | % | (6.3 | %) | (6.6 | %) | ||||||||||||
Same-Store Sales |
4.9 | % | (1.4 | %) | (0.2 | %) | 2.6 | % | (7.6 | %) | (7.5 | %) |
Source: Company filings.
On October 7, 2014 the Company meaningfully lowered its guidance and the Companys stock price fell 26%. Management has detailed a long list of potential culprits for the sharp decline including continued softness in mall traffic, lower than expected sales from its September fashion show, as well as late receipts associated with the West Coast port strike. In our minds the fashion show is an unsettling indication that the customer base is not responding well to the merchandise changes made since Mr. Wallers departure. Further, we were surprised by the magnitude of the impact of the West Coast port strike as no retailer we follow has been hurt to this degree. We are worried that there may be other issues impacting the Companys ability to connect with its customer base that are being masked by the port strike which might not become apparent for several quarters as the Company continues to work through the negative impact of the strike.
9/3/2014 | 10/7/2014 | 12/4/2014 | 1/9/2015 | 3/25/2015 | ||||||||||||||||
3Q14 Sales Guidance |
$ | 122-$124mm | $ | 114-$118mm | ||||||||||||||||
3Q14 Sales Results |
$ | 110.6mm | ||||||||||||||||||
4Q14 Sales Consensus |
$ | 110mm | $ | 107mm | ||||||||||||||||
4Q14 Sales Guidance |
$ | 94-$98mm | $ | 96-$98mm | ||||||||||||||||
4Q14 Sales Results |
$ | 98mm | ||||||||||||||||||
1Q15 Sales Consensus |
$ | 108mm | ||||||||||||||||||
1Q15 Sales Guidance |
$ | 90-$94mm | ||||||||||||||||||
2014 Consensus EPS |
$ | 0.48 | $ | 0.40 | $ | 0.30 | $ | 0.30 | | |||||||||||
2015 Consensus EPS |
$ | 0.48 | $ | 0.43 | $ | 0.31 | $ | 0.30 | $ | 0.13 | ||||||||||
2016 Consensus EPS |
$ | 0.80 | $ | 0.60 | $ | 0.46 | $ | 0.45 | $ | 0.30 |
Source: Bloomberg L.P. estimates and Company filings.
During its third quarter financial update on October 7, 2014, management commented that, we have seen recent improvements in the sell-through of fashion merchandise and continued strong margins in our core offerings. We continue to be highly focused on carefully managing inventory and SG&A expenses. We remain committed to our key initiatives of enhancing our merchandise assortments and presentation, improving our store environment and customer experience, and increasing our sales per store with our conversions to the MPW format. With a number of these initiatives gaining traction, we remain confident that we are on the right path to achieve long-term growth and profitability.
Unfortunately shortly after that statement, on the December 4, 2014 Q3 earnings call, management pushed back its high single digit operating margin target by one year and set Q4 guidance below analysts expectations. The stock price fell another 28%.
The most recent earnings disappointment came last week when Company management guided 1Q15 and FY15 significantly below analyst expectations and the stock fell another 10%. Again, it is unquestionable that the port strike has had an impact on companies in this sector; however, we believe no other retailers have felt it to this degree. Further, when discussing the financial goals of the Company, management has historically committed to a time table. Oddly, when management discussed the Companys financial goals on this conference call the targets were only described as their long term goals. We worry that neglecting to give a specific time table for achieving the targets was an acknowledgement of a lowered degree of confidence in ultimately achieving the results in a timely fashion.
4
IV. Weak Board Governance and Oversight
Since the resignation of the Companys founder in 2005 the Board has gone through many changes. We believe that on the whole, the current Boards oversight has been weak. While we have been very disturbed by this recent turn of events, it is unfortunately not the only decision this Board has made that causes us concern. The Boards decision to replace Mr. Waller when they did, as well as its decision to conduct a CEO search without Mr. Wallers involvement or input was also very questionable to us. We believe that the Board was deaf to the pleas of many shareholders who expressed concern that the Board was making a mistake and that the business recovery was too nascent to have more change inflicted upon it. Without proper leadership and governance we are fearful that the Companys results will continue to deteriorate. We believe the Board, on the whole, has not exercised good judgment and has a long history of poor decisions.
