Abercrombie & Fitch CEO faces an uprising
Shareholders roar with approval as an activist fund calls for Michael Jeffries' ouster, sending the stock up.
By Kyle Woodley
"Off with his head!" So proclaimed activist fund Engaged Capital on Tuesday, asking for the ouster of Abercrombie & Fitch (ANF) CEO Michael Jeffries.
Investors roared with approval, sending the stock 6% higher in hopes of something that might turn around the struggling retailer. The stock was unchanged Wednesday.
If you already hold Abercrombie shares, you likely agree with the sentiment.
Michael Jeffries, who took over in 1988 to put a spark into Abercrombie & Fitch, has led the teen-focused retailer on a roller-coaster ride ever since ANF hit the markets in September 1996. Abercrombie, which priced at $16, reached as high as $84 and change during its pre-crisis heyday.
However, the stock currently sits at $36 -- a far cry from its high-water mark. More importantly, that represents a 50%-plus drop for Abercrombie stock since 2011 against a broader market that has climbed 34% in that time.
Engaged Capital, which currently sits on 400,000 shares of ANF, wrote a letter to the Abercrombie & Fitch board calling for Jeffries’ ouster. The letter claimed that the retailer’s "perennial underperformance is a result of failure of leadership" and that Jeffries should be booted when his contract expires Feb. 1.
The proof is more or less in the pudding.
Abercrombie & Fitch's stock has been halved in two years and is down 25% year-to-date. Meanwhile, Jeffries' headline-making ability has been relegated to his bizarre and often polarizing public remarks.
Most notably, Jeffries came under fire when comments from a 2006 Salon interview were dredged up by Business Insider. Jeffries said they "want to market to cool, good-looking people. We don’t market to anyone other than that." The renewed media outrage caused ANF to backpedal and begin offering plus sizes.
Jeffries also made other inflammatory comments, including:
“Are we exclusionary? Absolutely. Those companies that are in trouble are trying to target everybody: young, old, fat, skinny. But then you become totally vanilla.”
“You don’t alienate anybody, but you don’t excite anybody, either.”
Couple that warm demeanor with flat-out awful performance, and you’ve got a recipe for a coup.
ANF tanked in August after the company badly missed second-quarter earnings expectations. Abercrombie & Fitch earnings fell 20% to 16 cents per share, well short of Zacks estimates of 28 cents, and that sent Abercrombie stock into a fitting 20% tailspin.
Then, at the beginning of November, the retailer announced that its same-store sales dropped by 14%, marking the seventh consecutive period in which Abercrombie & Fitch comps were in the red. That news was coupled with a cut in full-year earnings guidance, and the announcement that ANF would be closing its Gilly Hicks lingerie stores. All that conspired to cause another dip.
Later that same month, Abercrombie & Fitch also reported a Q3 earnings miss.
But while none of the three seem to have answers about how to bounce off the mat, only one of them has a CEO that openly appears to do more harm than good.
Booting Michael Jeffries won’t necessarily save ANF stock, and it certainly doesn’t provide an immediate fix to its woeful sales. But it’s definitely a better option than keeping him.
The bottom line is that the Abercrombie CEO is out of touch with the modern consumer and lacks basic PR skills -- a dangerous combination in the fickle world of teen retail.
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Yesterday's hip and cool is today's boring. AF's illusion could only last so long.
Its a far, far cry from when AF was an elite outdoor store.
....................what the CEO stated is correct.............
He knows the retailers demographics, however he should not have made that public proclamation. It made A&F look exclusionary.....
Now the chain is hung with a PR disaster that continues to plaque the brand. They are headed in the same direction as Sears.....unrecoverable!
Too bad A&F clothes are just ORDINARY!
Went in once. I don't look like their targeted crowd - but happily my wife certainly does. But I guess my looks rather posioned things. Wasn't until I waved a credit card around over my head saying "paying customer here" that someone came over. The item my wife wanted was on a mannequin and was the last one they had. But they could not take it off to sell it to us because "well we won't have one to show off for sale then, will we?"
It was the last time we went in.
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