(Adds Abercrombie & Fitch statement)
By Aditi Shrivastava and Maria Ajit Thomas
Dec 3 An Abercrombie & Fitch Co
shareholder urged the teen apparel retailer to replace Chief
Executive Mike Jeffries after his contract expires in February,
failing which the company should consider selling itself.
Engaged Capital LLC, which owns less than 1 percent of the
company's shares, said in a letter to the board on Tuesday that
the expiration of Jeffries' term is an opportunity for the board
to set a new direction for the company. (link.reuters.com/xek25v)
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 shares, which have lost about 30 percent of
their value this year, were up 5.6 percent to $35.95 in early
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
"A little fresh blood would definitely benefit the company,"
Morningstar Inc 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
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 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.
Abercrombie said it valued input from shareholders and has
had extensive talks with many of them, including Engaged
Capital, over the past several months.
"We look forward to continuing our dialogue with
shareholders as we execute on our long-term plan," the company
said in a statement emailed to Reuters.
Engaged Capital said it owned about 400,000 shares of
Abercrombie. The company has about 76.40 million shares
outstanding, according to Thomson Reuters Data.
Jeffries made headlines in 2006 when he said A&F's clothes
were made for "cool" and "attractive" kids and not for "fat"
people. The company, which does not 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 Inc and American
Eagle Outfitters Inc 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 that it expected a tough
holiday shopping season.
The company posted a loss in the third quarter after
comparable-store sales fell for the seventh straight quarter.
(Editing by Saumyadeb Chakrabarty)