Slide 1: Rebuttal Presentation
Rebuttal Presentation May 2017
Slide 2: Important Disclosures
Important Disclosures • Any views expressed in this presentation 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. Ma
Slide 3: COMPANY MYTH – The Strategic Pivot
COMPANY MYTH – The Strategic Pivot • COMPANY MYTH: “Citi Trends began a strategic pivot in 2012 which, under Ed Anderson’s leadership, has dramatically improved our performance over the last five years.” - Company Investor Presentation April 2017 • REALITY: — The concept of a “strategic pivot” away
Slide 4: Company's "Goal" Curiously Omits "Nationally Recognized Brands" for First Time in April 2017
Company’s “Goal” Curiously Omits “Nationally Recognized Brands” for First Time in April 2017 $60 10-K 4/13/11 and 10-K 4/17/13: Our goal 10-K 4/16/14, 4/15/15 10-K 4/3/17: Our goal is 4/11/12: Our goal is to is to provide nationally and 4/13/16: Our goal is to provide merchandise provide nationally
Slide 5: Board Seems Confused on What Its Strategy Really is or is it Just Revisionist History?
Board Seems Confused on What Its Strategy Really is or is it Just Revisionist History? • Fiscal 2010 - 2015 – during and after the Company’s purported “strategic pivot” beginning in January 2012, the Company never mentions a “strategic pivot” in its SEC filings and each filing refers to a goal of pr
Slide 6: Self-Inflicted Mistakes Resulted in the Deterioration
Self-Inflicted Mistakes Resulted in the Deterioration • In the Company’s own words, the Company’s worst performance in its history was self-inflicted, due primarily to its disastrous decision to change its strategy to make long-term, up front purchase commitments for future seasons. This decision pr
Slide 7: Operational Performance Deteriorated Well Before Decline in Urban Brands
Operational Performance Deteriorated Well Before Decline in Urban Brands • COMPANY MYTH: In speaking about its sales through 2009, the Company claims: “Citi Trends executed a highly successful strategy based on providing value priced urban branded apparel to its core base of lower income African Ame
Slide 8: Competitors Did Well While Citi Trends Deteriorated
Competitors Did Well While Citi Trends Deteriorated • REALITY: While the Board struggled to find a solution to the decline in the popularity of urban brands, competitors were able to adapt and flourish. • dd’s DISCOUNT Stores doubled their store count dd's DISCOUNT Stores 2006 2007 2008 2009 2010 20
Slide 9: Citi Trends Ignores Performance of Peers During Pivot Downturn
Citi Trends Ignores Performance of Peers During Pivot Downturn • COMPANY MYTH – The Company claims “We responded effectively to a dramatic change in our customers’ fashion preferences” – Company Investor Presentation April 2017. • REALITY: The Board isolates the period of January 2010 through Decemb
Slide 10: Recent Financial Results Show No Evidence of Performance Improvements
Recent Financial Results Show No Evidence of Performance Improvements • COMPANY MYTH – The Company claims “Our new strategy is driving substantially improved performance” – Company Investor Presentation April 2017. • REALITY : 2015, 2016, and recent Q4 2016 earnings shows the continued deterioration
Slide 11: Inventory Turns Still Below Worst-In-Class Peers
Inventory Turns Still Below Worst-In-Class Peers • COMPANY MYTH - Inventory turns improved 0.2x from 2012-2016 while proxy peer group mean has declined 0.5x. – Company Investor Presentation April 2017. • REALITY - The Board cherry picked a timeline that is misleading. Every year prior to 2012, Citi
Slide 12: Board Has Failed to Find and Retain Effective Leadership
Board Has Failed to Find and Retain Effective Leadership • COMPANY MYTH: “We developed a strong, deep management team, as evidenced by the recent promotions of Bruce Smith to acting CEO and Brian Lattman and Christina Short to General Merchandise Managers.” – Company Investor Presentation April 2017
Slide 13: Other Company Myths
Other Company Myths Myths Reality • “We freshened our Board with new, highly-qualified • Barbara Levy – previously worked with former CEO, Mr. independent directors” Mazzola at Ideeli, Inc. • Laurens Goff – was a Principal at Hampshire Equity Partners, which owned Citi Trends prior to the Company’s
Slide 14: Macellum Never Offered A Plausible Settlement
Macellum Never Offered A Plausible Settlement • COMPANY MYTH – “Over the past two months we have made five settlement offers.” • REALITY - Citi Trends NEVER offered or agreed to put any of our four original nominees on the Board. — Excerpts from the Company’s settlement offer to Macellum illuminates
Slide 15: Retail Industry Experts and Board Members Support Qualifications of Mr. Duskin
Retail Industry Experts and Board Members Support Qualifications of Mr. Duskin Kent Kleeberger Laura A Weil Seth Johnson Joel N Waller William F Sharpe III Chairman Board Member Board Member Board Member Board Member Christopher & Christopher & Christopher & Christopher & Christopher & Ban
Slide 16: Jonathan Duskin is an Excellent Board Member and a Retail Expert
Jonathan Duskin is an Excellent Board Member and a Retail Expert — “Jon is a great Board member. He understands the critical facets of what makes a retailer function and helps bring that perspective to the Board room. He constantly challenges the executives to focus on what’s right for the sharehold