Citi Trends Plays Hardball With Share-Grabbing Stockholder
Citi Trends Inc. is going on the defensive—just in case.
The low-cost clothing chain’s board adopted a limited duration shareholder rights plan that kicks in anyone amasses a 16 percent stake in the company.
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Citi Trends pointed out that it hasn’t gotten a takeover bid, or any similar attempt to take control of the more than 600-store retailer, which sells apparel for men, women and children, as well as shoes, beauty items, home goods and snacks to urban consumers. But the move could stave off a stockholder that’s “quickly accumulating a significant number of shares in the open market,” it said in a statement issued Wednesday.
These rights plans, commonly called a “poison pill,” equip companies to thwart strong-arm takeover tactics. But not everyone is a fan. Some complain that companies often hide behind poison pills, further entrenching boards that might need some blood. Critics also argue that poison pills force a takeover hopeful to negotiate with the board instead of taking their fight directly to fellow shareholders. But boards counter that argument by claiming that poison pills buy them time to force corporate raiders to the bargaining table to hash out a fair deal for everyone involved.
The Citi Trends rights plan is in effect through Dec. 4, 2024, or until further notice. Stockholders will have the chance to ratify the poison pill at the company’s next annual meeting, date TBD. The plan won’t go forward without shareholder approval.
Shares of Citi Trends were trading in the $30 range a year ago, and at one point in February reached $33. They fell to the $14.50 range in June, before closing at $24.27 on Wednesday.
Citi Trends isn’t the only retailer that has adopted a poison pill. Express Inc., Chico’s FAS Inc., Tailored Brands, Foot Locker, Kohl’s Corp. and Nordstrom Inc. have also had a reason to go on the financial defensive in recent years.
Last month Citi Trends reported a third-quarter net loss of $3.9 million, or 47 cents a diluted share, and $179.5 million in net sales, 6.7 percent lower than a year ago. Comparable store sales fell 6.2 percent for the three-month period.
