Tuesday, August 9, 2011

Notes (& Thoughts) From The 2011 Syms Annual Meeting...

Disclaimer: These come from my hand written notes of the meeting. I can not give any assurance as to the absolute accuracy of the notes, as I am human; I may have not heard something correctly, interpreted something the wrong way, or, may be mis-remembering something. With this said, I have strived to to my best with the accuracy of this post.

The meeting was held at 1 Syms Way, in New Jersey. Upon walking into the headquarters of Syms, I was greeted by a table of ladies who were checking people in to the meeting. I was asked for identification and proof of ownership of shares; pretty standard fare for meetings like this. After presenting the info, I was told that I would have to leave my cell phone an any other electronic device that I possessed at the table, as they were not allowed in the meeting. After removing my phone battery, I reluctantly left my phone at the table.

I am disgusted that the company did this. I think that it is pathetic that they treat the owners of the business in such a way. After all, I personally own more of the company than all of the board of directors combined (when you exclude Marcy Syms)- which isn't hard... If you have more than $1,000 dollars worth of Syms stock, you too own more of the company than the board of directors (per the latest proxy) owning a minuscule 100 shares... I wonder if they were treated in such a hostile manner.

At the meeting, there were roughly 35 people in attendance, plus the board. There were several posters displayed that more or less said: "No recording devices, comments will be limited to 3 minutes, disruptions will be asked to leave, and no written materials may be distributed."

To put it lightly, I the mood of the room was tense.

After the go around that involved the voting and business portion of the meeting, it was adjourned, with all matters that were up to vote passing. After this, as with most annual meetings, there is a Q&A session for shareholders.

Marcy Syms read a prepared statement, in which she expressed her view that company sales were dissapointing, with "progress being neither fast nor considerable enough." She went on to more or less say "while the economy isn't an excuse, high gas prices have put our customers in a bind." I found it somewhat unfortunate that the company couldn't capitalize on rising gas prices. It seems to me that if people are feeling a pinch in their wallets, it would be prime time for a discount retailer such as Syms, to take business away from Macy's, JCPenney, Saks, and the like.

Moving along, Ms. Syms proclaimed that there had been some hard lessons learned, and as a result, the company was working to change merchandising and brands, while bringing in new talent. Furthermore, they were working to reduce back office expenses and infarstructure costs (reducing distribution related jobs as previously talked about on this blog, citing this story, have gone a long way). She expressed the view that inventory management would help company results, as well. It does seem by my being in the Trinity store for the 3rd time in 3 years, that they are reducing inventory levels (check out this album). Furthermore, there is some scaffolding around the neighboring building that they acquired a few years ago. Additionally, there has been an "x" spray painted on the front of it... It may mean nothing, and I have yet to check permits in the city, but, something may be happening to the crown jewel of Syms' real estate.

I was dissapointed that Ms. Syms stated that she would not comment on the exploration of strategic alternatives and simply advised shareholders to read the Risk & Management sections of the company's public filings... Syms expressed her discontent with the (at the time) pending lawsuit against the company by saying: "due to the pending litigation against the company, answers to questions will likely be brief."

There was an older gentleman there that asked a few questions in regards to the opening of new stores in the area, which, apparently Syms investigated doing, but didn't follow through with due to worries of cannibalizing sales of their other stores. He also had several back and forths regarding the cost of rescheduling the meeting (apparently, around $2K) but ultimately seemed to be little more than a wordy gadfly. I am always astonished at how people can get up in arms, as was the case here, over a paltry $2 thousand dollars. The real problem, is that Syms likely broke the law with not giving enough notice of the meeting, which came after making the original date to far from the 2010 annual meeting. Furthermore, I am a lot more concerned about the company's $200 million+ in real estate that is presently being under utilized... but, I needn't digress.

There were a few Syms family members in attendance, who expressed their disdain for the way that Marcy Syms was running the company. Additionally, there was some sparring over the separation of the family, some things that Marcy Syms said roughly 2 decades ago in her book (which, is in my opinion, vital reading if you are looking at the company; it made me realize that Marcy isn't the idiot that news reports and message boards would have you think, actually, it is quite the opposite!), and the control of the various estate's common stock (which, apparently, each of the grandchildren got 5% of). I am under the impression that part of the dissent is due to how Marcy controls the company in such a way that it has caused a riff in the family. Based on this and the general mood of the meeting, I gather the impression that Marcy Syms may be looking for a way out. After all, already being a millionaire who has worked her whole life, she is nearing the age where it might be time for her to move on to her next (and less contentious) project.

