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 rose 5.8 percent to $35.99 at the close in New York 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, 69, 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,” Mackenzie Bruce, a company spokeswoman, 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, has fallen 25 percent this year, compared with a 26 percent gain for the Standard & Poor’s 500 Index.