The
Charming Shoppes Full Value Committee Files Definitive Proxy Materials to Elect
Its Slate of Three Director Nominees to Charming Shoppes' Board and Sends Open
Letter to Shareholders
Urges
Shareholders to Elect The Committee's Three Highly Qualified Nominees Who Will
Represent the Best Interests of All Shareholders
NEW YORK,
April 7, 2008 -- The Charming Shoppes Full Value Committee announced today that
it has filed with the Securities and Exchange Commission definitive proxy
materials in connection with its nomination of three highly qualified and
independent candidates for election to the Board of Directors of Charming
Shoppes, Inc. ("Charming Shoppes" or the "Company") (Nasdaq: CHRS - News) at Charming
Shoppes' 2008 Annual Meeting. The meeting is scheduled to be held at 450 Winks
Lane, Bensalem, PA 19020 on Thursday, May 8, 2008, at 10:00 A.M. (eastern time).
The Committee's nominees are Arnaud Ajdler, Michael Appel and Robert
Frankfurt.
The
Committee also announced today that it has issued an open letter to the
shareholders of Charming Shoppes in which it urges shareholders not to be misled
by recent public statements from the Company, which the Committee believes are
intended to distract shareholders' attention from the significant strategic and
financial problems that have been plaguing the Company. In the letter, the
Committee criticizes Charming Shoppes for telling its shareholders in a recent
letter that "Charming Shoppes has benefited immensely from the leadership of
your Board," when in reality the current Board has presided over disastrous
operating performance, poor capital allocation decisions and misguided business
strategies.
The full text of the letter follows:
ATTENTION
CHARMING SHOPPES, INC. SHAREHOLDERS
Vote
the enclosed WHITE proxy card
FOR
The
Charming Shoppes Full Value Committee's Director Nominees
April 7,
2008
Dear
Fellow Shareholders:
IT IS TIME FOR A CHANGE!
For years
now, the current Charming Shoppes Board and senior management team have overseen
a dramatic deterioration and precipitous decline in both the Company's operating
and stock performance. In fact, in the last year
alone the Company's stock price has sunk almost 62%, more than double that of
the S&P Retail Index. While all Charming Shoppes' shareholders have
suffered mightily, the very Board of Directors that was elected to represent our
best interests has continued to reward its senior management team with excessive
salaries and bonuses. To add insult to injury, Charming Shoppes has the audacity
to tell its shareholders in a recent letter that "Charming Shoppes has benefited
immensely from the leadership of your Board." The reality is that the current
Board has presided over disastrous operating performance, poor capital
allocation decisions and misguided business strategies. We cannot sit idly by
and accept the status quo. Please sign, date and
return the enclosed WHITE proxy card today.
THE
CURRENT BOARD JUST DOESN'T GET IT!
The
Company would have you believe that Charming Shoppes has "benefited immensely"
from the leadership of the current Board. Ask yourself who benefits
when:
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The
Company's current stock price is up only 7.9% compared to where the stock
price was more than 12 years ago when Ms. Dorrit Bern, the Company's
current Chairman, President and CEO, became Chief Executive Officer,
compared to a 146% increase in the S&P 500 Index during the same
period.
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The
Company experiences a decline of 4.1% in consolidated comparable sales
over the last six years vs. an increase of 11.5% for its peers despite
what the Company continues to characterize as "very high growth"
marketplace.
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The
Company generates operating margins well below that of its peer group(1)
despite greater revenues and a leadership position in the fast growing
plus size women's apparel
marketplace.
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The
Company's net income swings to a loss of approximately $83 million for
fiscal year 2008, a decline of approximately $192 million from the
immediately prior fiscal year.
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The
Company has spent $628 million on capital expenditures and acquisitions
over the last three years ... an incredible amount when you consider that
the Company's total market cap is only $565 million today. Where did our
money go?
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The
Company boasts of spending $253 million in fiscal year 2008 to buy back
shares when in actuality it paid an average cost of $10.43 per share, or a
premium of 109% to the April 4, 2008 closing price of
$4.99.
