Marcato Capital Management LP, said it is sending a letter to Deckers’ stockholders announcing that it has modified its slate of highly-qualified director nominees for election at the Company’s 2017 Annual Meeting of Stockholders to include Kirsten J. Feldman, Steve Fuller, and Anne Waterman.
The full text of the letter Marcato sent to Deckers’ stockholders is below.
December 4, 2017
Dear Fellow Deckers Stockholder,
Deckers Outdoor Corporation’s (“Deckers” or the “Company”) 2017 Annual Meeting is rapidly approaching and every vote counts in this important election. As stockholders, the true owners of Deckers, we must hold Deckers’ directors accountable for the Company’s persistent failures, including chronic underperformance, missed margin targets and corporate governance abuses.
We remain highly concerned that the status quo will produce the same shortfalls to the Company’s targets that stockholders have suffered through for years on end. CHANGE IS URGENTLY NEEDED to break this pattern. After significant consideration, we have determined the best chance to affect meaningful change at Deckers and protect the value of each stockholder’s investment, is to reduce the number of nominees on our slate to three. Accordingly, we believe Marcato nominees Kirsten J. Feldman, Steve Fuller, and Anne Waterman, if elected, will bring the right mix of fashion, apparel, retail, marketing, finance, and capital allocation expertise to improve the Deckers Board of Directors (the “Board”). Notably, our three nominees are independent from both management and Marcato and will further enhance diversity in the boardroom.
ISS RECOGNIZES THAT BOARD CHANGE IS NECESSARY AND OFFERS SUPPORT
FOR MARCATO NOMINEES
ISS ALSO HIGHLIGHTS DECKERS’ PERSISTENT UNDERPERFORMANCE RELATIVE TO PEERS, REPEATED MISSED FINANCIAL TARGETS AND BOARD’S LACK OF URGENCY
In its December 1, 2017 report, Institutional Shareholder Services Inc. (“ISS”) suggested Deckers’ stockholders vote on the GOLD proxy card for Marcato nominees Fuller and Waterman. ISS also stated:
- Marcato “makes a strong case that the company’s prolonged underperformance, retreating cost and investment discipline, and the board’s lack of urgency in the face of significant industry disruption to address these issues suggests that some degree of board change is necessary.”
- Deckers “could certainly benefit from new director perspectives on marking strategy and capital discipline. Dissident nominees Fuller and Waterman seem particularly well positioned to add value to the board from day one, given both parties’ skillsets in marketing strategy and brand management, particularly Waterman’s experience brand-building on a global scale at Michael Kors and Fuller’s experience transitioning iconic outdoor apparel brand L.L. Bean’s direct-to-consumer model away from traditional catalogues toward ecommerce.”
- “While the company’s operating performance on an absolute basis shows mixed results for the company, the company clearly underperformed the peer group on a relative basis. Specifically, the company underperformed in terms of changes in total revenue, SG&A, adjusted EBITDA, and net income on both a 5-year and a 1-year basis. Although the Sanuk write-down is a central factor in driving the company’s underperformance, Deckers remains underperforming even after removing its effects. For instance, annualized growth rates for adjusted EBITDA trailed peers by 9.2 and 11.7 percentage points on a 1- and 5-year basis, respectively.”
- Deckers “has demonstrated a track record of failing to meet goals that have been articulated as actual targets, not as stretch goals. One of the more egregious examples is Deckers’ perpetually under-target operating margin which, after falling short for a number of years, has been lowered, after which the company has continued to come in below-target for multiple years.”
- “…an early-stage revival does not erase the many value-destructive years of prior underperformance overseen by the board.”
- “Overall, while shoe and apparel designers and distributors have been facing headwinds in the face of ecommerce disruption as evidenced by worsening metrics over recent years, it appears that Deckers has worsened to a greater degree…the company seems to have fallen from a leading position and landed somewhere near the middle of the pack in terms of performance.”
- “The board has not embraced its own role in the choices and missteps that led the company down a years-long path of lagging performance. The board has not demonstrated a proportionate sense of urgency in enacting change…”
- “…it is somewhat disconcerting that, in the face of clear investor demand for the information, the company would not commit to continue to break out more granular detail regarding store and individual brand results, especially given that this is a key criticism raised by the dissident…Such disclosure shortfalls seem to substantiate the dissident’s skepticism as to whether the company’s senior management team possesses a balance of both operational and capital markets acumen.”
MARCATO NOMINEES KIRSTEN J. FELDMAN, STEVE FULLER, AND ANNE WATERMAN HAVE THE RIGHT MIX OF FASHION, APPAREL, RETAIL, MARKETING, FINANCE AND CAPITAL ALLOCATION SKILLSETS AND EXPERTISE DESPERATELY NEEDED ON THE DECKERS BOARD
Marcato’s three highly-qualified nominees are:
Kirsten J. Feldman
Kirsten J. Feldman was employed by Morgan Stanley from 1984 through 2008. Ms. Feldman began working in Morgan Stanley’s mergers and acquisitions department. From 1992 to 2001 she served as a Managing Director and head of Morgan Stanley’s Global Retail Group during which time she was responsible for Morgan Stanley’s worldwide investment banking activities in the retail industry. From 2001 to 2008, Ms. Feldman was an Advisory Director in the Investment Banking Division of Morgan Stanley and a member of Morgan Stanley’s Retirement Plan Investment Committee.
Steve Fuller served as Senior Vice-President and Chief Marketing Officer for L.L. Bean, Inc. (“L.L. Bean”) from 2004 until his retirement in 2016. In this role, Mr. Fuller led all marketing functions for L.L. Bean, including branding, advertising, customer satisfaction, ecommerce, partnerships, database analytics and marketing operations.
Anne Waterman spent 15 years at Michael Kors where she served in various senior positions responsible for public relations, communications, media and marketing, including Senior Vice President, Global Image. Prior to that, she worked in the Public Relations department at Gucci, and managed sponsorship and fundraising activities for the Council of Fashion Designers of America (“CFDA”) as part of the team that created 7th on Sixth. Ms. Waterman is currently an independent consultant advising brands on strategy, creative and product development.
Photo courtesy UGG