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Carter’s, Inc.’s board of directors has adopted a shareholder rights plan, also known as a poison pill, following an investment firm’s “rapid accumulation of a significant amount” of its common stock, the children’s wear retailer said in financial filings Wednesday.
Hedge fund Roseman Wagner Wealth Management earlier this month disclosed it had acquired nearly 17% of the company’s shares, making it the retailer’s top shareholder.
“Carter’s was given no advance notice of the stock accumulation by RWWM, and there has been no communication from RWWM, despite attempts by Carter’s management to contact RWWM,” Carter’s said in its filing. “It is possible that RWWM is continuing to accumulate stock.” RWWM did not reply to Retail Dive’s requests for comment.
The firm’s move prompted the new policy, which will expire in about a year. At the close of business Oct. 3, Carter’s will issue to stockholders of record one preferred share purchase right for each outstanding share. This is meant to reduce the possibility of a takeover that Carter’s shareholders haven’t agreed to, or increase the company’s chances of negotiating a higher purchase price if they are open to being acquired.
The children’s apparel retailer is in the midst of a turnaround, unveiled in May, under a chief executive who arrived a few months before. The company “has faced continual challenges since the pandemic and despite investing in a new pricing plan, has not been able to reach a positive comp since 2019,” Wells Fargo analysts led by Ike Boruchow said when the plans were announced.
At that point CEO Douglas Palladini cited “a challenging market environment and the possibility the Company may incur significantly higher product costs as the result of the new proposed tariffs on products imported into the United States.” In July, the company discussed plans to trim costs including via about 100 store closures as leases expire.