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The
Company acquires Crosstown Traders, a non-core catalog business, for
approximately $261 million only to see Crosstown Traders' revenue decline
11% (despite the addition of Lane Bryant Catalog) and an EBITDA loss of $2
million. The Company recently wrote down the value of Crosstown Traders by
$98.2 million, or almost 40% of the purchase
price.
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Moody's
Investor Service recently cuts Charming Shoppes ratings three notches and
Standard & Poor's Ratings Services lowers Charming Shoppes' corporate
credit rating from B+ to BB- stating, "The downgrade is based on recent
very weak operating trends which have resulted in sharp deterioration of
credit metrics and our belief that these trends will not be substantially
reversed in the near term."
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(1) Peer
group consisting of Chico's, Christopher & Banks, Dress Barn, Ann Taylor,
Debs Shop and Cato Corp.
While
shareholders have suffered because of management's missteps, this current Board
has awarded the top five listed senior executives approximately $53.2 million in
compensation over the last four fiscal years. Ms. Bern alone made $30.5 million
over the last four years. It seems apparent to us that the only people who have
"benefited immensely" are the senior executives who have been handsomely
rewarded despite having implemented a flawed business strategy that has led to
substantial underperformance and significant erosion to shareholder
value.
Ask
yourself whether Charming Shoppes is truly being run for the benefit of its
shareholders.
THE CURRENT BOARD IS DISCONNECTED FROM
REALITY
Consider
the following:
WHAT THEY SAY: "Charming Shoppes' Board is
comprised of highly-qualified proven business executives with relevant
experience in the retail industry."
THE REALITY: None of the seven independent
directors have any experience in women's apparel retail. Ms. Bern, herself,
seems to admit as much when she stated on the Company's most recent earnings
conference call that "for the last six months, as I think you know, our board
has been looking for qualified retailers, so that search continues ...
"
WHAT THEY SAY: As illustrations to the way
shareholders have supposedly "immensely benefited" from the leadership of the
current Board, a recent letter to shareholders highlights, among other things,
the following performance metrics over the last 5 years: "Increased consolidated
net sales 25%" and "Successfully integrated and grown Lane Bryant to 896 stores
from 647 stores (an increase of 38%), increased sales by 36%, and expanded Lane
Bryant's distribution channels to include e-commerce, outlets and
catalog."
THE REALITY: These statements illustrate that
this current Board doesn't look at the right metrics to analyze the business.
This Board does not seem to understand that only profitable growth (i.e., high
return on capital reinvestment) can create value for shareholders. Growth for
growth's sake has generated a low return on capital, a weakened balance sheet
and negative shareholder value as indicated by the Company's poorly performing
share price.
WHAT THEY SAY: "Arnaud Ajdler, a nominee of the
Crescendo and Myca hedge funds, sits on the board of directors of Mothers Work,
Inc., a direct competitor
of Charming Shoppes headquartered a mere twenty minute drive from
Charming Shoppes' headquarters."
THE REALITY: Mothers Work, Inc. is a retailer
of maternity apparel. Charming Shoppes is a retailer of primarily plus-size
women's apparel. That the Company claims this makes them direct competitors only
confirms what we believe - that this Board does not understand its target
customers. How can a Board and senior management team effectively market to the
diverse segments of plus-size women when it does not even know who its target
customers are in the first place? No wonder Charming Shoppes' operating margins
have lagged its peer group's margins. No wonder the Company is suffering as a
result of poor merchandising and store-level marketing that is confusing the
Company's target audience.
We also
question what the proximity of corporate offices has to do with competition? If
it's proximity to its corporate offices that this Board wishes to raise, then it
should be asking itself why its Chairman, President and CEO has commuted back
and forth more than 750 miles from Illinois to the Company's headquarters in
Pennsylvania for the entire 12 years since she took office.
WHAT THEY SAY: "Charming Shoppes' Board is
independent, diverse and open- minded, and our interests are closely aligned
with those of all Charming Shoppes' shareholders ... Furthermore, on November 8,
2007, we announced your Board's authorization of an additional $200 million
share repurchase program, reflecting our great confidence in the future of this
Company, and our commitment to creating shareholder value."
THE REALITY: Non-employee directors have
purchased only 22,000 shares of your Company in the past 2 years with their own
money. To the contrary, during their service, these directors have taken out
hundreds of thousands of dollars out of
your Company in the form of compensation and received, on average, 11% more in
total compensation this year than last year. Why have the members of the Board
purchased so few shares of your Company if they are so confident in its future?
