Triumphing from a 10-month fight against an activist shareholder, Deckers Brands said all its candidates had been elected to its board of directors at its 2017 Annual Meeting of Stockholders.
Marcato Capital, which owns an 8.4 percent stake in Deckers, had sought to replace three directors with the activist hedge fund’s own candidates. Marcato had urged management to consider spinoffs, expense reductions and stock buybacks after complaining after the performance of Deckers’ shares.
Deckers said in a statement, “We are very pleased with the outcome of today’s vote. On behalf of the entire Deckers Board and management team, we sincerely thank our stockholders for their valuable insight and support throughout this process. Today’s outcome reaffirms that we are on the right track. We remain focused on continuing our strategic transformation as we optimize our retail strategy, improve operating profits, refresh our Board and return capital to stockholders.”
Deckers said it expects to file the preliminary voting results with the Securities and Exchange Commission within four business days. Deckers will file the final voting results with the Securities and Exchange Commission “as soon as practicable.”
Marcato had won votes from many other active investors, including other hedge funds, according to Reuters. However, passive investors BlackRock Inc. and Vanguard voted for the company’s directors, sources told Reuters.
During the prior week, Glass Lewis and Egan-Jones, both independent advisory firms, said they backed Management’s slate of directors. The two commended Deckers’ early success of its extensive transformation.
With a goal of improving operating profits by $100 million by the end of fiscal 2020, Deckers has implemented several initiatives to improve margins, centralize procurement, reduce headcount and enhance productivity. Diversification for its flagship brand, Ugg, expansion for Hoka One One and accelerated expansion internationally are also in the works.
Glass Lewis recommended that Deckers stockholders vote for Deckers’ director nominees because it believed that Deckers’ board had a “firm handle and deeply engaged understanding of the opportunities and challenges facing the business and how to address them in a timely and sustainable manner.”
The firm said Deckers’ “strategic and cost savings initiatives implemented both before and since Marcato arrived on the scene have begun to show positive results in terms of margin improvement and growth.” Glass Lewis added that it “does not appear to be an appropriate time for shareholders to support an overhaul of the board proposed by a shorter-term shareholder advocating an alternative plan that is centered on dismantling the strategies put in place in recent years by the current board and on more aggressively pursuing cost savings, store closures or other financially short-sighted initiatives, all of which would likely derail the progress made by the company and potentially be value destructive.”
Deckers also said last week that its board had retained a leading national director search firm and is actively engaged in a search process to identify at least two new qualified independent directors.
For its part, Marcato won the backing of Institutional Shareholder Services (ISS). ISS initially supported Maracto’s turnaround plan but didn’t endorse the hedge fund’s slate because too much disruption would come from its initial plan to replace all nine members of Deckers board. Support from ISS came late last week after Marcato trimmed its candidates to three individuals: Steve Fuller was previously marketing chief of apparel brand L.L. Bean, while Anne Waterman was a former Michael Kors executive. Kirsten Feldman is a former Morgan Stanley executive.
In an e-mail sent to media outlets, Mick McGuire, managing partner of Marcato, stated: “We continue to believe that the status quo at Deckers is unacceptable, and the board must take meaningful steps to avoid repeating its many historical failures. We are pleased to have served as a positive change agent and believe our involvement has created significant value for all stockholders. However, a lot of work is still required in order for Deckers to reach its full potential.”
Photo courtesy Ugg
