Third Point leader Dan Loeb wrote a forceful letter to the retail chain last week.
As a brand known for a presence built around the suburban mall, Bath & Body Works (BBWI) – Get a free reportIt’s had a tumultuous few years: While the early onset of COVID-19 saw a surge in orders for its soaps, lotions and other household products, the months after would bring a recession and customers less willing to spend amid a worsening of economic prospects.
The shares are down nearly 20% from a year ago, and last summer, the retailer lowered its earnings outlook.
DON’T MISS: Bath & Body Works – A Top Retail Stock Selected by Wells Fargo
The home goods retailer has also been preparing to go head-to-head in a proxy battle with hedge fund firm Third Point Management, which owns a 6 percent stake in the company.
Here’s why Bath & Body Works goes head-to-head with a hedge fund
As tensions mounted over how the retailer should be governed, Third Point CEO Dan Loeb sent shareholders a letter saying he was prepared to launch a proxy fight if Bath & Body Works did not renew. his board and gave to former Third Point chief investment officer Munib. Islam a seat.
While the company recently appointed two new members to allay the hedge fund company’s concerns, Loeb remained dissatisfied with its governance, saying Third Point “has no choice” but to “hold its capital managers accountable for the decisions they make.”
In return, Bath & Body Works sent its own letter to shareholders saying it had taken “all reasonable steps to avoid a costly and distracting power contest” but “would not accede to Mr. Loeb’s ultimatum.”
“It is disappointing and unfortunate that, despite repeated efforts to engage productively with Third Point, the Company will have to expend time, effort and resources in a costly power struggle resulting from Mr. Loeb’s unreasonable insistence that his personal protégé be appointed to the Board, Bath & Body Works said in a memo to shareholders first reported by the Wall Street Journal.
Executive pay is a main reason for Loeb’s anger
The two parties are now at an impasse as the shareholders decide what the future of the company should look like. One of the issues raised by Loeb was the size of executive compensation packages, such as the nearly $18 million chairwoman Sarah Nash received when she took over as interim CEO last year.
That alone, Loeb said in the letter, is an indication of a “red flag for shareholders” and “massive governance failure.”
“Ms. Nash’s exorbitant compensation is even more remarkable compared to her counterpart at the Company’s closest and much larger competitor, Ulta Beauty (LAST) – Get a free reportwhich paid its CEO approximately $8.9 million in 2022,” he wrote.
Bath & Body Works, in turn, said it has continually “seeked renewal” in its governance and has been charting a strong course for the future with new CEO Gina Boswell.
“Unfortunately, Third Point appears to be more interested in publicizing an ostentatious power struggle than doing what is best for Bath & Body Works and its shareholders and allowing the company to focus on executing its growth strategy,” the retailer wrote. .
