Chico's Bids Goodbye to the Gralnicks

• Email
• Share
• Print

Chico 's (NYSE: CHS) may have had a tough year, and now it's ending it with significant goodbyes as well. Founders Marvin and Helene Gralnick will be retiring from their positions on the company's board of directors. In addition, Chico's also said it is reducing its open board seats from 11 to eight.

According to the company's site, the Gralnicks formed Chico's in 1983, peddling Mexican art and sweaters in a single store on Sanibel Island, Fla. Now, Chico's has 570 Chico's stores, 261 White House/Black Market stores, 47 Soma by Chico's stores, and 10 Fitigues stores.

We might wonder just how involved in day-to-day operations the Gralnicks were at this point, although we can infer that they were indeed involved -- Marvin Gralnick was chairman of the board and both were consulting employees (and they will resign from those duties as well). Marvin Gralnick, now 72, was also CEO until 2003.

Chico's President and CEO Scott Edmonds will remain in his current position, and the company has appointed Michael Weiss, the retired president and CEO of Limited Brands (NYSE: LTD), to be non-executive chairman of the board.

Many Fools find having company founders around a plus for would-be investors, so news like this is certainly noteworthy. I lifted an eyebrow recently when one of J. Crew's (NYSE: JCG) co-founders left the retailer -- of course, the eyebrow-lifting was more related to the departure's close proximity with J. Crew's highly successful IPO than anything else.

I own shares of both Starbucks (Nasdaq: SBUX) and Urban Outfitters (Nasdaq: URBN), and I admit, the involvement of founders in both those companies gives me an added sense of confidence. Something about having passionate founders around can boost an investment thesis.

That said, of course, it certainly doesn't mean that not having a founder around is a recipe for disaster or anything. (However, when the Gralnicks first tried to retire in 1993, they ended up coming back when the company lost its direction.)

Although Chico's has had a tough 2006, Scott Edmonds shouldn't be given short shrift. He's hardly some Johnny-came-lately; he started at Chico's in 1993 as operations manager, which implies he worked his way up to his current position and knows this company about as well as any long-term shareholder might hope the company's leader would.

It's too bad the Gralnicks aren't leaving on a more positive note, seeing how Chico's has had some missteps this year and its shares are down 48.5% in that timeframe (of course, compare that to the 287.8% increase over the last five). However, given Chico's history and what seems to be a pretty solid management team, many of whom have been there for many years, investors probably have good reason to hope that saying goodbye to the Gralnicks is nothing more serious than a bittersweet moment that was bound to happen at some point.

For related news, see the following Foolish articles:

• My Foolish colleague Jeremy MacNealy made some good points about last quarter's conference call from Chico's -- were things a little too secretive?
• This was my short take on the quarter.
• J. Crew lost a co-founder recently, too.

Starbucks is a Motley Fool Stock Advisor recommendation. To find out what other companies David and Tom Gardner have recommended to investors, click here for a 30-day free trial.

Limited Brands is an Income Investor selection.

Alyce Lomax owns shares of Starbucks and Urban Outfitters. The Fool has a disclosure policy.