After that exchange, Andrew Sole, the managing member of Esopus Creek had a tense back and forth with Maryc Syms, asking "How much control has been ceded since A&M were retained by the company?"

Syms then read a long prepared statement that didn't address the question at all. After this, Sole said what everybody in the room was thinking, which was more or less "that is obviously a prepared remark and it doesn't answer my question... How much control of the company has been ceded to A&M?"

Seeming to sense that Sole wasn't going to be satisfied with anything short of a straight answer, she said "I have not ceded any..." Which, came to me as no surprise. Furthermore, I wouldn't expect it of her.

Sole then asked another question: "When was Alvarez and Marshall retained and how many of their employees are working in the company?"

Marcy, living up to her previous promise of brevity, replied with "April, 3."

There was a bit more back and forth between Sole and Syms, due to the strange wording of the answer, but, ultimately, it came out in such a way that the company retained A&M sometime in April, that there are 3 employees working with Syms.

A representative of Franklin Resources asked if the NY Post report of the company only reviewing bids for the whole company was true. Marcy responded with "We have not limited the scope of strategic alternatives." This was a relief to hear.

And there you have it, that's pretty much all that happened at what can be called the most tense annual meeting since the time I ventured to Chigago for the Motorola meeting where Carl Icahn attempted to get board seats (the first time... the one that he lost).

Overall, it seems that the company is fighting tooth and nail to keep it's cards to it's chest. However, in light of losing the most recent court case it seems that they are failing; which I view as a big net positive for shareholders. Furthermore, while the tone of the meeting was very tense and there were some heated exchanges, I view this as a net positive for the stock, but, a negative for the people involved. Surely, anytime that people don't get along, it is unfortunate. However, sometimes, if one of the parties wins, there can be gains. It seems that Syms is losing the legal battle, and as a result, has less ground to stand on than ever before. In fact, if losses at the company continue, I can make a strong argument that the company will be more in play for a sale than ever before; a net positive for shareholders.

With all of this said, I am more confident of things going well for shareholders than at any point in the past. While I don't know what is going to happen, I have feeling that something should happen. Even if the company goes temporarily insolvent, my investment should be more than protected by the plethora of real estate that the company owns; so, it seems like a "heads I win, tails, I don't do badly" type of scenario- especially when I consider that I was lucky enough to have my average purchase price be in the low 7 dollar range.

There is blood in the water and it seems as if the dam is beginning to show signs of wear.

Like this post and want to learn about a shareholder meeting of a company that you own some stock of, but, don't have the time or interest to attend? Check this page out, shoot me an email (ragnarisapirate[at]gmail.com), and maybe we can work something out...

Disclosure: I am long shares of Syms. This is not advice of any kind. This is not a recommendation of any kind. I have received nothing to write/post these notes. Always do a ton of your own research in regard to anything that I say, do, write, or so much as even think about.



3 comments:

Saj Karsan said...

Thanks, Jeff! Good info

Taylor Conant said...

Jeff,

I'd be interested to know why you bother going to these things and don't just sell the stock when there seem to be long-winded, if not entirely intractable, problems related to a particular company?

I am not challenging your decision to do so, just want to understand when and why this is a superior strategy versus "voting with your feet." It often seems to me like managements are willing to listen and on shareholders' sides when things are going well, and when they're not, they're as good as brick walls. I know Graham argued people should be activists but I wondered often how that is possible if you don't have control over the board.

jeff said...

Going to meetings helps you to get a feel for who you are dealing with. Plus, it is a good excuse to go to a cool city for a vacation... I actually hung out with one of my friends while in NYC for a few days. Not that it is ever reason for owning a stock, just a perk of traveling to these things.

The value in the company is immense, and I feel that I am well compensated for the risk involved with being an owner. Additionally, there is an activist who seems to be doing a hell of a job- he doesn't need to control the board to get stuff done... The company is also presently exploring strategic alternatives. It's a lot about the risk/reward.

I view there as being a lot of potential here. If it goes insolvent, I think I would still do well in a bankruptcy situation- the typical worse case, isn't really that bad.

While lengthy and a bit old (there have been some new developments, this post sums up most of my thesis on the company.

http://ragnarisapirate.blogspot.com/2011/03/syms-corp-off-priced-stock-of-off-price.html