Dive Brief:

• James Mitarotonda, who heads activist investment firm Barington Capital Group, this week fired off a letter to Chico's, blaming its board for the apparel company's underperformance and urging it to explore "strategic alternatives." Soma vastly outpaces its two sibling brands, and its value could exceed the overall company's enterprise value of some $640 million, Barington said in a press release.

• In a press release ahead of its first quarter report, Chico's acknowledged its communications with Barington and said it's "committed to taking all appropriate actions to improve performance and drive shareholder value."

• The next day, Chico's illustrated Barington's point, reporting that Soma's Q1 revenue rose 64.7% from 2020, with Chico's up 34.7% and White House Black Market up 24%. Total comps compared to 2019 fell 21.7%, with Soma up 39.3% and the other two down 32.9% combined.

Dive Insight:

Barington, which owns 2% of Chico's stock, appears to have lost its patience with the retailer's directors, slamming the board and former chief executive Shelley Broader for their inability to make what the firm described as necessary changes "to enhance value at Chico's, including improving merchandising, reducing bloated SG&A expenses and eliminating underperforming locations."

Mitarotonda, by contrast, praised current CEO Molly Langenstein for a track record of digital improvements and expense cuts.

"Moreover, we believe Ms. Langenstein is returning each brand to its roots by building merchandise assortments around quality fabric, fit and fashion," Mitarotonda wrote. "We know from our history with Chico's that these merchandising elements are critical to its loyal customer base."

In a conference call with analysts, Langenstein declined to elaborate further on any steps Chico's might consider in light of Barington's demands.

Barington got traction with similar activism at L Brands in recent years. After Barington criticized that company's direction, particularly at Victoria's Secret, and pointed out the value of sibling Bath & Body Works, L Brands shook up its board and eventually attempted to sell its underperforming lingerie business. The pandemic last year helped scuttle a sale to private equity firm Sycamore Partners. But this year, after rejecting offers for Victoria's Secret that it deemed insufficient, L Brands is taking its final steps to splitting the two businesses into separate publicly owned companies.