| We believe that the Board has been careless with the Companys cash. The Board voted to continue paying a dividend for over 3 years while the Companys operating earnings were deteriorating significantly. The Company paid out over $25mm during that period (an amount that represents over 10% of the Companys present market capitalization). It wasnt until December 2011, when facing an annual loss of $(39)mm in EBITDA, that they chose to suspend the dividend. |
| We question the wisdom behind hiring a new CEO whose prior CEO experience was in footwear with disappointing results. |
| We believe that the Board failed to direct the Company to develop contingency plans to deal with the West Coast port strike. Many retailers have discussed the impact of the port strike but we believe Christopher & Banks to be one of the most severely impacted. What is particularly troubling from an oversight perspective is that the potential for a port strike, surfaced last summer. We are confident that a board of directors with more relevant experience would have been able to anticipate such a potential systemic operating issue. Additionally, we believe that a board of directors with meaningful economic exposure to the outcomes of a companys performance would not sit idly by while this type of disaster was percolating. |
| We wonder where the Board oversight was while the Company was communicating its third quarter and 2014 guidance to shareholders, guidance which was lowered one month later. We believe that most operators are optimistic by nature and it is the boards job to weigh multiple variables outside the Companys immediate purview and temper that optimism with realism. |
| Lastly, and particularly worrisome given the initial third quarter guidance cited above, are the recent stock sales by Board directors just weeks before the Company was forced to lower its guidance. The magnitude of the sales also leaves us questioning the Boards commitment to the Company. |
Date |
Board Member | Type of Sale | Shares | Price | % of Ownership Sold | |||||||||||
9/5/2014 |
Paul Snyder | Open Market Sale | (20,000 | ) | $ | 10.56 | 16 | % | ||||||||
9/5/2014 |
Anne Jones | Open Market Sale | (40,000 | ) | $ | 10.67 | 31 | % | ||||||||
9/11/2014 |
David Levin | Open Market Sale | (14,480 | ) | $ | 10.61 | ||||||||||
9/12/2014 |
David Levin | Gift \ Disposition \ Open Market Sale | (8,520 | ) | $ | 10.64 | 36 | % | ||||||||
11/21/2014 |
Mark Cohn | Other Disposition | (25,000 | ) | $ | 7.10 | 43 | % |
Source: Bloomberg L.P. and Company filings.
5
V. Offers to Help Denied
Under Mr. Wallers leadership, we believe that the Company was saved from a potential bankruptcy and was able to deliver a merchandise strategy that immediately resonated with its target audience. Mr. Waller has an extensive resume of successful retail turnarounds. We are frankly dumbfounded by the Boards decision not to embrace someone with his track record and successful history at the Company. The Boards refusal to even sit down and listen to us while simultaneously moving to add a new director speaks volumes about their poor judgment, weak governance and indifference to the constituency they are supposedly appointed to represent. At this juncture we are prepared to wait and see how much of the spate of negative results and negative earnings revisions were in fact due to variables outside of the Companys control. However, as the Companys third largest shareholder we will continue to engage the Company and the Board in hopes of putting the Company back on the right track as quickly as possible and will not sit patiently for long.
Sincerely,
/s/ Jonathan Duskin
Jonathan Duskin
Macellum Advisors GP, LLC
6
About Macellum Advisors GP, LLC
Macellum Advisors GP, LLC was formed in July 2009 by Jonathan Duskin. Macellum and its partners, through their in-depth sector knowledge, are dedicated to identifying investment opportunities in the consumer and retail sector. Mr. Duskin has focused on the consumer and retail sector for over 15 years and his partners have extensive operating history, collectively serving as CEOs and Directors of over two dozen leading companies in the sector. Mr. Duskin has a long track record of enhancing value in turnaround investments by overseeing and implementing new merchandise and marketing strategies, operational reorganizations, cost cutting programs, balance sheet restructurings and effective board governance.
Important Disclosures
Any views expressed in the above letter represent the opinion of Macellum, whose analysis is based solely on publicly available information. No representation or warranty, express or implied, is made as to the accuracy or completeness of any information contained therein. Macellum expressly disclaim any and all liability based, in whole or in part, on such information, any errors therein or omissions therefrom. Macellum also reserve the right to modify or change their views or conclusions at any time in the future without notice. The information contained in the letter does not recommend the purchase or sale of any security nor is it an offer to sell or a solicitation of an offer to buy any security. Furthermore, the information contained in the letter is not intended to be, nor should it be construed or used as, investment, tax or legal advice. No representation or warranty is made that Macellums investment processes or investment objectives will or are likely to be achieved or successful or that Macellums investments will make any profit or will not sustain losses. Past performance is not indicative of future results. Nothing contained in the letter should be taken as any form of commitment on the part of Macellum to take any action in connection with any particular security. Macellum and their respective affiliates are in the business of buying and selling securities. They have, and may in the future, buy, sell or change the form of their respective positions in any security for any or no reason whatsoever. Macellum have neither sought nor obtained the consent from any third party to use any statements or information contained in the letter that have been obtained or derived from statements made or published by such third parties. Any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein.
