Spotlight Capital Management, LLC said Friday that shareholders of women's apparel retailer Chico's FAS Inc.(CHS) reprimanded Chico's board of directors at the company's annual meeting on Thursday, with one of the company's directors, John Burden, receiving a protest vote. The firm urged the company's board to take immediate steps to improve corporate governance and foster a turnaround at the company.
Private investment fund Spotlight Capital owns shares of Fort Myers, Florida-based Chico's in its flagship activist fund, Spotlight Capital Partners LP, and had previously announced its intention to withhold support from Burden. For several months, the firm has called for significant changes at Chico's, including instituting annual elections for all board members and replacing the CEO.
The fund noted that John Burden received a 45.5% protest vote, the highest in the company's history and among the highest for all directors of U.S. public companies this year. More than 45% of the shareholders withheld ballots for Burden.
Gregory Taxin, managing director of Spotlight Capital said, "Given that Mr. Burden was criticized in numbers rarely seen in the capital markets, he should at a minimum step off the Board's Corporate Governance and Nominating Committee."
Taxin added, "This historic protest vote is a clear message that shareowners expect the Board to take immediate steps to improve corporate governance, show less loyalty and deference to the CEO and foster a turnaround at the Company. This Board cannot remain inert."
Spotlight said that at the meeting, Taxin presented the fund's view to the board and assembled shareowners on the topics.
Taxin said, "Chico's has one of the worst performing CEOs in the country. Now is the time to do the right thing for shareowners and immediately replace him with an executive who has the skills necessary to return Chico's to greatness."
Spotlight has also been critical of the board's recent decision to weaken its corporate Governance Guidelines. The fund noted that at the meeting, the independent directors did not offer any rationale for this highly unusual action when challenged by it.
Last week, the fund announced that three proxy advisory firms, RiskMetrics, PROXY Governance and Glass, Lewis & Co., have each recommended that their clients withhold support from John Burden at the annual meeting of Chico's shareholders on June 26.
Spotlight noted that Chico's has underperformed the market and its peers since Scott Edmonds became the Chief Executive Officer in 2003. During his tenure, the stock is down more than 50%, costing investors more than $1.6 billion. The company also noted that fiscal year 2008 would be the third consecutive year of earnings-per-share declines for the company.
Spotlight said that the company's board of directors promoted the CEO to the combined post of chairman and CEO even as the business substantially underperformed its peers. According to the fund, the board also awarded Edmonds a "special bonus" of $650 thousand for strengthening his management team, apparently believing the $25 million in pay Edmonds has received as CEO was insufficient reward for hiring employees.
Spotlight said it opposed Burden's candidacy to the board because it believed that Burden has a conflict of interest that inhibited his ability to act independently on behalf of shareowners. The firm noted that Burden's son-in-law is a member of the Chico's management team. Burden sits on the company's Corporate Governance and Nominating Committee and, until recently, sat on the Compensation Committee.
Spotlight noted that Burden was regarded as a "conflicted director" by Chico's own Governance Guidelines, until those guidelines were, without fanfare or announcement, recently watered down to reclassify him.
On Thursday, Chico's said that based on a preliminary count provided by the election inspector, shareholders have re-elected all three of the company's Class III Directors at the Annual Meeting of Stockholders. Chico's also noted that at the end of the first quarter of fiscal 2008, it had approximately $271 million dollars in cash and marketable securities and zero debt.
The company outlined several steps that it was taking for future earnings growth, saying it would slow down real estate square footage growth until there was improvement in the overall economy and evidence of improved same store sales, profitability and cash flow. In addition, the company said it would implement tighter controls over inventory levels commensurate with the trend in business, thereby avoiding significant markdowns. The company also intends to reduce capital expenditures from prior years by only allowing expenditures that are crucial to its needs and that provide measurable payback.
Chico's has suffered as consumers cut back spending amid a rising cost of living and declining home values. Women's apparel retailers have been among the hardest hit sectors in the retail industry.
Last month, the company reported a profit for the first quarter that fell to $12.7 million, or $0.07 per share from $47.2 million, or $0.27 per share a year ago. Net sales for the quarter declined 9.6% to $409.6 million. The company also said it continues to expect negative comparable store sales and lower earnings for the first half of 2008.
Earlier this month, Chico's reported a 16.9% drop in comparable store sales for May compared to the same period last year. Total sales for May reported by the Chico's declined 8.8% to $141.4 million from $155.0 million for the corresponding period a year ago.
For the first five months, the company reported comparable store sales decrease of 17.4%. Total sales declined 9.4% to $551.0 million from the same period last year.
In Friday's regular trading session, CHS is trading at $5.71, down $0.05 or 0.87% on a volume of 65 thousand shares. The stock has been trading in a range of $5.42-$25.33 in the past 52 weeks.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.