Members of the Charming Shoppes Full Value Committee collectively own
approximately 8.2% of the outstanding shares of common stock. Our interests in
maximizing shareholder value are squarely aligned with yours.
THIS
BOARD WANTS IMMUNITY -- NOT ACCOUNTABILITY
What else
could explain why the Company is spending hundreds of thousands of dollars of
the shareholders' money in filing a groundless, last-ditch lawsuit littered with
wildly unsupportable and frivolous claims? If the Board and senior management
team are so confident that shareholders are "benefiting immensely" under their
leadership and are pleased with the Company's performance, then why would they
try to block the democratic process and not want to put the director election to
a shareholder vote? We believe this lawsuit was designed with one purpose in
mind -- to limit accountability and further entrench the Charming Shoppes Board.
Please sign, date and return the enclosed WHITE
proxy card today.
DO
NOT BE MISLED
The
Company would have you believe that it filed the lawsuit to protect your
interests as shareholders. Ask yourself whom this Board is really trying to
protect? How does it protect shareholders when a company takes actions aimed
directly at disenfranchising shareholders and "chilling" the democratic process?
It seems to us that the only interests the Board is really trying to protect in
bringing this baseless lawsuit are its own. In fact, we do not think it is a
coincidence that Dorrit Bern, the Company's Chairman, President and CEO,
herself, is one of three incumbent directors up for election at this year's
Annual Meeting.
We are
shareholders just like you. Despite what the Company would have you believe, we
have absolutely no interests in the Company that are not absolutely aligned with
the best interests of all shareholders. If our investment in Charming Shoppes
prospers, so does yours. This lawsuit is nothing more than a "smokescreen"
designed to distract your attention from the real and severe operational and
financial problems that have been plaguing the Company.
YOU
HAVE THE OPPORTUNITY TO PROTECT YOUR INVESTMENT
Our
nominees, if elected, will work with the Board to re-evaluate senior
management's plan. They will appropriately represent the shareholder's best
interests.
If
elected, our nominees will ask the tough questions and work tirelessly with the
other members of the Board to:
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Focus
senior management on improving the underperforming retail
operations;
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Focus
on merchandise improvements to appeal to the Company's core customer
base;
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Explore
the sale of non-core assets to simplify the business;
and
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Buy
back a significant amount of shares with cash flow from operations and
cash raised through asset sales. We have no intention to push
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DON'T RISK YOUR INVESTMENT ON THE CURRENT BOARD'S
IRRESPONSIBLE OVERSIGHT
We urge
all shareholders to elect our experienced director nominees on the enclosed
WHITE proxy card today. Vote today for much needed change at Charming Shoppes by
signing, dating and returning the enclosed WHITE proxy card today. We urge
shareholders to discard any proxy materials you receive from Charming Shoppes
and to vote only the enclosed WHITE proxy card.
If you
have already voted management's proxy card, you have every right to change your
vote by executing the enclosed WHITE proxy card - only the latest dated proxy
card you return will be counted.
Your vote
is very important, regardless of how many or how few shares you own. If you have
any questions, or need assistance in voting your shares, please call our proxy
solicitors, D.F. King & Co., Inc. toll-free at (800) 735-3107.
We thank
you for your consideration and look forward to the responsibility of
representing our collective interests to maximize value for all Charming Shoppes
stockholders.
Thank
you for your support,
The
Charming Shoppes Full Value Committee
CERTAIN
INFORMATION CONCERNING THE PARTICIPANTS
The
Charming Shoppes Full Value Committee (the "Committee"), together with the other
participants named herein, has made a definitive filing with the Securities and
Exchange Commission ("SEC") of a proxy statement and an accompanying WHITE proxy
card to be used to solicit votes for the election of its slate of nominees at
the 2008 annual meeting of shareholders of Charming Shoppes, Inc., a
Pennsylvania corporation (the "Company").
