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Aug. 13, 2013 /PRNewswire/ -- BeaconLight Capital LLC and its affiliates (together, "BeaconLight"), a significant shareholder of Jos. A. Bank Clothiers, Inc. (NASDAQ: JOSB) ("Jos. A. Bank" or the "Company") delivered today a letter to the Board of Directors of Jos. A. Bank.
The full text of the letter follows:
August 13, 2013
Board of DirectorsJos. A. Bank Clothiers, Inc.500 Hanover Pike
Hampstead, MD 21074-2095
Dear Board of Directors,
We are writing to you on behalf of BeaconLight Capital LLC and its affiliates (together, "BeaconLight" or "we"), collectively the beneficial owners of more than 1% of the common stock of Jos. A. Bank Clothiers, Inc. ("Jos. A. Bank" or the "Company"), having been shareholders for three years. After extensive study and analysis, we are convinced that tremendous value is trapped inside the Company due to the absence of a credible capital allocation policy, an insular insider Board of Directors (the "Board"), poorly aligned management incentives, and the Company's refusal to communicate with shareholders. After several unsuccessful attempts to privately engage in constructive dialogue with the Company and the Board, we believe it is necessary to publicly voice our concerns about the Company's direction. We urge the Board to meet with shareholders with the goal of reconstituting the Board to add true shareholder representation, and strongly encourage other shareholders to reach out to the Company to demand change. With the simple changes outlined in this letter, we believe that the stock should be worth
$70 per share even at a discounted multiple to its peers.
Jos. A. Bank Has Underperformed Its Peers and Is the Cheapest US-Listed Retailer
While we appreciate the role that current leadership played in building the Company from a sleepy 100-store regional retailer to a national 600-store company with over
$1 billion in sales, they have delivered increasingly dismal total shareholder returns over the last five years. The Company's stock has underperformed the S&P Retail Index by 5%, 116%, and 40%, in the last five, three and one year periods, respectively.
Although the Company has suffered weak operating results in the past eighteen months, the vast majority of the stock's underperformance is attributable to multiple contraction. The market is heavily penalizing the Company for its inefficient use of cash and exceptionally poor corporate governance. As a result the Company currently trades at depressed multiples on depressed earnings. In fact, at 6x enterprise value to consensus EBIT expectations for the year ending
January 2014, the company trades at nearly a 30% discount to its peer group. Additionally, 6x EBIT is the lowest multiple of any retailer publicly listed in
the United States with a market capitalization over
The Board's Actions Make Clear Its Total Disregard for Shareholders
A. Bank Board has no truly independent directors, has one of the longest average board member tenures of any US-listed company, and has a combined ownership of only 1.5% of the Company's outstanding stock. These factors have resulted in a Board that defers to the Chairman,
Robert Wildrick, and seems to ignore other stakeholders. While we acknowledge Mr. Wildrick's contributions to the growth of the Company during his time as CEO, his past success does not entitle him to run the Company as a personal fiefdom.
Though the Board
technically has four independent directors, the reality is that every member of the Board has relationships or connections to the Company or Mr. Wildrick. The Lead Independent Director,
Andrew Giordano, was the former Chairman of the Board who hired Mr. Wildrick to run the Company in 1999.
Neal Black, the Company's current CEO, was hired by Mr. Wildrick after previously working with him at Belk.
James Ferstl also worked with Mr. Wildrick at Belk and at their ill-fated attempt to turn around Venture stores in the 1990s. The remaining two directors,
Sidney Ritman and
William Herron, are both friends of Mr. Wildrick and Mr. Giordano from
Palm Beach. This cohort allows the Chairman to collect
$825,000 per year for consulting the Company on acquisitions that none of the shareholders seem to want. Notably, the entire Board combined only owns a measly 1.5% of the Company's stock. In fact, in 2006 when he was the CEO, Mr. Wildrick sold nearly his entire 5% stake in Jos. A. Bank at an average share price of
$28 and has not purchased another share since.
In 2010, the Board installed a "share compensation" plan for management, providing a cash and stock bonus based exclusively on the annual performance of the Company's net income relative to targets set by the Board. There is no compensation based on any shareholder-aligned metrics, such as earnings per share, return on capital, or total shareholder return. Further, each year, the stock portion of the bonus is for a fixed amount of dollars rather than a fixed number of shares. This actually creates a perverse incentive for management to minimize the share price and thereby, accumulate a larger stake in the Company over time.