Abercrombie & Fitch stores need a facelift —and the operation should begin with the removal of CEO Mike Jeffries, an investor says.
The 69-year-old retail exec — whose face has sparked endless speculation about plastic surgery, even as he has openly discriminated against the overweight in his stores — has lost touch completely with what kids want to wear, an activist investor charged Tuesday.
Recent conversations with Abercrombie’s board, meanwhile, have “confirmed” that the retailer hasn’t identified a succession plan for its blond, blow-dried and washed-up CEO, according to Glenn Welling, managing director at Engaged Capital, in a letter to Abercrombie’s board.
That’s despite the fact that Jeffries’ employment contract is up for renewal Feb. 1.
“As Mr. Jeffries approaches 70 years of age, no credible successor exists inside the company’s executive ranks,” Welling said.
Shares of the beleaguered teen retailer spiked 5.8 percent to $35.99 after Engaged Capital published a nine-page letter sent to Abercrombie’s board, demanding that it replace Jeffries, and possibly put the company on the block.
“It should now be abundantly clear that a transition in leadership is not just needed, but absolutely required, to restore investor confidence in the company’s future,” Welling wrote.
Abercrombie confirmed in a written statement that it has been in “extensive discussions” with investors, including Engaged Capital, and said it is “committed to creating value.”
“We look forward to continuing our dialogue with shareholders as we execute on our long-term plan,” a company spokesperson said.
Nevertheless, investors weren’t impressed by a turnaround strategy presented last month by Jeffries and his executive team, with the shares plunging 13 percent the day of the analyst meeting.
The ouster of Jeffries is necessary whether or not the company is sold, according to Welling. In conversations with buyout firms, Welling said he has been told that the lingering presence of Jeffries is seen as a “major stumbling block” for any prospective buyout.
Welling, whose fund has amassed 400,000 Abercrombie shares, said Jeffries has frittered away the company’s cash on expensive store openings in Europe and Japan.
Likewise, Jeffries has had little response to intensifying competition from “fast-fashion” retailers like H&M and Forever 21, despite making pledges to do so as early as 2008.
During the past five fiscal years, Jeffries has raked in $140 million in compensation — just a hair under Ralph Lauren, making him the second-highest paid among peers in retailing, according to securities filings.
During that same time frame, Abercrombie’s stock has lost 31 percent.