THE
COMMITTEE ADVISES ALL SHAREHOLDERS OF THE COMPANY TO READ THE DEFINITIVE PROXY
STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY
CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS ARE AVAILABLE AT NO CHARGE
ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN
THE PROXY SOLICITATION WILL PROVIDE COPIES OF THE DEFINITIVE PROXY STATEMENT
WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE
PARTICIPANTS' PROXY SOLICITOR, D.F. KING & CO., INC., TOLL FREE AT (800)
735-3107.
The
participants in the proxy solicitation are Crescendo Partners II, L.P., Series
Q, a Delaware limited partnership ("Crescendo Partners II"), Crescendo
Investments II, LLC, a Delaware limited liability company ("Crescendo
Investments II"), Crescendo Partners III, L.P., a Delaware limited partnership
("Crescendo Partners III"), Crescendo Investments III, LLC, a Delaware limited
liability company ("Crescendo Investments III"), Myca Master Fund, Ltd, a Cayman
Islands company ("Myca Master Fund"), Myca Partners Inc., a Delaware corporation
("Myca Partners"), Eric Rosenfeld, Arnaud Ajdler, Michael Appel and Robert
Frankfurt.
Crescendo
Partners II beneficially owns 7,354,125 shares of Common Stock of the Company.
As the general partner of Crescendo Partners, Crescendo Investments II may be
deemed to beneficially own the 7,354,125 shares of the Company beneficially
owned by Crescendo Partners II.
Crescendo
Partners III beneficially owns 378,275 shares of Common Stock of the Company. As
the general partner of Crescendo Partners III, Crescendo Investments III may be
deemed to beneficially own the 378,275 shares of the Company beneficially owned
by Crescendo Partners III.
Eric
Rosenfeld, as the managing member of Crescendo Investments II, which in turn is
the general partner of Crescendo Partners II, may be deemed to beneficially own
the 7,354,125 shares of the Company owned by Crescendo Partners II.
Additionally, Eric Rosenfeld, as the managing member of Crescendo Investments
III, the general partner of Crescendo Partners III, may be deemed to
beneficially own the 378,275 shares of the Company owned by Crescendo Partners
III.
Myca
Master Fund beneficially owns 1,523,405 shares of Common Stock of the Company.
As the investment manager of Myca Master Fund, Myca Partners may be deemed to
beneficially own the 1,523,405 shares of the Company beneficially owned by Myca
Master Fund.
Robert
Frankfurt, as the President of Myca Partners, the investment manager of Myca
Master Fund, may be deemed to beneficially own the 1,523,405 shares of the
Company beneficially owned by Myca Master Fund. Additionally, Robert Frankfurt,
as a member of a "group" for the purposes of Rule 13d- 5(b)(1) of the Securities
Exchange Act of 1934, as amended, may be deemed to beneficially own the
7,354,125 shares owned by Crescendo Partners II and the 378,275 shares owned by
Crescendo Partners III. Mr. Frankfurt disclaims beneficial ownership of the
shares owned by Crescendo Partners II and Crescendo Partners III.
Arnaud
Ajdler owns 15,000 shares of Common Stock of the Company. As a member of a
"group" for the purposes of Rule 13d-5(b)(1) of the Securities Exchange Act of
1934, as amended, is deemed to beneficially own the 7,354,125 shares owned by
Crescendo Partners II, the 378,275 shares owned by Crescendo Partners III and
the 1,523,405 shares owned by Myca Master Fund. Mr. Ajdler disclaims beneficial
ownership of the shares owned by Crescendo Partners II, Crescendo Partners III
and Myca Master Fund.
Michael
Appel, through the Michael Appel Rollover IRA account, owns 10,000 shares of
Common Stock of the Company. As a member of a "group" for the purposes of Rule
13d-5(b)(1) of the Securities Exchange Act of 1934, as amended, is deemed to
beneficially own the 7,354,125 shares owned by Crescendo Partners II, the
378,275 shares owned by Crescendo Partners III and the 1,523,405 shares owned by
Myca Master Fund. Mr. Appel disclaims beneficial ownership of the shares owned
by Crescendo Partners II, Crescendo Partners III and Myca Master
Fund.
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Contact:
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Crescendo
Partners II, L.P.
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Eric
Rosenfeld or Arnaud Ajdler, (212) 319-7676
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Myca
Partners, Inc.
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Robert
Frankfurt, (212) 587-7611
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