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As Chico's reels, hedge fund wants CEO ousted

Three years ago Scott Edmonds was named retailer of the year by the industry's top trade group in Florida. This week a hedge fund wants him ousted as chief executive of Chico's FAS Inc.

Once a Wall Street darling, the Fort Myers-based apparel chain has been unable to rediscover the magic with customers at its 1,063 stores that operate as Chico's, Soma and White House/Black Market. The company lost an estimated $1.6-billion in market value while Edmonds was paid $25-million.

"He's got one of the worst track records of any CEO of a public company," said Greg Taxin, managing director of hedge fund Spotlight Capital Management. "He had a couple of great years, but mortgaged the company's future for the sake of ever higher earnings. It's clear this management is incapable of righting the ship."

Taxin is onetime chief executive of Glass Lewis, one of the big investor advisory services. He urged fellow shareholders in a letter Tuesday to withhold votes for a director at the annual meeting June 26 at the Ritz-Carlton in Sarasota.

He's pressing the board to dump Edmonds, 50, or risk a full-fledged proxy battle a year from now. Three shareholder advisory services back Taxin's move to withhold votes for incumbent director John Burden, 71, onetime president of Burdines, whose son-in-law is Chico's corporate services director.

Taxin faces an uphill battle. His fund owns less than 5 percent of Chico's stock. He could not get a shareholder proposal on the agenda because the fund has not held shares long enough. Activist shareholder movements rarely succeed.

Taxin is picking on Burden because Chico's had a policy forbidding independent directors from having relatives on the payroll if they earned more than $100,000. Taxin questioned Burden's son-in-law earning $157,000. So the company changed the policy.

Legitimizing a conflict of interest is poor governance, Taxin says. Burden sat on the committee that set Edmonds' salary while his relative works for Edmonds. Chico's shares closed at $6.95 Friday. That's down 23 percent year to date and well below a 52-week high of $26.03.

About Chico's FAS

. Founded: 1983

. Specialty: Fort Myers-based apparel chain caters to middle-aged women

. Style: Sells original casual-to-dressy designs in just four sizes: 0, 1, 2 and 3.

. First-quarter performance: "Extremely disappointing," said CEO Scott Edmonds. May sales off 8.8 percent from a year ago.

As Chico's reels, hedge fund wants CEO ousted 06/13/08 [Last modified: Thursday, June 19, 2008 9:52am]
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