Destination Maternity Responds to Dissident Group Seeking Company Control at 2018 Annual Meeting
The full text of the letter follows:
VOTE FOR ALL OF DESTINATION MATERNITY'S DIRECTOR NOMINEES AND OTHER PROPOSALS ON THE WHITE PROXY CARD TODAY
Dear Fellow Stockholders:
The 2018 Annual Meeting of Stockholders will be held on
AT A PIVOTAL MOMENT IN ITS HISTORY, DESTINATION HAS THE RIGHT LEADERSHIP AND GO-FORWARD STRATEGY TO MAXIMIZE STOCKHOLDER VALUE
While the Company has succeeded in establishing and maintaining its leadership position within this specialty retail sector, the past few years have undoubtedly been difficult due to a number of factors and industry headwinds, including the overall weakness in the women's specialty apparel retail space as well as declining mall-based traffic. Contrary to the claims made by the
The Board has implemented significant changes to its own composition, with half of Destination's nominees having joined in the last four months. Destination's Board understands the importance of maintaining fresh perspectives and new viewpoints, and will continue to regularly evaluate its composition.
Destination's current directors and nominees each possesses extensive, relevant expertise and can provide the effective oversight necessary for the Company to continue making meaningful progress executing on its go-forward strategy. In addition to having significant professional experience in retail, e-commerce, marketing and finance, several of our directors can draw upon their past experiences serving on Boards of other public companies, ensuring your Board has the right corporate governance qualifications and sector-specific knowledge to oversee your business. Additionally, the Boardroom now features an increased ownership perspective in Mr. Pierre-André Mestre, who as Chairman of French children's clothing retailer Orchestra-Prémaman, represents over 13% of the Company's outstanding shares.
In contrast to Destination's nominees, the
As a further testament to the Company's willingness to effect impactful change, the Board and management have worked closely on a significant revision to Destination's go-forward strategy, highlighted by the following:
- Creating a more seamless and relevant omni-channel experience to lift performance in all channels.
- Capitalizing on the Company's investments in product sourcing, planning, buying and allocation.
- Increasing distribution points through additional digital marketplaces as well as a deepened relationship with
- Expanding product offerings beyond our customer's pregnancy to her life as a new-mom, including baby apparel, hard goods and other products of interest to the growing family.
- Working diligently to improve profitability through a stringent profit focused philosophy, including a continued, rigorous review of our real estate portfolio as well as opportunistically cutting or investing in our operations where appropriate for ROI.
- A continued intense focus on supplying the very best product to our customers.
INVESTMENTS IN E-COMMERCE ARE SHOWING MEANINGFUL EARLY RESULTS
In the first quarter of fiscal 2017, the Company upgraded its e-commerce site with the Demandware platform, giving it new capabilities to drive online and omni-channel sales, including ship from store fulfillment. These investments in our platform have generated significant positive momentum as evidenced by e-commerce sales, which have improved sequentially over the recent quarters, rising 54% in the third and 60% in the fourth quarters of 2017, leading to a 41% increase for the full fiscal year. We expect to continue and accelerate this favorable momentum through other technological enhancements, with the goal to make great product available to our customer wherever, whenever and however she chooses to shop.
DESTINATION IS INCREASING ITS FINANCIAL FLEXIBILITY THROUGH STORE OPTIMIZATION, EXPENSE SAVINGS AND INCREASED BORROWING CAPACITY
Under the direction of your Board, Destination has taken significant steps to enhance its financial flexibility, providing it with the resources necessary to implement its strategy to deliver long term profitable growth.
In the brick and mortar channel, Destination continues to optimize its store fleet by closing unprofitable locations, allowing the Company to evolve its business model to address shifting customer preferences while shedding unnecessary real estate costs. By the end of fiscal 2018, the Company will have opportunities to exit or renegotiate terms on approximately 30% of its 487 locations, with that percentage increasing to almost 50% by the end of fiscal 2019.
