Clifton Robbins: Finding Companies Poised to Unlock Value

Clifton Robbins of Blue Harbour Group has the unenviable task of following Alexander Roepers.
Robbins is a value investor focused on small- and mid-cap companies in the U.S. His Blue Harbour Group, founded in 2004, boasts total assets of $1.6 billion. The group’s mantra is, “Think Like an Owner.”
Blue Harbour invests for the long term – its typical holding period is two to three years. The company only backs management teams that are smart, flexible and determined to win.
Blue Harbour attempts to help companies unlock value through sales of non-core businesses and acquisitions in consolidating industries – among other initiatives.
With that, Robbins revealed Blue Harbour’s latest stock pick:
Chico’s (CHS):

  • Specialty retailer with market cap of $2.7 billion, $2.3 billion enterprise value. Blue Harbour lead shareholder – owns roughly 6% of company.
  • Targets female consumers ages 30-65 through a portfolio of four brands. Chico’s growing slowly but generating lots of cash. White House Black Market is its fastest-growing business.
  • All four brands are growing their store base. Expect it to grow 50% in the coming years.
  • Has been beating competitors – sales have grown 50% since 2007 while sales at rivals such as Talbots have been falling.
  • Chico’s is more productive than its peers, with sales of $751 per square foot – almost double Talbots and Ann Taylor.
  • Near-term headwind: U.S. retail sales slumping the last few years. However, that has helped drive down the stock’s price.
  • New leadership beginning in 2009, helped accelerate double-digit revenue growth and 235 increase in same-store sales.
  • Soma, Chico’s “intimate women’s apparel” business, is emerging as a potential rival to Victoria’s Secret.
  • Company has no debt, plenty of cash – $370 million by year’s end. Should have $720 million by 2015.
  • In the process of share repurchases that will continue in the coming years.
  • 40-80% upside
  • More a growth stock than a value stock
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