UPDATE: July 20, 2021: Genesco shareholders voted "overwhelmingly" to re-elect its current board directors, the company said in a press release after preliminary vote tallies. The vote follows an effort by an activist investor group to remake the company's board and shake up its operational and financial strategy.
In the release, Genesco CEO Mimi Vaughn said that the company is "highly energized to continue to execute on our footwear focused strategy, build on our progress and momentum coming out of the pandemic, and realize the significant synergies across our businesses to drive growth and profitability."
- Ahead of a proxy vote, Genesco is engaged in a public war of words with activist shareholders intent on revamping the company's board, and pushing out new operating and financial strategies.
- In public statements and press releases, asset management firm Legion Partners has attacked the retailer and brand owner's conglomerate structure, capital allocation, cost structure, executive compensation, board experience and lack of social, environmental and diversity focus.
- Genesco issued a press release Thursday that defended the company's strategy and said that Legion "fundamentally misunderstands the dynamics of today's footwear retail and branded market."
In its latest public release to shareholders, Legion, which says it owns 5.9% of Genesco's stock, outlined a top-to-bottom shakeup at Genesco. The investment firm has called for the company to assess possible divestment of "non-core, non-synergistic businesses," as well as company culture and a new growth strategy for the Journeys business.
There's more. The investors also want Genesco to consider property sales, cost cuts, new targets on executive compensation, sustainability and supply chain practices, and a loyalty program at Journeys, among several other things.
As it tries to transform the company, Legion is targeting Genesco's board. Legion has identified four directors at Genesco that they say "continue to hold the Company back" and "must be removed and replaced on the Board." As a proxy fight looms, Legion has put forward four directors of its own that it is asking shareholders to vote for, including a former executive at Macy's and a former chief marketing officer of Burlington.
Genesco this week issued a thorough defense of itself and hit back at the activists in their midst. In its release it said that Legion has issued "collectively over 200 pages of misinformation, misleading claims, and superficial suggestions, as well as a press release with inaccurate assertions regarding Genesco's commitment to ESG and DE&I, which the Company believes demonstrate a lack of understanding of Genesco's business and the industry and a disregard for long-term value creation."
Genesco also said that Legion has "proposed a random collection of ideas in an attempt to generate short-term gains," as well as made demands for initiatives "that Genesco largely is either already pursuing, has carefully considered and ultimately rejected, or that simply do not make sense for Genesco's business."
Specifically, the company defended its share buyback program as systematic — with 30% of share repurchased since 2017 — and its cost-cut target as being higher than Legion's. It also pointed to the potential divestment of assets, including its Johnston & Murphy brand and Schuh banner, as leading to "destruction" of shareholder value "at this inopportune time, following a pandemic, at a deep discount and without consideration for the resulting dis-synergies and stranded costs."
Legion's recommendations for Journeys — including more omnichannel offerings, a new mobile app, and improved website and digital marketing — Genesco called "either outdated, already being implemented or are simply not appropriate for the Journeys' customer base." The company also defended its commitment to diversity, social and environmental issues, as well as called out Legion's recommendations for more Johnston & Murphy stores as being out of step with the growth of e-commerce.
Additionally, Genesco pointed out that one of Legion's board selections, Marjorie Bowen, sits on the board of Sequential Brands, which Genesco considers a competitor.
Barring an agreement between Legion and Genesco, shareholders will decide the company's board makeup at the company's July 20 annual investor meeting.