May 24, 2016 / 4:25 AM / a year ago

UPDATE 1-Barington Capital launches proxy fight against U.S. retailer Chico's - source

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By Michael Flaherty

May 23 (Reuters) - Barington Capital has nominated two directors to join the board of Chico's FAS Inc's, in a proxy fight that targets high expenses and weak stock returns at the women's apparel retailer, according to a person familiar with the matter.

Chico's Chief Executive Officer Shelley Broader took up her position in December, after top roles at Wal-Mart Stores Inc. . Barington is not seeking her ouster nor does the fund want the company to seek a sale, according to the person.

Barington believes Chico's spends too much on advertising and on headquarter-level expenses, said the person familiar with the matter, who was not authorized to speak publicly about the discussions.

Chico's targets women over the age of 35 with its three brands: Chico's, White House Black Market and Soma Intimates. The company reported a fourth-quarter loss in February, and said it anticipates flat-to-slightly negative comparable sales for fiscal 2016.

The company's shares closed at $10.90 on Monday, nearly 40 percent below where they traded a year ago.

Barington owns $10.5 million worth of Chico's shares, or 1.4 percent of the company, according to its last quarterly filing. Another activist investor, Blue Harbour, owns 3 percent of the company, making it Chico's sixth-largest shareholder, according to Thomson Reuters data.

Chico's did not immediately respond to a request for comment. Barington declined to comment.

The retailer's annual meeting is scheduled for July 21. If Barington and Chico's can not reach an agreement before that, the fate of the hedge fund's two board nominees will go to a shareholder vote.

One of the Barington nominees is said to be a former high-ranking executive at department store chain Macy's Inc , according to the Wall Street Journal, which first reported news of the proxy fight.

Cosmetics maker Avon Products Inc agreed in March to give Barington the right to approve the appointment of an independent director after months of pressure from the hedge fund. (Additional reporting by Ramkumar Iyer in BENGALURU; Editing by Peter Cooney and Kenneth Maxwell)

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