UPDATE 1-Activist Barington lays out demands in fight with Chico's

Thu Jun 2, 2016 3:40pm EDT
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(Adds statement from Chico's; updates share price)

By Svea Herbst-Bayliss

BOSTON, June 2 (Reuters) - Activist investor Barington Capital turned up the heat on apparel chain Chico's FAS on Thursday with specific demands to cut costs, boost revenue and buy back more shares one week after mounting a fight to win two board seats.

The New York-based hedge fund, which owns a 1.5 percent stake in the retailer, said it wants Chico's to slash selling, general and administrative costs by $100 million, improve merchandising and grow its Soma intimate apparel brand by 200 to 300 stores over the next five years.

It also warned the company against making new acquisitions and urged it to keep buying back stock now that the share price has fallen.

In response, Chico's said that many of the suggestions are already being considered and that its leaders have the skills and expertise to "fully realize the value of the Company."

After weeks of private discussions, Barington went public with its demands to ratchet up pressure on a company it thinks can perform better.

"Chico's could more than double its earnings per share in three years, which we estimate could translate to a stock price of approximately $25 to $27 per share," Barington's founder, James Mitarotonda, wrote to Chico's board chairman, David Walker, in a letter attached to a public filing.

Shares of Chico's, which caters to older women, have fallen 33 percent over the last 12 months while the S&P 500 apparel retail index has dropped 0.2 percent in the same period.   Continued...