0001688522-17-000005.txt : 20170426 0001688522-17-000005.hdr.sgml : 20170426 20170425224701 ACCESSION NUMBER: 0001688522-17-000005 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20170426 DATE AS OF CHANGE: 20170425 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: New York & Company, Inc. CENTRAL INDEX KEY: 0001211351 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 331031445 FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-80433 FILM NUMBER: 17782358 BUSINESS ADDRESS: STREET 1: 330 WEST 34TH STREET - 9TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 212-884-2110 MAIL ADDRESS: STREET 1: 330 WEST 34TH STREET - 9TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10001 FORMER COMPANY: FORMER CONFORMED NAME: NY & CO GROUP INC DATE OF NAME CHANGE: 20021220 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Philotimo Fund, LP CENTRAL INDEX KEY: 0001688522 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 5850 CORAL RIDGE DRIVE, SUITE 309 CITY: CORAL SPRINGS STATE: FL ZIP: 33076 BUSINESS PHONE: 631-863-3100 MAIL ADDRESS: STREET 1: 5850 CORAL RIDGE DRIVE, SUITE 309 CITY: CORAL SPRINGS STATE: FL ZIP: 33076 SC 13D 1 KWM_13D_NWY.txt KWM SC 13D FILING NWY UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. ________)* NEW YORK & COMPANY, INC. (Name of Issuer) Common Stock (Title of Class of Securities) 649295102 (CUSIP Number) Mr. David L. Kanen Kanen Wealth Management LLC 5850 Coral Ridge Drive, Suite 309 Coral Springs, FL 33076 Simon Riveles Riveles Wahab LLP 40 Wall St. 28th Floor New York, NY 10005 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 24, 2017 (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 240.13d-1(e), 240.13d-1(f) or 240.13d-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 240.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's 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. 649295102 SCHEDULE 13D 1 Names of Reporting Persons Kanen Wealth Management, LLC 2 Check the Appropriate Box if a Member of a Group (a) [ ] (See instructions) (b) [ ] 3 SEC USE ONLY 4 Source of Funds (See Instructions) OO 5 Check if Disclosure of Legal Proceeding is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Florida, USA NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 Sole Voting Power 634,284 8 Shared Voting Power 0 9 Sole Dispositive Power 634,284 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by each Reporting Person 634,284 (1) 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] 13 Percent of Class Represented by Amount in Row (11) .99% 14 Type of Reporting Person IA (1) KWM is the beneficial owner of 634,284 shares held by the Philotimo Fund, LP. David L. Kanen is the managing member of KWM and may be deemed to share voting and dispositive power over such shares with KWM. 1 Names of Reporting Persons David Kanen, Managing Member of Kanen Wealth Management, LLC 2 Check the Appropriate Box if a Member of a Group (a) [ ] (See instructions) (b) [ ] 3 SEC USE ONLY 4 Source of Funds PF 5 Check if Disclosure of Legal Proceeding is Required Pursuant to Items 2(d) or 2(e) 6 Citizenship or Place of Organization USA NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 Sole Voting Power 66,868 8 Shared Voting Power 3,231,953 (2) 9 Sole Dispositive Power 3,281,953 (3) 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by each Reporting Person 3,281,953 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] 13 Percent of Class Represented by Amount in Row (11) 5.09% 14 Type of Reporting Person IA (2) Includes 66,896 shares of Common Stock held by Mr. Kanen for his own account. (3) Represents 2,647,669 shares of Common Stock held by Mr. Kanen for his own account and held in customer accounts, over all of which KWM has dispositive power pursuant to investment advisory agreements. KWM has discretionary voting rights 2,597,669 shares. Mr. Kanen is the managing member of KWM and may be deemed to share voting and dispositive power over such shares with KWM. Item 1. Security and Issuer. This Schedule 13D relates to the common stock (the "Common Stock") of New York & Company, Inc (the "Issuer"). Item 2. Identity and Background. (a) This statement is filed by: (i) Kanen Wealth Management LLC ("KWM"), an investment adviser registered as such in Florida, New York and Texas; and (ii) David L. Kanen, the managing member of KWM. The foregoing persons are hereinafter sometimes collectively referred to as the "Reporting Persons." Any disclosures herein with respect to persons other than the Reporting Persons are made on information and belief after making inquiry of the appropriate party. (b) The principal business address of the Reporting Persons is 5850 Coral Ridge Drive, Suite 309 Coral Springs, FL 33076. (c) KWM is a registered investment adviser as set forth in Item 2(a) above. The principal business of KWM is purchasing, holding and selling securities for investment purposes. Mr. Kanen is the managing member of KWM. (d) None of the Reporting Persons have, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons have, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was, or is 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) KWM is a limited liability company organized under the laws of the State of Florida. Mr. Kanen is a citizen of the United States of America. Item 3. Source or Amount of Funds or Other Consideration. The Reporting Persons purchased the shares of Common Stock of the Issuer in the ordinary course of business. The Common Stock of the Issuer beneficially owned by KWM was acquired on behalf of the investment advisory clients of KWM under discretionary authority granted by KWM. In addition, Mr. Kanen purchased Common