Abercrombie & Fitch Co. separated its chairman and chief executive officer roles almost two months after activist investor Engaged Capital LLC urged the teen-clothing retailer to start a search for a new CEO.
Arthur Martinez, a former executive at Sears, Roebuck & Co., will become non-executive chairman, the New Albany, Ohio-based company said in a statement today. Michael Jeffries, who had been chairman since 1996, will continue to serve on the board and as CEO. The company also eliminated its stockholder rights program.
Jeffries has been struggling to reconnect with the chain’s customers, who have become less enamored of its fashions and half-naked models, leading to three straight quarterly sales declines. Abercrombie investor Engaged Capital urged the company in December to start searching for a new CEO and consider selling itself to private-equity buyers.
“This is just a continuation of their response to the Engaged letter, and this is their way of ‘ousting’ him in deference to Jeffries and what he’s done historically for the company,” Simeon Siegel, a New York-based analyst at Nomura Securities, said in a phone interview. “This seems like a political way of saying let’s gradually take away power. It’s further support for the notion that Abercrombie is becoming more shareholder friendly.”
Siegel has a buy rating on the shares.
Abercrombie’s board must “objectively evaluate” organizational and strategy changes at all times, not just to appease shareholders, Engaged Capital’s Chief Investment Officer Glenn Welling said in an e-mailed statement.
“We are pleased to see the board respond to our stated concerns at Abercrombie by enacting the earlier announced governance changes,” Welling said. “While a good first step, we believe these reactive changes alone will not be sufficient to put the company back on a course towards creating shareholder value.”
Engaged Capital, based in Newport Beach, California, owns about 400,000 shares, or less than 1 percent of shares outstanding.
Abercrombie rose 4.8 percent to $36.27 at the close in New York. It declined 31 percent last year.
About 45 percent of Standard & Poor’s 500 Index boards had separate CEO and chairman jobs in 2013, up from 42 percent in 2012 and 39 percent in 2008.
Abercrombie today also named new directors who bring retail and consumer expertise. Terry Burman, former CEO of Signet Jewelers Ltd., and Charles Perrin, a former CEO of Avon Products Inc., join the board effective immediately.
Martinez serves on the boards of American International Group Inc. and IAC/InterActiveCorp. and was previously chairman and CEO of Sears and an executive at Saks Fifth Avenue.
Jeffries got a new contract with Abercrombie that goes into effect on Feb. 1, when his current agreement expires. The pact pays a base salary of $1.5 million a year with long-term incentive awards at a target value of $6 million and annual bonuses of as much as $4.5 million, the company said in a filing Dec. 9. Jeffries also has access to the company’s aircraft for as much as $200,000 in personal travel.
Abercrombie said in December it will recruit executives to the new position of brand president for each of its Abercrombie & Fitch, Abercrombie kids and Hollister lines as part of its succession planning.