Charlotte Russe Proxy Fight Heats Up

The proxy fight at juniors retailer Charlotte Russe Holding Inc. took a tough turn on March 24.

Charlotte Russe board chairman Jennifer Salopek issued a strongly worded statement urging company shareholders to reject three candidates for its board of directors. These candidates are supported by private investment firm Karp Reilly Capital Partners. “Karp Reilly is the proverbial fox in the henhouse,” the letter told shareholders. Board elections will take place April 28 at the company’s annual shareholder meeting in San Diego.

The letter is the latest twist in a long-brewing fight for the future of this retailer, which runs a fleet of 487 stores in 45 states. On March 13, the board of directors announced the company was up for sale and retained financial firm Cowen and Company LLC to provide financial counsel. The same day, rival shareholder leader Allan Karp issued a statement accusing Charlotte Russe’s board of mishandling company business by hiring a team with no experience in the juniors or fast-fashion market. In November, the board hired a new team helmed by John Goodman, president of defunct retailer Mervyns.

The hire came on the heels of a Nov. 12 offer by Karp to purchase all of the outstanding shares of the company. Karp founder Allan W. Karp still owns a 5.68 percent share of Charlotte Russe. He served on Charlotte Russe’s board of directors from 1996 to 2007 and currently serves on the boards of fashion brand Trina Turk and restaurant companies Z’Tejas and Habit Burger Grill.

Karp nominated himself to be on the board as well as Hezy Shaked, chairman of Irvine, Calif.–based action-sports chain Tilly’s, and Gabriel Bitton, president of Canadian contemporary brand Buffalo David Bitton. Karp argued that his slate’s current experience with juniors retailing could boost sales for Charlotte Russe. In her letter, Salopek argued that Shaked and Bitton were Russe competitors and did not seek to serve the retailer’s best interests.

On Jan. 21 the retailer announced results for its first fiscal quarter of its new year. Its same-store sales declined 9.1 percent. Its net sales were $240.7 million. —Andrew Asch