Abercrombie Names New Directors in Accord With ActivistLindsey Rupp
Abercrombie & Fitch Co. named four new independent directors to its board yesterday after forging a truce with activist investor Engaged Capital LLC, which had sought a management shakeup at the teen retail chain.
Hudson’s Bay Co. Vice Chair Bonnie Brooks, ex-Ralph Lauren executive Sarah Gallagher, Fossil Group Inc. director Diane Neal and Ernst & Young LLP veteran Stephanie Shern will be nominated for election to the board, according to a statement. Four current members won’t stand for re-election, leaving the 12-person board with 11 independent directors.
“Our new director nominees each bring strong and relevant backgrounds,” Arthur Martinez, nonexecutive chairman of the New Albany, Ohio-based company, said in the statement. “These actions will further enhance the board and management team’s focus, including strengthening the business, executing on the company’s strategic plans and succession planning.”
Mike Jeffries, Abercrombie’s chief executive officer, has been revamping his management team after four straight quarters of declining sales. The company promoted Jonathan Ramsden to the newly created chief operating officer position in January, and then hired Joanne C. Crevoiserat in April to replace him as chief financial officer. The retailer also has announced plans to hire two presidents to run the Hollister and Abercrombie brands as part of its succession planning.
The truce signals Abercrombie’s management and board are willing to listen to investors, said Betty Chen, a San Fransisco-based analyst at Mizuho Securities.
“This is the latest in a long line of changes they’ve made to demonstrate their willingness to be more shareholder friendly and to accelerate the turnaround process,” she said.
Engaged had nominated five directors to the board in February, saying the retailer needed a new strategy. Of those candidates, only one -- Neal, a former CEO of Bath & Body Works -- was included in yesterday’s additions. The firm has also called for a new top executive at Abercrombie and pushed the clothing maker to consider putting itself up for sale.
Yesterday’s agreement, in addition to Abercrombie’s earlier changes, “position the reconstituted board to set a new direction for the company and execute upon an agenda focused on shareholder value creation,” Engaged founder Glenn Welling said in the statement.
As part of the effort to make the board more independent, Abercrombie split up the chairman and CEO roles in January.
Abercrombie also is working to reposition its brands. The main Abercrombie nameplate will be aimed at shoppers with more money to spend, rather than teens. The Hollister brand, a Southern California-influenced clothing line, will use low prices and rapidly changing styles to recapture customers who have turned to chains like Forever 21.
The shares rose 2.9 percent to $37.84 at the close of trading in New York. The stock has gained 15 percent this year.
The move to expand the board and appease shareholders could give the retailer more time to execute its turnaround strategy, rather than having a strategic or financial buyer step in, Mizuho’s Chen said.
“It means we’re not going to see a takeover imminently,” Chen said. “It certainly sets the company up well longer term as a stand-alone.”