Abercrombie Shareholder Wants New CEO or Company Sold

Retail Outlook
Mark Lennihan/APAbercrombie Fitch CEO Michael Jeffries

By Aditi Shrivastava
and Maria Ajit Thomas

An Abercrombie Fitch shareholder urged the teen apparel retailer to replace Chief Executive Officer Mike Jeffries after his contract expires in February, failing which the company should look to sell itself.

Engaged Capital, which owns less than 1 percent of the company’s shares, said in a letter to the board Tuesday that the expiration of Jeffries’ term is an opportunity for the board to set a new direction for the company.

Engaged Capital, a young activist investment firm led by former Relational Investors managing director Glenn Welling, said a sale of the company to a private equity buyer may represent the best option for shareholders.

“However, as we have learned through discussions with industry insiders and private equity firms, Mr. Jeffries’ presence represents a major stumbling block to a transaction,” the activist investment firm said in the letter.

Abercrombie’s (ANF) shares, which have lost about 30 percent of their value this year, rose 6.4 percent to $36.20 by midday.

Analysts have raised concerns about the company’s ability to revitalize its merchandise, citing management’s focus on cost-cutting, marketing and distribution instead of product and design.

“A little fresh blood would definitely benefit the company,” Morningstar (MORN) analyst Bridget Weishaar told Reuters.

However, she said the board has been very supportive of Jeffries. “So, I’d be highly doubtful if this letter changes anything.”

Engaged Capital said there appeared to be no qualified successor within the company to replace 69-year-old Jeffries, who has been CEO for 16 years. His current contract includes a clause that he would receive over $100 million if the company changes control. Jeffries owned about 1.3 percent of Abercrombie’s shares as of July 30.

The company wasn’t immediately available for comment.

Engaged Capital said it owned about 400,000 shares of Abercrombie. The company has about 76.4 million shares outstanding, according to Thomson Reuters Data.

Jeffries made headlines in 2006 when he said AF’s clothes were made for “cool” and “attractive” kids and not for “fat” people. The company, which doesn’t offers sizes for women above large, said last month it would expand sizes, colors and fits for all styles by the spring to attract more customers.

Abercrombie and rivals Aeropostale (ARO) and American Eagle Outfitters (AEO) have been hit as young shoppers shift to “fast fashion” chains such as Inditex’s Zara and privately owned Forever 21, which offer more fashionable clothing at cheaper prices.

Abercrombie warned last month of tough holiday sales. The company posted a third-quarter loss after comparable-store sales fell for the seventh straight quarter.

  • There’s a sale at Penney’s!

    Yes, the deals are back with a vengeance at J.C. Penney (JCP) after the “fair and square pricing” experiment turned into a debacle. In August alone, there were more than 20 sales and coupons. Some of these were specific to product lines, but there were plenty of across-the-board sales, including a 20 percent-off online sale, a $10-off-$25 apparel coupon, and a 25 percent off sale that was good in-stores and online. In fact, more than half the days in August saw some kind of universal sale at the retailer. And even when there wasn’t a big sale or coupon, there were also a number of department-specific sales, including a sale offering 40 percent to 50 percent off in the bedding, bath, window and luggage departments.

    J.C. Penney

  • Express (EXPR) is a big fan of sales of the “$25 off $75, $50 off $150” variety, and which apply to the vast majority of merchandise in stores or online. Over the period we examined, you were never more than a few days away from a sale on all or most of the merchandise sold by Express. There were also sales that took took an extra discount off clearance items.

    Bottom line: If Express isn’t having a sale, you should probably just check back later that week.


  • Dealnews confirmed what my inbox already told me: Banana Republic has a lot of sales, and they’re usually very good. In July, for instance, it had five sales that all offered between 30 percent and 40 percent off.

    Yes, sometime there’s a lull of a week or so, but the magnitude of the discounts means it’s almost always worth the wait. Sure, if you urgently need a new shirt for a job interview, you might have no choice. But if it’s not a clothing emergency, why spend $100 when you can wait a few days and spend $60? 

    Banana Republic

  • The Gap is owned by the same company as Banana Republic, and it shares its enthusiasm for sales: Over a two-month period, it had nine sales that applied to all or most regularly priced items, so you’re rarely more than a week away from a sale there. Discounts tended to fall in the 30 percent to 40 percent off range.

    And what of Old Navy? The third of the Gap brands is also the cheapest, and that’s probably why it’s less keen on having big sales that take 40 percent off everything in the store. There were a few sales in the 20 to 30 percent-off range, but in general, the sales we saw were of the “up to 40 percent off activewear” variety. You can wait around to see if something you want goes on sale, but otherwise you might as well just take advantage of the already-low prices here.

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  • It’s not news that Macy’s (M) holds a lot of sales. Take June, for instance: The retailer had five different sales or coupons that offered a discount on most items.

    But a couple of caveats are in order. One is that the sales are relatively modest in value — we found a couple of coupons offering $10 off $25, or 25 percent-off $100 or more, but for the most part, you’re looking at sales in the 15 percent off range. The other is that the sales pretty much always carry a ton of restrictions and exclusions, to the point that it will take you a while to read all the fine print.

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    Take July: The month started off with a coupon offering 20 percent off any one item, which was immediately followed by another coupon offering $5 off $30. But then things quieted down for about a month: There were a few department-specific sales ($30 off any one tablet, for instance) and one sale that was exclusive to rewards members, but no across-the-board sales. Then in mid-August we got another two-week period with good coupons, and now we’re once again in a dry period for sales.

    So if you’re going to Staples for something you don’t need right away — a new laptop, for instance, or a shredder for your office — you might consider waiting a few weeks to see if a coupon pops up. But if you urgently need some office supplies, don’t bother waiting around.


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