Legion Partners Asset Management, LLC (together with its affiliates, “Legion Partners” or “we”), which collectively with the other participants in its solicitation beneficially owns approximately 5.9% of the outstanding common shares of Genesco, Inc. (NYSE: GCO) (“Genesco” or the “Company”), today issued the below statement in an effort to address the Company’s July 1st press release and focus shareholders’ attention on the need for boardroom change. Legion Partners is seeking to elect four highly-qualified and independent candidates – Marjorie L. Bowen, Margenett Moore-Roberts, Dawn H. Robertson and Hobart P. Sichel – to Genesco’s nine-member Board of Directors (the “Board”) at the upcoming Annual Meeting of Shareholders (the “Annual Meeting”) on July 20, 2021. Learn about how to vote on the WHITE proxy card by visiting www.GCOForward.com.
Chris Kiper and Ted White, Legion Partners’ Managing Directors, commented:
“We urge our fellow shareholders to see through the smoke screen that Genesco is trying to create as this contest enters the home stretch. Rather than acknowledge the Company’s many years of underperformance and commit to enacting long-overdue governance enhancements and necessary operational improvements, the current Board is trying to divert attention away from substantive issues by disseminating an array of self-serving misrepresentations.
The reality is that Legion Partners sought to engage in good faith with Genesco prior to publicly announcing our nominations and we made multiple attempts to reach a settlement for one designee, provided that twenty-year director Matthew C. Diamond step down in 2022. In addition, we have worked with our nominees to share thoughtful, value-enhancing ideas pertaining to capital allocation, governance practices, operations, e-commerce and marketing, the supply chain and Genesco’s ideal areas of focus. We believe the current Board has continually impugned its credibility by stating we have not engaged to avert an election contest and we have not set forth a clear potential strategy. The incumbents are spending $8.5 million of shareholders’ resources on external advisors in order to craft and promote these distortions, representing a blatant misallocation of capital.
The current Board’s second press release today, which includes seemingly absurd arguments about Genesco’s share price movements, may be the most damning instance of its apparent desperation. The fact is Genesco’s shares have been appreciating over the course of the past several months as the pandemic has eased. We suspect Genesco’s most recent share price appreciation is largely the result of shareholders anticipating more boardroom changes and expressing enthusiasm for our slate’s vision for reversing years of underperformance.
In our view, shareholders should simply be focused on answering the following question at this point in time: Is change needed in Genesco’s highly interconnected boardroom and are our expert nominees the right change agents? We believe change is clearly needed based on the following:
- Chronic Underperformance - The Company has dramatically underperformed relative to its peers and relevant indices over an array of time horizons. We suspect long-term shareholders are well aware that a dollar invested in Genesco a decade ago has barely appreciated and that a dollar invested five years ago is actually worth less today. This is because Genesco’s management is not executing a winning strategy.
- Concerning Corporate Governance - We believe the Company has exhibited a fundamental disregard for sound corporate governance by keeping stale directors in place, maintaining a combined Chairman and Chief Executive Officer position, and sustaining a misaligned executive compensation program supported by a flawed conglomerate structure. Although the Company has unveiled a newfound interest in environmental, social and governance (“ESG”) principles following our nomination, we have exposed this as a reactionary ploy and our nominees have outlined much more specific initiatives.
- Considerable Interlocks Among Insiders - The Board has been consistently comprised of individuals with direct connections to other directors and Company executives, creating an apparent lack of independent and diverse perspectives. This is especially glaring when considering that McKinsey veteran Joanna Barsh, who is currently Chair of Genesco’s Compensation Committee, has presided over millions of dollars in pay to her fellow McKinsey alumni.
- Deep Undervaluation - The Company’s shares have traded at a persistent discount to both footwear retailers and footwear brands for years, signaling to us the chilling effect of the Company’s existing value-destroying conglomerate structure.
- Neglect for the Core Business - Journeys, which is the Company’s largest segment, has been substantially under-managed for years based on a review of management’s inaction and inability to implement modern retailing practices.
- Bloated Costs - Costs have remained elevated at excessive levels even as margins have shrunk and while there have been years of promises about cost cuts, selling, general and administrative costs are well above peers.
- Illusory Synergies - The Company’s underlying footwear businesses have weak synergies and low strategic value to one another, as evidenced by years of operating margins below peers.
- Seemingly Misleading Attacks on Our Nominees - The Company’s June 18th letter includes disingenuous side-by-side comparisons of the incumbents versus our nominees. We believe it impugns the Board’s credibility for it to mischaracterize our nominees’ backgrounds and omit important details pertaining to their successful track records.
We firmly believe our nominees are the right individuals to address these issues and help Genesco transform into a footwear business that thrives in the highly-competitive, increasingly-digital retail environment:
- Marjorie L. Bowen - In addition to possessing considerable capital markets expertise and corporate governance acumen, Ms. Bowen has a proven record of applying her experience to deliver value-enhancing outcomes for Genesco shareholders. When Ms. Bowen was a Genesco director in 2018, she applied her capital markets background and transaction experience to the Company’s strategic alternatives process – which resulted in the sale of the non-synergistic Lids business and provided a runway for value-enhancing share repurchases. This experience would be invaluable if the Board were to consider new ways to refine the Company’s costly and cumbersome conglomerate model.
- Margenett Moore-Roberts - We believe Ms. Moore-Roberts possesses a rare blend of customer engagement, digital marketing, ESG and DEI experience and a vision for helping Genesco develop value-generating relationships with key stakeholders, including younger and socially-engaged consumers. When Ms. Moore-Roberts served as Vice President and Global Head of Inclusive Diversity at Yahoo!, she established the company’s first Office of Inclusive Diversity and a global Center of Excellence. She oversaw the implementation of a number of policies and procedures that filtered into business lines and operations during a period of strong top-line growth at Yahoo!
- Dawn H. Robertson - Ms. Robertson is a proven retail leader with deep experience across merchandising, marketing, e-commerce and operations from her time at companies such as Old Navy, OCM, May Dept Stores and Macy’s. When Ms. Robertson was President of Macys.com, she led the development, launch and growth of its e-commerce sales. As President of Old Navy, she drove significant sales and improved EBITDA, including strong e-commerce performance. This is exactly the type of experience Genesco’s brands need given the large younger customer shift to digital.
- Hobart P. Sichel - Mr. Sichel has the analytical background of a retail-focused consultant and the practical experience of a highly-successful operator, positioning him to help Genesco find operational efficiencies while still targeting growth at the operating brand level. Mr. Sichel previously worked at Burlington Stores from 2011 to 2019, where he served as Executive Vice President and Chief Marketing Officer. He was a key member of the leadership team that turned the business around and ignited sales growth prior to an initial public offering. He has the ideal background for helping Genesco identify efficiencies while still pursuing growth – especially e-commerce growth – during a transformation period.
We believe when all the facts and nominee qualifications are objectively assessed, it will be clear that our director candidates are best suited to build a stronger Genesco inside and outside of the boardroom.”
Please visit www.GCOForward.com to view important materials.
If you have any questions or require assistance as you consider how to vote, please contact Legion Partners’ proxy solicitor Kingsdale Advisors at GCO@kingsdaleadvisors.com.
About Legion Partners
Legion Partners is a value-oriented investment manager based in Los Angeles, with a satellite office in Sacramento, California. Legion Partners seeks to invest in high-quality businesses that are temporarily trading at a discount, utilizing deep fundamental research and long-term shareholder engagement. Legion Partners manages a concentrated portfolio of North American small-cap equities on behalf of some of the world’s largest institutional and high-net-worth investors. Learn more at www.LegionPartners.com.