Stock of the Issuer for his own account. Because substantially all of the shares of Common Stock beneficially owned by KWM were acquired by customers prior to entering into investment advisory agreements with KWM, the aggregate amount of funds used to acquire the Common Stock set forth in this Item 3 is to the best knowledge of the Reporting Persons. In addition, none of the funds used to purchase the Common Stock of the Issuer were provided through borrowings of any nature.The aggregate amount of funds used to purchase all of the Common Stock reported in this filing totaled approximately $6,621,85. Item 4. Purpose of Transaction. The 66,896 shares of Common Stock beneficially owned by Mr. Kanen for his own account were purchased and are held by Mr. Kanen for investment purposes. Depending on market conditions and other factors Mr. Kanen may deem relevant, Mr. Kanen may acquire additional shares of the Common Stock, or dispose of the shares of Common Stock, from time to time, in open market or privately negotiated transactions. The 2,647,669 shares beneficially owned by KWM were purchased and are held for investment purposes on behalf of client accounts over which KWM, together with Mr. Kanen, has sole discretionary dispositive and voting power. Depending on market conditions and other factors KWM may deem relevant, KWM may, on behalf of client accounts as part of its ongoing portfolio management process, acquire additional shares of the Common Stock, or dispose of the shares of Common Stock, from time to time, in open market or privately negotiated transactions. KWM is the beneficial owner of 634,284 shares held for the Philotimo Fund, LP. Depending on market conditions and other factors KWM may deem relevant, KWM may, on behalf of the fund as part of its ongoing portfolio management process, acquire additional shares of the Common Stock, or dispose of the shares of Common Stock, from time to time, in open market or privately negotiated transactions. Item 5. Interest in Securities of the Issuer. (a)-(b) KWM may be deemed, for purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, to be the beneficial owner of an aggregate of 634,284 shares of Common Stock which represent 0.99% of the Issuer's outstanding shares of Common Stock. (i) Sole power to vote or direct vote: 634,284 (ii) Shared power to vote or direct vote: 0 (iii) Sole power to dispose of or direct the disposition: 634,284 (iv) Shared power to dispose of or direct the disposition: 0 Mr. Kanen may be deemed, for purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, to be the beneficial owner of an aggregate of 3,281,953 shares of Common Stock which represent 5% of the Issuer's outstanding shares of Common Stock. (i) Sole power to vote or direct vote: 66,896 (ii) Shared power to vote or direct vote: 3,231,953 (iii) Sole power to dispose of or direct the disposition: 3,281,953 (iv) Shared power to dispose of or direct the disposition: 0 For purposes of calculating the percentages set forth in this Item 5, the number of shares of Common Stock outstanding is 64,437,073, as of the date of April 24, 2017. KWM, in its role as investment manager to several customer accounts (collectively, the "Accounts") to which it furnishes investment advice, and Mr. Kanen, as the managing member of KWM, may each be deemed to beneficially own shares of the Issuer's Common Stock held in the Accounts. In addition to those shares of Common Stock held in the Accounts over which Mr. Kanen shares voting and/or dispositive power with KWM, Mr. Kanen beneficially owns 66,896 shares of the Issuer's Common Stock held for his own account. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Except for the investment advisory agreements between the Reporting Persons and the owners of the Accounts, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the Reporting Persons and any other person with respect to any securities of the Issuer. Item 7. Material to Be Filed as Exhibits. Exhibit A - Letter from KWM to the Issuer's Board of Directors, April 26, 2017 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 25, 2017 Date KANEN WEALTH MANAGEMENT LLC /s/ David L. Kanen Signature David L. Kanen, Managing Member Name/Title DAVID L. KANEN /s/ David L. Kanen Signature EX-1 2 NWY_Letter.txt LETTER FROM KWM TO NWY BOARD KWM Kanen Wealth Management, LLC Philotimo Fund, L.P. 5850 Coral Ridge Drive, Suite 309 Coral Springs, FL 33321 P: (631) 863-3100 F: (631) 863-3103 April 26, 2017 New York & Company 330 W. 34th St., 9th Floor New York, NY 10001 Dear NWY Board of Directors and Executive Management, We are writing to highlight the losing record of the board of directors and company management. We want to formally express our view that the results of the company and the share price have been awful. The status quo is unacceptable; only a few people at the top are benefiting from representation, while minority shareholders are suffering at the bottom. Over the last five months, through private discussions with company management and the board, we have attempted to amicably effect positive change at New York and Company and are deeply frustrated with management's lack of action and results to date. Maybe you view our 5% stake, as well as other larger shareholder's ownership, less significant than Irving Place Capital's ownership and not worthy of a seat at the table. We intend to vigorously represent ourselves, and perhaps other non-Irving Place shareholders feel the same way. Let us summarize the scorecard of events over the past 4 years: 1) Stock performance on a relative basis - In July of 2013 our stock was approximately $6.72 a share. Currently the stock trades at approximately $1.80 a share; this represents approximately a 73% decline in value. During the same timeframe our benchmark, XRT (S&P Retail ETF), is up 6.87% before dividends. Over this period of 73% decline in stock price, executive management has received modest base salary increases. 