1 | Source: Bloomberg L.P. Returns are calculated assuming the reinvestment of dividends. |
2 | Source: Peer Group Average includes AEO, ANN, ASNA, CHS, EXPR, GPS, LB, LULU, and URBN. |
3 | Source: EBITDA is calculated as reported operating income plus asset impairment charges plus depreciation and amortization. |
4 | Calculated using 36,929,420 shares as of November 28, 2014. |
7
Exhibit 99.2
Transactions in Securities of the Issuer During the Past Sixty Days
The following table sets forth all transactions with respect to shares of Common Stock or options to purchase or sell shares of Common Stock effected in the last sixty days by any of the Reporting Persons or on behalf of any of the Reporting Persons. All such transactions were purchases or sales of shares of Common Stock or purchases or sales of options to purchase or sell shares of Common Stock effected in the open market through brokers, and the table excludes commissions paid in per share prices.
Number of Shares | Price Per | Date of | ||||||||||
Type of Security |
Purchased / (Sold) | Share($) | Purchase / Sale | |||||||||
Macellum Retail Opportunity Fund, LP | ||||||||||||
Common Stock |
6,000 | 5.33 | 3/19/2015 | |||||||||
Common Stock |
10,000 | 5.48 | 3/20/2015 | |||||||||
Common Stock |
66,207 | 5.64 | 3/20/2015 | |||||||||
Common Stock |
63,915 | 5.84 | 3/23/2015 | |||||||||
Common Stock |
90,440 | 5.85 | 3/23/2015 | |||||||||
Common Stock |
145,000 | 5.90 | 3/24/2015 | |||||||||
Common Stock |
140,000 | 5.92 | 3/24/2015 | |||||||||
Common Stock |
(1,500 | ) | 5.38 | 3/24/2015 | ||||||||
Common Stock |
289,607 | 5.23 | 3/25/2015 | |||||||||
Common Stock |
398,689 | 5.27 | 3/25/2015 | |||||||||
Common Stock |
200,000 | 5.25 | 3/26/2015 | |||||||||
Common Stock |
104,448 | 5.24 | 3/26/2015 | |||||||||
Common Stock |
153,270 | 5.30 | 3/27/2015 | |||||||||
Common Stock |
73,930 | 5.44 | 3/27/2015 | |||||||||
$5 Call options due May 15, 2015 |
140,000 | 1 | .71 | 3/27/2015 |
1 | Represents shares underlying American-style call options which are exercisable through May 15, 2015. |
Macellum Capital Management, LLC | ||||||||||||
Common Stock |
(4,730 | ) | 5.30 | 2/9/2015 | ||||||||
Common Stock |
3,000 | 5.18 | 2/20/2015 | |||||||||
Common Stock |
(3,000 | ) | 5.16 | 2/20/2015 | ||||||||
Common Stock |
3,700 | 5.06 | 2/23/2015 | |||||||||
Common Stock |
(8,437 | ) | 4.91 | 2/24/2015 | ||||||||
Common Stock |
3,222 | 5.84 | 3/23/2015 | |||||||||
Common Stock |
4,560 | 5.85 | 3/23/2015 | |||||||||
Common Stock |
16,730 | 5.30 | 3/27/2015 | |||||||||
Common Stock |
8,070 | 5.44 | 3/27/2015 |
Exhibit 99.3
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of a Statement on Schedule 13D (including additional amendments thereto) with respect to the shares of Common Stock, par value $0.01 per share, of Christopher & Banks Corporation. This Joint Filing Agreement shall be filed as an Exhibit to such Statement. The undersigned acknowledge that each shall be responsible for the timely filing of any amendments to such joint filing and for the completeness and accuracy of the information concerning him or it contained herein and therein, but shall not be responsible for the completeness and accuracy of the information concerning the others.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
EXECUTED as of this 1st day of April, 2015.
MACELLUM RETAIL OPPORTUNITY FUND, LP | ||
By: | Macellum Advisors GP, LLC, | |
its general partner | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Sole Member | |
MACELLUM CAPITAL MANAGEMENT, LLC | ||
By: | MCM Managers, LLC, | |
its managing member | ||
By: | MCM Management, LLC, | |
its managing member | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Managing Member | |
MACELLUM ADVISORS GP, LLC | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Sole Member | |
MACELLUM MANAGEMENT, LP | ||
By: | Macellum Advisors GP, LLC, | |
its general partner | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Sole Member |
MCM MANAGERS, LLC | ||
By: | MCM Management, LLC, | |
its managing member | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Managing Member | |
MCM MANAGEMENT, LLC | ||
By: | /s/ Jonathan Duskin | |
Name: | Jonathan Duskin | |
Title: | Managing Member | |
/s/ Jonathan Duskin | ||
JONATHAN DUSKIN |