Activist Investor Pushes Abercrombie To Drop CEO Mike Jeffries
Engaged shareholder Capital LLC fired off a letter to the board on Tuesday saying the company's "perennial underperformance is a result of a failure of leadership."
"Given the Company's history of operational missteps, taken together with Mr. Jeffries' age and his increasingly controversial reputation, the Board must not let this opportunity pass," Engaged Capital Managing Director Glenn W. Welling wrote in the letter. Engaged Capital owns less than 1% of the company's shares.
Abercrombie's shares were up 2% in early trading Tuesday.
Jeffries, 69, has been CEO of the teen retailer for 16 years. According to his contract, he would receive more than $100 million if the company replaced him.
"A little fresh blood would definitely benefit the company," Morningstar Inc analyst Bridget Weishaar told Reuters. But Weishaar added that the board has been supportive of Jeffries. "So, I'd be highly doubtful if this letter changes anything."
Abercrombie's sales have been plummeting as teens abandon the retailer for fast fashion brands including Forever 21, H&M and Urban Outfitters.
Same-store sales fell 14% in the most recent quarter ending November 2, up from a 10% drop in the previous quarter.
The company has been criticized for not updating its fashions to reflect changing consumer tastes.
Jeffries has also become the target of criticism for saying he only wants beautiful people to shop in his stores.
"Publicity around Mr. Jeffries' past public statements and the apparent intrusion of his private life into Company business have caused unnecessary controversy, no doubt damaging the Company's public profile, employee morale, and likely sales," Welling wrote.
The company's poor corporate culture also makes it difficult for Abercrombie to attract and retain talent, he added.
"[Abercrombie's] future success will be dependent on the Company's ability to adapt to a fast changing retail environment, carefully manage expenses, and efficiently allocate capital," Welling wrote. "Unfortunately, these are not areas where Mr. Jeffries has demonstrated expertise or competency."
See the full letter below.