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Sycamore cuts Chico's bid - our data found falling engagement online

8 months ago by Jon Marino in Markets

Sycamore Partners cut its offer to buy out Florida-based women's retailer Chico's ($NYSE:CHS). 

Typically when a private equity firm like Sycamore shows up with an LBO offer for a retailer like Chico's and is rejected - which is what happened when Sycamore offered $4.30 per share to buy the company out - it usually returns with more cash, not less. Not the case this time. Sycamore reduced its offer by more than 18%, for a company that announced its CEO and President would step down last month. Chico's made the announcement of the lower offer May 10, without saying when the initial bid was made. 

Sycamore Partners co-founder Stefan Kaluzny has made a career - and an entire LBO shop - out of being able to identify a bargain in the consumer and retail space and Chico's shares have slumped more than 30% in 2019. If Chico's cannot identify new management, or a new plan, quickly, investors may begin to warm to the company being bought out completely. 

Online Attention Sagging

Our data shows less visitors are heading to Chico's website. At a time when other retailers are pulling product from underperforming distributors and working to sell more online, the reduction in both physical footprint for Chico's, combined with falling online interest, is a sign of difficulty. 

Where's the Love (Or, the Likes?)

Social engagement for each of Chico's brands (Chico's, and affiliates Soma Intimates and White House Black Market) is starting to plateau. Facebook ($NYSE:FB) data we analyzed shows that for Chico's in particular, its ability to garner likes on social media is flat so far this year. Similarly, our data tracks Talking About Count - or the online chatter generated by an individual brand. Again, for Chico's, our data is reflecting a drop-off in social engagement compared to prior years like 2017. 

Shrinking Footprint

From its 2018 Form 10-K to its 2019 annual report, Chico's revealed the total number of stores it operates fell. Now, as part of the plan to reverse its stock's trajectory, the company will shutter about 200 more stores. From October 2017 until recently, Chico's already eliminated more than 20% of its stores, our data shows. Between reduced visibility in an increasingly competitive online marketplace, and its shrinking brick-and-mortar presence, it is unclear how Chico's will resurrect revenue growth. Perhaps a new CEO - either one put in by the shareholders, or one appointed by Stefan Kaluzny - will have that answer. 

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Jon Marino

Jon Marino is Thinknum's finance editor, covering the impacts of alternative data on public companies and investors. Prior to joining Thinknum, Jon worked in the ...

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