Glass Lewis, a leading shareholder advisory firm, has taken sides in the tussle between Legion Partners Asset Management and Genesco, backing the activist investor in its bid to install new directors on the footwear company’s board.
The proxy firm announced its recommendation today that shareholders vote for boardroom change at Genesco’s annual shareholder meeting on July 20, specifically endorsing two of Legion’s board picks, Dawn H. Robertson and Hobart P. Sichel and critiquing the company’s 20-year director, Matthew C. Diamond.
“Genesco’s defense of its longest-serving directors quickly falters under the weight of the company’s dour metrics,” Glass Lewis wrote in its statement. “With this view in mind, we believe there is ample cause for Genesco to support an incremental degree of board change at this time.”
“Genesco’s performance and returns have been profoundly substandard by almost any benchmark over almost any period,” the firm continued.
The announcement counters the recommendation of fellow proxy firm Institutional Shareholder Services (ISS), which sided with Genesco earlier this week.
In a statement, Mimi Vaughn, board chair, president and CEO of Genesco, responded to Glass Lewis’s recommendation, saying it “unfortunately ignores the series of decisive changes Genesco’s board has initiated and implemented across the company to sharpen our focus on our industry-leading footwear platform and the positive results these changes are producing for shareholders. Genesco’s nine director nominees collectively bring a wealth of leadership experience, financial, strategic and retail expertise, and strong track records of building enduring brands and creating sustainable value for shareholders.”
Legion, which owns 5.9% of Genesco’s shares, has nominated four new directors to the company’s board: Robertson, Sichel, former director Marjorie L. Bowen and Margenett Moore-Roberts, citing what it says is the Nashville, Tenn.-based company’s ongoing underperformance and poor shareholder return.
Genesco has previously countered that Legion’s nominees “would disrupt our substantial progress and business momentum, diminish the quality and strength of our board and jeopardize our ability to execute on Genesco’s strategic plan.”
In May, the footwear company named three new independent directors: Angel Martinez, former chairman and CEO of Deckers Brands; Mary Meixelsperger, CFO of oil manufacturer Valvoline and former CFO of DSW; and Greg Sandfort, former CEO of Tractor Supply Company. Current directors Kathleen Mason and Marty Dickens will retire at the start of Genesco’s annual shareholder meeting.
Glass Lewis did agree with the footwear company on its assessment of the remaining two of Legion’s nominees, which held that Bowen’s reelection “would not be expected to yield substantial value” while Moore-Roberts’s experience “does not speak to the Board’s current needs.”
Vaughn’s tenure as CEO began in February 2020, and the company reported first-quarter earnings that soared past analyst estimates, reversing a loss from the prior year.
For the three months ended May 1, the company posted adjusted profits of $11.6 million, or earnings of 79 cents per share, beating Wall Street’s forecast of a loss of 52 cents per share. Revenues jumped 93% to $539 million, also topping analysts’ projections of $449.15 million.