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In this Aug. 12, 2008 file photo, shoppers walk in front of a Abercrombie & Fitch store in San Jose, Calif. (Paul Sakuma/AP)
In this Aug. 12, 2008 file photo, shoppers walk in front of a Abercrombie & Fitch store in San Jose, Calif. (Paul Sakuma/AP)

Struggling Abercrombie strips CEO Jeffries of chairman role Add to ...

Teen apparel retailer Abercrombie & Fitch Co. stripped chief executive Mike Jeffries of his chairman duties, bowing to investor pressure to reduce his control over the struggling company.

Shares of the company rose nearly 7 per cent on Tuesday after A&F also abandoned a “poison pill” aimed at blocking hostile buyout bids and named three new board members.

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The moves comes nearly two months after the company extended Jeffries’ contract by a year, ignoring shareholder Engaged Capital LLC’s call to replace the CEO.

“It seems like it’s a political and respectful way of approaching a CEO issue without saying we’re gonna throw you to the curb,” said Nomura Equity Research analyst Simeon Siegel.

Jeffries, who has been CEO for nearly 22 years, has faced criticism for failing to stop the once-edgy retailer from ceding market share to “fast fashion” chains such as Forever 21 and Inditex’s Zara over the past couple of years.

Analysts have raised concerns about A&F’s ability to boost sales, saying management was more focused on marketing and cutting costs than on improving merchandise in a bid to bring teen shoppers back into its stores.

“Today’s announcements ... come as no surprise given the poor performance of the company under Mike Jeffries,” Topeka Capital analyst Dorothy Lakner said.

Shares of the company, which is set to post its eighth-straight decline in quarterly same-store sales, have lost about a quarter of their value in the last 12 months.

“While a good first step, we believe these reactive changes alone will not be sufficient to put the company back on a course towards creating shareholder value,” said Engaged Capital’s chief investment officer Glenn Welling.

FRESH PERSPECTIVE

Jeffries, 69, was hired as A&F’s CEO in 1992 to revamp the ailing sports brand, after it was acquired in 1988 by Limited Brands – now known as L Brands Inc.

The CEO revamped the company to “sizzle with sex” by introducing racy catalogues and advertising aimed at making the more than century-old brand a must-have for teenagers.

He had also stirred controversy in the process by suggesting the company’s clothes were made for “cool” and “attractive” kids and not for “fat” people.

However, the high prices that company charged soon led to its shoppers opting for trendier and cheaper clothes at “fast fashion” chains.

“Separating the chairman and CEO functions addresses recent shareholder concerns over leadership and also brings fresh perspective going forward,” Jefferies analyst Randal Konik said.

Last November, the company said it would expand its women’s tops collection, offer larger sizes and more colours, and start selling shoes, in a bid to win back teen shoppers.

In December, it said it would hire presidents for its Abercrombie & Fitch, abercrombie kids, and Hollister brands to help with succession planning.

The company said on Tuesday that Jeffries, who has served as chairman since 1998, would be replaced by Arthur Martinez, who was appointed non-executive chairman and added to the company’s board.

New Albany, Ohio-based A&F also appointed two independent directors, Terry Burman and Charles Perrin, increasing the number of board members by three to 12.

Martinez serves as a director of several companies and is the current chairman of HSN Inc.

Burman is currently the chairman of Zale Corp. and serves on the board of Tuesday Morning Corp. He was also CEO of jewellery chain Signet Jewelers Ltd.

Perrin, who is a former CEO of Avon Products Inc, currently serves on the board of Campbell Soup Co.

POISON PILL

A&F also said it would drop a plan that triggers the issue of new shares, designed to dilute the holding of any shareholder that raises their stake above a certain threshold.

The shareholder rights plan, commonly known as a “poison pill”, was adopted in 1998 and was set to mature in 2018.

“We think the termination of the shareholder rights plan better opens A&F up to the potential for a leveraged buyout,” Konik added.

Engaged Capital, which owns less than 1 per cent of A&F’s stock, had also said that the company should sell itself if it did not replace Jeffries.

Rival American Eagle Outfitters Inc, which is also struggling with fickle teen shoppers, said last week that chief executive Robert Hanson would leave the company.

 
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