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Activist investor Third Level desires to appoint candidates to Tub & Physique Works board


Activist investor Third Level LLC on Wednesday laid out a plan to appoint candidates — together with a shareholder consultant — to the board of Tub & Physique Works Inc., saying shareholders of the retail chain “urgently want illustration” on grounds that government pay was too excessive and financials have been too weak.

The funding agency introduced the plans after it boosted its stake in Tub & Physique Works
through the fourth quarter. Third Level has a greater than 6% stake in Tub & Physique Works, which sells cleaning soap, air fresheners, body-care objects and different wellness merchandise.

Tub & Physique Works, in an announcement launched late Wednesday, disputed Third Level’s accusations, saying its management repeatedly listened to shareholders and that it was dedicated to refreshing the composition of its board. The corporate mentioned it will evaluate any potential nominations launched by Third Level.

Shares of Tub & Physique Works rose 2.7% on Wednesday. The Wall Road Journal reported the information earlier within the day.

In a letter to the board of the corporate on Wednesday, Third Level Chief Government Daniel Loeb mentioned the decision for better shareholder illustration got here after “stalled” discussions on the right way to enhance the corporate, and indicators of better resistance to a shareholder consultant.

He additionally mentioned Tub & Physique Works didn’t acknowledge Third Level’s function in suggesting the appointment of Lucy Brady — who’s president of grocery and snacks at Conagra Manufacturers Inc.
— as an impartial director. And he mentioned board chair Sarah Nash gave “unconvincing explanations” for rejecting a second candidate, one other shareholder, who was put ahead by Third Level.

Loeb additionally criticized the roughly $18 million that Nash obtained for taking over a brand new function as government chair and interim chief government final 12 months, calling the interim CEO stint “part-time” work.

“That fee got here on prime of the $700,000 she was already receiving yearly to function Board Chair,” Loeb mentioned. “Ms. Nash’s exorbitant compensation is much more outstanding when in comparison with her counterpart on the Firm’s closest and far bigger competitor, Ulta Magnificence, which paid its Chief Government Officer roughly $8.9 million in 2022.

“Ms. Nash’s outsized pay package deal is a crimson flag for shareholders and alerts a large governance failure,” Loeb continued, including that the compensation raised questions on her independence as a director.

Gina Boswell is Tub & Physique Works’ present chief government.

Tub & Physique Works’ inventory has fallen as Wall Road grows extra involved in regards to the influence of inflation on issues prospects wish to purchase — just like the self-care merchandise bought by the chain — and the issues they should purchase. Nevertheless, the retail chain in November boosted its full-year revenue outlook.

Loeb additionally criticized what he mentioned was Nash’s inexperience in retail and mentioned her function as chief government at one other firm raised questions on her dedication to Tub & Physique Works. The retailer’s separation from Victoria’s Secret in 2021, adopted by a CEO departure in 2022, led to stumbles in efficiency and in managing buyers’ expectations, Loeb added, resulting in “sloppy execution” on a share-buyback plan.

“[Bath & Body Works] purchased again $1.3 billion of inventory at a mean worth of practically $50 earlier than a number of cuts in earnings steerage despatched the inventory as little as $25,” Loeb mentioned.

Tub & Physique Works, in an announcement, mentioned its board had “diligently pursued refreshment over time,” with 75% of its administrators having joined since 2019. And it mentioned that 11 of its the 12 administrators on its board have been impartial, with seven from “various communities: feminine, individuals of coloration and/or LGBTQIA+.”

And it mentioned its appointment of Steve Voskuil — the chief monetary officer at Hershey Co.
— to the board this week mirrored its willpower that he was “the correct addition,” following Third Level’s suggestions that the board might stand to strengthen its monetary experience. Loeb, in his letter, mentioned Voskuil’s appointment didn’t tackle his issues about company governance.

“It’s unlucky that Third Level has chosen to announce its intent to pursue a pricey public proxy combat regardless of the Board’s good religion engagement efforts over the previous a number of months,” Tub & Physique Works mentioned in an announcement. “The Board will evaluate and contemplate Third Level’s proposed nominations in the end as soon as they’re obtained.”

Tub & Physique Works shares are down 18.2% over the previous 12 months. By comparability, the S&P 500
is down 7.4% over that interval.

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