Activist investor Third Point LLC on Wednesday laid out a plan to nominate candidates — including a shareholder representative — to the board of Bath & Body Works Inc., saying shareholders of the retail chain “urgently need representation” on grounds that executive pay was too high and financials were too weak.
The investment firm announced the plans after it boosted its stake in Bath & Body Works BBWI, +2.77% during the fourth quarter. Third Point has a more than 6% stake in Bath & Body Works, which sells soap, air fresheners, body-care items and other wellness products.
Bath & Body Works, in a statement released late Wednesday, disputed Third Point’s accusations, saying its leadership regularly listened to shareholders and that it was committed to refreshing the composition of its board. The company said it would review any potential nominations introduced by Third Point.
Shares of Bath & Body Works rose 2.7% on Wednesday. The Wall Street Journal reported the news earlier in the day.
In a letter to the board of the company on Wednesday, Third Point Chief Executive Daniel Loeb said the call for greater shareholder representation came after “stalled” discussions on how to improve the company, and signs of greater resistance to a shareholder representative.
He also said Bath & Body Works didn’t acknowledge Third Point’s role in suggesting the appointment of Lucy Brady — who is president of grocery and snacks at Conagra Brands Inc. CAG, -0.30% — as an independent director. And he said board chair Sarah Nash gave “unconvincing explanations” for rejecting a second candidate, another shareholder, who was put forward by Third Point.
Loeb also criticized the roughly $18 million that Nash received for taking on a new role as executive chair and interim chief executive last year, calling the interim CEO stint “part-time” work.
“That payment came on top of the $700,000 she was already receiving annually to serve as Board Chair,” Loeb said. “Ms. Nash’s exorbitant compensation is even more remarkable when compared to her counterpart at the Company’s closest and much larger competitor, Ulta Beauty, which paid its Chief Executive Officer approximately $8.9 million in 2022.
“Ms. Nash’s outsized pay package is a red flag for shareholders and signals a massive governance failure,” Loeb continued, adding that the compensation raised questions about her independence as a director.
Gina Boswell is Bath & Body Works’ current chief executive.
Bath & Body Works’ stock has fallen as Wall Street grows more concerned about the impact of inflation on things customers want to buy — like the self-care products sold by the chain — and the things they need to buy. However, the retail chain in November boosted its full-year profit outlook.
Loeb also criticized what he said was Nash’s inexperience in retail and said her role as chief executive at another company raised questions about her dedication to Bath & Body Works. The retailer’s separation from Victoria’s Secret in 2021, followed by a CEO departure in 2022, led to stumbles in performance and in managing investors’ expectations, Loeb added, leading to “sloppy execution” on a share-buyback plan.
“[Bath & Body Works] bought back $1.3 billion of stock at an average price of nearly $50 before multiple cuts in earnings guidance sent the stock as low as $25,” Loeb said.
Bath & Body Works, in a statement, said its board had “diligently pursued refreshment over the years,” with 75% of its directors having joined since 2019. And it said that 11 of its the 12 directors on its board were independent, with seven from “diverse communities: female, people of color and/or LGBTQIA+.”
And it said its appointment of Steve Voskuil — the chief financial officer at Hershey Co. HSY, -0.43% — to the board this week reflected its determination that he was “the right addition,” following Third Point’s feedback that the board could stand to strengthen its financial expertise. Loeb, in his letter, said Voskuil’s appointment didn’t address his concerns about corporate governance.
“It is unfortunate that Third Point has chosen to announce its intent to pursue a costly public proxy fight despite the Board’s good faith engagement efforts over the past several months,” Bath & Body Works said in a statement. “The Board will review and consider Third Point’s proposed nominations in due course once they are received.”
Bath & Body Works shares are down 18.2% over the past 12 months. By comparison, the S&P 500 SPX, -0.16% is down 7.4% over that period.
