Struggling retail group Specialty Fashion says it will close hundreds of underperforming stores in an attempt to revive the company's fortunes, following a massive shareholder revolt.
A majority of shareholders (51 per cent) voted against the group's remuneration report at its annual meeting on Tuesday – twice the amount required to register a "first strike" that will put the board at risk of being spilt if there is a protest vote again next year.
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The company owns the Millers, Katies, Autograph, Crossroads, City Chic, and Rivers chains.
The company owns the Millers, Katies, Autograph, Crossroads, City Chic, and Rivers chains. Photo: Ken Irwin
And 34 per cent of shareholders voted against the re-election of director Michael Hardwick, who is chief financial officer at fellow retailer Cotton On.
Cotton On founder Nigel Austin's private company NAAR is Specialty's biggest shareholder with 20.2 per cent of the group's stock, while Specialty's chief executive Gary Perlstein owns another 9.3 per cent and company co-founder Iam Miller holds another 8.7 per cent.
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Specialty Fashion CEO Gary Perlstein.
Specialty Fashion CEO Gary Perlstein. Photo: Jim Rice
Top managers at the company, which owns Millers, Katies, Autograph, Crossroads, City Chic and Rivers, received none of their cash bonuses in 2017.
The protest vote comes after Specialty Fashion ran at an after-tax loss of $8.8 million last year, a $2.1 million loss in 2016 and a $4.4 million loss in 2015.
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Specialty also issued a profit warning last month, citing difficult market conditions in the first quarter that would see underlying earnings in the first half fall from $30 million last year to between $14 million and $17 million.
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Specialty tried to address shareholders' anger by announcing that NAAH's second board representative, Ashley Hardwick, would not stand for re-election at next year's AGM. NAAH currently has 40 per cent of the seats on Specialty's five-person board despite only owning 20 per cent of the company.
On Tuesday the group said it would close about 300 under-performing stores over the next three years, to bring it to a footprint of about 700 outlets.
Mr Perlstein, who resigned last week after 14 years in the top job and will retire once a replacement CEO is found, acknowledged shareholders' dissatisfaction.
"The company has outlined a transformation program that's accelerating the closure of underperforming stores and its other operational initiatives that were explained today, and were well received," he said.
"And we've got a strong plan vis-a-vis driving continual improvement in the omni channel experience."
Company chairman Anne McDonald said the company's growth strategy was to focus on e-commerce and expanding the wholesale business of the City Chic brand, which has been picked up by US department stores Macy's, Bloomingdale's and Nordstrom.
Ms McDonald said the company had already cut costs by $3.6 million in the first quarter by thinning out its support office, and was undertaking a "comprehensive structural review" of the company to try to improve shareholder value.
Mr Perlstein took home remuneration of $845,100 in 2017, comprised of a $735,985 cash salary, a car allowance and superannuation, the company's annual report shows.
The company has said it would change is remuneration plan so executive pay would be more closely tied to returns to shareholders.
Shares closed down 2.5 per cent at 19¢. The stock has fallen more then 60 per cent over the past year.