Abercrombie rejects shareholder call; extends CEO contract

Mon Dec 9, 2013 1:07pm EST
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By Maria Ajit Thomas

(Reuters) - Struggling teen apparel retailer Abercrombie & Fitch Co (ANF.N: Quote) said it will extend Chief Executive Mike Jeffries' contract by at least a year after it expires in February, days after a shareholder urged the company to replace him.

Abercrombie shares fell as much as 4 percent in early trade on Monday. Shares of the company, which has reported seven straight quarters of declines in same-store sales, had lost 27 percent of their value this year up to Friday's close.

Engaged Capital LLC, which owns less than 1 percent of the company's shares, last week urged the retailer to replace Jeffries or sell itself.

"The ideal scenario that investors were hoping for was that Mike Jeffries would be replaced when his contract expired," Morningstar Inc analyst Bridget Weishaar told Reuters, but said this was unlikely, given the board's support.

Abercrombie instead announced plans to hire brand presidents for its Abercrombie & Fitch, abercrombie kids, and Hollister brands to help with its succession planning.

"This gives them a chance to introduce at least three new very senior leaders to the organization ... so they have some options in the future when the CEO position is vacated," Weishaar said.

Engaged Capital, a young activist investment firm led by former Relational Investors Managing Director Glenn Welling, said in its letter to the board that there appeared to be no qualified successor within the company to replace 69-year-old Jeffries.

"This decision appears to be made without any substantive discussion with shareholders - a rushed response, less than one week after receiving our letter," Welling said in a statement.   Continued...

An employee stands outside the Champs Elysees store of clothing retailer Abercrombie & Fitch on opening day in Paris May 19, 2011. REUTERS/Benoit Tessier