Abercrombie Gains as Investor Urges CEO Search, Possible Sale

Abercrombie & Fitch flagship store | Source: Abercrombie & Fitch

NEW YORK, United States — Abercrombie & Fitch Co. gained after investor Engaged Capital LLC urged the teen-clothing retailer to start a search for a new chief executive officer and consider selling the company.

The shares advanced as much as 7.3 percent after Engaged Capital said in a letter to Abercrombie’s board that there’s “no qualified successor” to Chief Executive Officer Michael Jeffries, whose contract expires Feb. 1. Jeffries is a “major stumbling block” to a potential sale of the company to private equity, Engaged Capital said.

“The board needs to come to the same conclusion that everyone else already has –- it is time for new leadership at Abercrombie & Fitch,” Glenn Welling, chief investment officer at Engaged Capital, wrote in the letter.

Engaged Capital, a Newport Beach, California-based activist investor, owns about 400,000 shares, or less than 1 percent of shares outstanding.

Jeffries has been struggling to reconnect with the chain’s teenage customers who have become less enamored of its fashions, half-naked models and noisy stores. Full-year earnings will be as much as $1.50 a share on an adjusted basis, excluding charges, Abercrombie said in a Nov. 5 statement, below the $1.97 estimate of analysts.

The retailer has “had extensive discussions with many of its shareholders, including Engaged Capital, over the past several months,” Abercrombie said in an e-mail. “We look forward to continuing our dialogue with shareholders as we execute on our long-term plan.”

Abercrombie, based in New Albany, Ohio, rose 6.5 percent to $36.22 at 12:10 p.m. in New York, after reaching $36.50 for the biggest intraday gain since May.

By Lindsey Rupp; Editors: James Callan, John Lear, Robin Ajello