As a brand known for a presence built around the suburban mall, Bath & Body Works (BBWI) has had a tumultuous few years -- while the early onset of COVID-19 saw a surge of orders for its soaps, lotions and other home products, later months would bring with them a downturn and customers less willing to spend amid a worsening economic outlook.
Shares are down nearly 20% from a year ago and, last summer, the retailer lowered its earnings outlook.
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The home product retailer has also been preparing to go head to head in a proxy battle with hedge fund company Third Point Management, which owns a 6 percent stake in the company.
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As tensions over how the retailer should be governed simmered, Third Point chief executive Dan Loeb sent shareholders a letter saying that he was prepared to launch a proxy fight if Bath & Body Works did not revamp its board and give former Third Point Chief Investment Officer Munib Islam a seat.
While the company recently appointed two new members to assuage the concerns of the hedge fund company, Loeb remained dissatisfied about its governance and said that Third Point has " no choice" but "hold the stewards of their capital responsible for the decisions they make."
In return, Bath & Body Works sent its own shareholder letter saying that it had taken "all reasonable steps to avoid a costly and distracting proxy 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 spend time, effort and resources on a costly proxy fight 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 Payouts Are A Main Reason For Loeb's Wrath
The two sides are now at an impasse as shareholders get to decide what the future of the company should look like. One of the issues brought up by Loeb was the size of executive compensation packages, such as the nearly $18 million that board chair Sarah Nash was paid when she stepped in as interim CEO last year.
That alone, Loeb said in the letter, is indication of a "red flag for shareholders" and "a massive governance failure."
"Ms. Nash's exorbitant compensation is even more remarkable when compared to her counterpart at the Company's closest and much larger competitor, Ulta Beauty (ULTA), which paid its Chief Executive Officer approximately $8.9 million in 2022," he wrote.
Bath & Body Works, in turn, said that it has continuously "pursued refreshment" of 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 the publicity of a splashy proxy fight than doing what is in the best interests of Bath & Body Works and its shareholders and allowing the company to focus on executing its growth strategy," the retailer wrote.