Abercrombie & Fitch Co. (NYSE:ANF) ignored the demand of an activist shareholder to change the leadership of the company, particularly its CEO Michael Jeffries whose employment contract is set to expire on February 1, 2014.
Jeffries signs restructured contract extension with Abercrombie
The struggling teen apparel retailer announced that it entered into a new and restructured employment agreement with Jeffries to lead the company. The new employment contract will take effect immediately after the expiration of its current agreement.
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In a statement, Craig Stapleton, lead independent director of the board of Abercrombie & Fitch Co. (NYSE:ANF) explained that Jeffries was retained to lead the company under a new contract after a detailed discussion with shareholders over several months. He said the new contract reflects the feedback given by shareholders during the discussions.
Stapleton said, “The new agreement employs a more simplified, performance-based compensation structure that is designed to align incentives closely with the success of the company and the interests of shareholders.”
“Mike is a visionary in this industry and has been responsible for reinventing, creating and evolving today’s Abercrombie & Fitch Co. (NYSE:ANF) and Hollister brands. Under his direction, Abercrombie & Fitch has grown from just 36 domestic stores and $50 million in sales in 1992 to having a global presence and over $4 billion in sales today,” added Stapleton.
Furthermore, Stapleton said Jeffries and his team developed a long-term plan based on the previous successes of Abercrombie & Fitch Co. (NYSE:ANF) while targeting the current challenges confronting the company. He expressed confidence that Jeffries is the right person to execute the plan and to deliver substantial and sustainable value.
Engaged Capital led the charge for CEO replacement
Engaged Capital, owner of 400,000 shares of Abercrombie & Fitch Co. (NYSE:ANF) is pushing for the replacement of Jeffries citing that the company is mismanaged with a history of annual underperformance. The activist shareholder said that despite the “enviable competitive position” for owning two of the most valuable brands in teen apparel, its shareholders did not benefit from it due to failure in leadership.
“We are confident that an independent and objective evaluation of management’s performance would result in the conclusion that an immediate leadership change is necessary,” wrote Engaged Capital in a letter to the board of Abercrombie & Fitch Co. (NYSE:ANF) last week.
The teen apparel retailer also created new leadership positions for its major brands as part of its strategy. Its objective is to boost the market presence of its brands. Abercrombie & Fitch Co. (NYSE:ANF) will be hiring brand presidents to supervise the Abercrombie & Fitch and Abercrombie kids, and the Hollister brands.
Herbert Mines Associates was recently hired by the company to help in the search for external candidates for the newly created leadership positions. “Abercrombie & Fitch has always been highly focused on recruiting and cultivating the best talent for the company’s success, and we believe that these new senior additions to the management team will help the company achieve its potential,” said Stapleton.
The company also announced that Leslee Herro will retire as executive vice president of merchandise planning, inventory management, and brand senses in the spring next year. She will remain with the company for a period to provide advice and counsel for the leadership team and to perform special projects in her capacity in non-named executive position.
Abercrombie & Fitch Co. (NYSE:ANF) appointed Robert E. Bostrom as senior vice president, general counsel, and corporate secretary effective January 2014.