Fashion Activism with Barington Capital vs. Dillards

Jim Mitarotonda is staying true to form with a new activist campaign launched at Dillard’s Inc., a large fashion apparel and home furnishings retailer.

Mitarotonda’s Barington Capital Group LP and another activist investor, Clinton Group, reported in a government regulatory filing that they own 5.3% of Little Rock, Ark.-based Dillards, and they are recommending operational and strategic improvements, such as eliminating its duel-class stock structure, evaluating its senior management team and shuffling the company’s real estate portfolio by closing underperforming properties.

Barington’s effort at Dillard’s follows up on the activist’s campaigns at other fashion apparel companies, including Syms Corp., Payless Shoes and Speedo swimwear and Calivin Klein under and jeans maker Warnaco Group Inc. For Mitarotonda, who got his start in the New York fashion scene with a job at fashion trendsetter Bloomingdale's in New York in the early 1980s, fashion activism is par for the course.

The activist funds also would like to see the company complete a sale-lease back of owned properties, a typical tactic considered by activist investors seeking to have corporations raise capital for other purposes such as stock buybacks or special dividends.

Barington and his group sent two letters to Dillard’s board, in August and a follow up letter on Jan. 29, according to the filing. “The disappointing financial performance of Dillard’s must be addressed,” Barington wrote. “While we acknowledge that the market conditions in the department store sector have been challenging over the past few quarters due to concerns with a weakening U.S. economy, the magnitude of Dillard’s recent weak results cannot be attributed to the economy alone.”

The activist group says in the filing that it is “committed to taking all actions necessary,” which for Barington, in the past, has at times included launching proxy contests to replace directors.

Barington and Clinton Group have launched activist efforts at the same company in the past. After Barington launched an insurgency at Steven Madden Ltd., Clinton Group followed up with its own activist effort there. -- Ron Orol


Ron Orol is a Washington-based reporter for The Deal and author of Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World.