These actions are one component of the Company's ongoing stringent profit focused philosophy, which helped drive a
In order to strengthen its balance sheet and enhance its borrowing capacity, Destination entered into a new five-year
THE MILLER GROUP WANTS TO TAKE CONTROL OF YOUR COMPANY AND REPLACE DESTINATION'S ENTIRE BOARD OF DIRECTORS WITH A SLATE OF UNPROVEN AND UNTESTED NOMINEES
Additionally, not one of the
When conducting a side by side evaluation across a number of important metrics, we believe it is apparent that the incumbent Director nominees are far and away the most qualified individuals to execute the Company's ongoing initiatives.
Incumbent Destination Directors
Miller Group Nominees
Public company BOD experience
Over 55 years
Public company C-suite experience
Over 40 years
Public company senior leadership experience
Over 65 years
Fewer than 10 years
As evidenced by Destination's multiple attempts to reach a settlement with the
Unfortunately, our good faith efforts to reach a settlement were met with continued disproportionate demands by the
After Mr. Miller abandoned this effort, he proposed a private investment in the Company that would essentially enable him and an unidentified group of investors to gain control of the Company's stock, control of the Company's Board, and control of the appointment of Destination's next permanent chief executive officer – all at a discounted price. Having carefully evaluated their financial considerations and management implications, the Board determined that Mr. Miller's proposals, while perhaps in his personal best interest, were clearly not in the best interests of all of the Company's other stockholders.
With Mr. Miller having failed to gain control of your Company through these bargain-basement takeover attempts, the
Whether through its inadequate proposal to purchase the Company, its inadequate proposed private investment that would enable it to acquire control of the Company's shares, or its current attempts to gain full control of the Company's Board, it is clear that the
Stockholders should ask themselves: If the
PROTECT THE VALUE OF YOUR INVESTMENT IN DESTINATION: VOTE THE WHITE PROXY CARD "FOR" ALL OF THE PROPOSALS TODAY
Your Board is comprised of individuals who bring valuable perspectives and highly relevant experience, and they have recently overseen the successful recruitment of two highly qualified independent directors to further diversify opinions in the Boardroom. With a strong team in place and a solid infrastructure upon which to grow, the Company is focused on improving performance, achieving profitable growth and maximizing stockholder value. Do not turn over control of your Company to a group of individuals with no public company board experience, limited executive management experience and limited relevant industry experience. Vote on the WHITE proxy card "FOR" all proposals and our highly qualified slate of nominees:
Your vote is extremely important, no matter how many or how few shares you own. We urge you to vote today by telephone, online or by signing and dating the enclosed WHITE proxy card and returning it in the postage-paid envelope. If you have previously returned a gold proxy card you received from the
We are extremely honored to serve on behalf of you, our stockholders. Your Board and management team are committed to constructive engagement with our stockholders and maximizing the value of your investment.
On behalf of the Board, thank you for your continued support.
Very truly yours,
The Destination Maternity Board
If you have any questions, require assistance in voting your WHITE proxy card,
or need additional copies of the Company's proxy materials,
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The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this letter or made from time to time by management of the Company, including those regarding real estate opportunities, sales,additional borrowing capacity, expected SG&A savings and various business initiatives, involve risks and uncertainties, and are subject to change based on various important factors. The following factors, among others, could affect the Company's ability to realize such savings and could cause actual results to differ materially from those expressed or implied in any such forward-looking statements: the strength or weakness of the retail industry in general and of apparel purchases in particular, our ability to successfully manage our various business initiatives, our ability to successfully manage our real estate relationships, overall economic conditions and other factors affecting consumer confidence, demographics and other macroeconomic factors that may impact the level of spending for apparel (such as fluctuations in pregnancy rates and birth rates), availability of suitable store locations, our ability to develop and source merchandise and other factors set forth in the Company's periodic filings with the
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