2) Four years ago, in calendar 2013 (FY14), our gross margin (GM) was 28.15%, our selling, general, and administration expenses (SG&A) as a percentage of total sales were 27.82% leaving us with an operating margin of 0.33%. 3) If we fast forward 4 years to calendar year 2016 (FY17), our GM was 28.41% and SG&A as a percentage of total sales was 30.07% leaving us with a negative operating margin of 1.66%. 1) During the aforementioned 4-year period, management has guided for an engagement in cost saving initiatives in SG&A and COGS to maximize profits and expand margins. These initiatives, however, have failed to translate to the company's earnings performance. During this period, the companies operating margins declined from 33 bps to negative 166 bps. Unfortunately, the numbers speak for themselves. 4) Below are some quotes from earnings calls dating back 4 years that demonstrate management and the boards failure to execute: a) March 2013 "In addition, buying and occupancy costs decreased by 180 basis points as a percentage of net sales, largely due to the company's continued focus on cost savings and reduced rent expenses." "So it's really a combination of the 3 channels of our business that will get us back to that peak operating margin in the high single digits." b) December 2014 - "In connection with our analysis, we recently initiated an organizational realignment, which included the elimination of numerous positions in our corporate offices. As a result of the organizational changes made, we expect to save $9 million to $10 million in expenses, $1.5 million of which will be realized in the fourth quarter of fiscal year 2014." c) August 2015 - "Turning to Project Excellence, our productivity initiative. As you know, our goal of Project Excellence is to improve our overall operational efficiency and productivity. At the same time, increase gross margin and mitigate expense increases and investments and growth areas of our business. As previously announced, we launched a comprehensive business reengineering project in late 2014, and we now expect Project Excellence to produce savings of approximately $30 million on an annualized basis, which has been revised upward from our prior estimate of $20 million to $25 million." d) December 2015 - "So ultimately, our target goal over a longer period of time is to get back to the high single digit operating margins." e) March 2016 - "From a bottom line benefit, we continue to expect Project Excellence to produce an estimated $15 million in savings in 2016 on top of the savings already achieved in 2015." f) May 2016 - "We continue to be pleased with the success of Project Excellence to date. And while we are excited that these savings begin flowing through directly to our bottom line in 2016, we still remain very focused on identifying new opportunities to reduce costs, increase our speed to market, increase efficiency and improve profitability." Gross Margins are unacceptable! Here are gross margins for some of New York & Co.'s peers: * ASNA, 57.98% * FRAN, 46.93% * CATO, 37.07% * CHS, 38.23% * NWY at the bottom with a GM of 28.41%. Unacceptable! Recommended Actions: 1) One new independent board member. 2) The formation of a special committee of independent directors that represents minority shareholders (non-management, non-Irving Place or have never worked at Irving Place) who's responsibility will be to conduct an in-depth, comprehensive review of NWY's operations for the purpose of maximizing gross profit and saving on SG&A. Currently, there are 3 board members that work or have worked at Irving Place Capital. We believe this would be an exercise of "best practices" for corporate governance. This in-depth review would satisfy and alleviate any concerns minority shareholders have regarding their representation. It will also show us the company is doing everything in its power to achieve its operating margin targets. 3) An enhanced capital allocation strategy that returns more cash to shareholders. We would like to highlight the many positives NWY has potential to build upon: 1) Our enterprise value is only $39 million. 2) Our enterprise value is only 4% of revenue. 3) The growth potential of Eva Mendes and Gabrielle Union. 4) The balance sheet has over $76 million in net cash ~ $1.20 per share. 5) Our revised private label credit card deal which should generate $10-11 million in incremental high margin royalties this year. 6) A solid brand. 7) A majority of the leases are less than 1-2 years. 8) Tailwinds and opportunities from competitors closing stores. 9) The potential to drive gross margins higher (currently, well below peer group). 1) 10) Loyal customer base with over 40% of sales coming from private label credit card. 11) Dedicated employees at the store level. In summary, we are calling for: board representation that gives non-Irving Place Capital shareholders a true seat at the table; formation of a special committee, which is truly independent, that will conduct an in-depth review of operations to drive GM's up and SG&A expenses down; and an enhanced capital allocation strategy. A very wealthy shareholder at the top has been amply represented for years; we believe minority shareholders deserve appropriate representation! Sincerely, Dave Kanen President, Portfolio Manager Kanen Wealth Management, LLC Philotimo Fund, L.P. P: (631) 863-3100 E: dkanen@kanenadvisory.com