(Bloomberg) -- Activist investor Dan Loeb said he may seek board changes at Bath & Body Works Inc., arguing that several decisions at the company have raised “significant concerns” about its corporate governance.
Loeb’s Third Point, which has increased its stake in the retailer to 6%, said in regulatory filing Thursday that it believes the company’s board has made errors in how it has structured its executive compensation. Third Point also has “significant concerns” about financial discipline at the company, investor communication and its board composition, including “the ability of current board members to make long-term value-maximizing decisions through responsible and thoughtful capital allocation.”
Shares of Bath & Body Works jumped as much as 9.5% in extended trading. The stock had fallen about 40% this year through Thursday’s close, giving the company a market value of roughly $9.6 billion.
What Bloomberg Intelligence Says
“Third Point’s reported comments on financial controls and governance practices suggest the activist investor’s 6% stake in Bath & Body Works is aimed mostly at invoking changes at the board level rather than with the company’s strategy. CEO Gina Boswell took the helm Dec. 1; the prior CEO left for health reasons.”
— Lindsay Dutch, consumer hardlines analyst
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A representative for Third Point declined to comment beyond the filing. A representative for Bath & Body Works wasn’t immediately available for comment.
Bath & Body Works had been operating for much of 2022 without a permanent chief executive officer after it was spun off from Victoria’s Secret & Co. last year. Chairwoman Sarah Nash filled in as interim CEO before former Unilever executive Gina Boswell took over the role on Dec. 1.
While the company performed well through the pandemic as consumers flocked to its personal-care products, like candles, soaps and lotions, issues with excessive inventory and promotions have since weighed on its margins. The company cut about 130 jobs in August as it realigned its operations. It said at the time it was also cutting its full-year guidance and taking measures to improve its performance, including organizational changes, additional cost cuts and efforts to improve margins on its merchandise.
Third Point, which disclosed a 3.6% stake in the company last month, said Thursday that the issues it is raising can be resolved with shareholder input, including through board refreshment.
While some new directors have joined the company’s board since the split with Victoria’s Secret, there are still some board members with little to no retail experience. Michael Morris, 75, the chairman and CEO of Appalachian Power Co., has been on the board for more than a decade and is its longest-serving member, according to data compiled by Bloomberg.
The New York hedge fund said that if a satisfactory resolution can’t be achieved, it reserves the right to seek board changes or take up other measures at the company’s annual meeting.
(Updates with company’s history starting in fifth paragraph)
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