January 28, 2014
In an unexpected move, but one that had been sought by Wall Street and corporate governance proponents, Abercrombie & Fitch has appointed split the chairman and CEO roles, added independent directors to the board and ended its "poison pill" plan that acted to discourage takeover efforts.
Veteran retail executive Arthur Martinez will take the role of chairman, effective immediately, the New Albany-based retailer said today.
The news sent Abercrombie shares up more than 6 percent in late-morning trading.
Michael S. Jeffries, who has served as chairman since 1996, will continue to serve as a director and as the CEO.
“This is a historic moment,” said Eleanor Bloxham, a Westerville-based corporate-governance expert. “It’s excellent. I know it will please shareholders and help the board execute a succession plan they intend to work on.
“What else this shows (is) that it can be done,” she said. “Lots of times boards will say, ‘ We want to split the roles, but not now.’ Abercrombie is proving it can be done. It’s a good signal that the board will act as an independent body.”
While the move was praised by corporate governance experts, some on Wall Street were more cautious.
“We continue to believe the company remains in the very early stages of a long-term strategic restructuring,” said analyst Matthew McClintock of Barclay’s Capital in a note to investors. “We expect results to remain volatile in the near-term and reiterate our Underweight rating.”
Martinez’ experience as a retail executive includes serving as chairman and CEO of Sears, Roebuck and Co. and prior to that as vice chairman and a director of Saks Fifth Avenue. He previously served on the board of PepsiCo Inc. and was chairman of the board of the Federal Reserve Bank of Chicago
Along with Martinez, Abercrombie has appointed Terry Burman and Charles R. Perrin to the board of directors, expanding the board to 12 members, all of whom are to stand for election annually. Burman is currently chairman of Zale Corp., and Perrin is currently on the board of Campbell Soup Co. and has executive experience including having led Avon Products and Duracell International.
In connection with the separation of the roles of chairman and CEO, Craig Stapleton, who has served as lead independent director since 2010, will no longer serve in that role but will continue to serve as a director and as chairman of the nominating and board governance committee.
In addition to those moves, Abercrombie announced it has ended its shareholder rights plan, or “poison pill” to possible buyouts.
“Whether or not it’s putting it into a position of being up for sale is open to debate,” Bloxham said. “But this and everything else they’ve done demonstrates that this is not a board afraid of the dialogue or being active overseers of the company. It’s a statement of strength.”
Martinez currently serves on the board of directors of American International Group, IAC/Interactive Corporation, Fifth & Pacific Companies (formerly Liz Claiborne), International Flavors & Fragrances, Inc., and HSN, Inc., where he is chairman. He has notified the boards of two companies of which he currently is a director that he will not stand for re-election at the next annual meeting.
Abercrombie intends to pay Martinez $300,000 annually to serve as chairman, of which $200,000 will be paid in cash and $100,000 in stock.
In December, Abercrombie gave Jeffries, 69, a new contract despite the company's recent record of poor sales, a move that left Wall Street unimpressed.
That contract announcement came a few days after the investment firm Engaged Capital sent a letter to Abercrombie's board urging it to replace Jeffries “and reverse the years of disappointment to which (Abercrombie) shareholders have grown accustomed.”
Abercrombie's comparable-store sales, a key indicator of a retailer's health, have not been impressive recently.
Over the past seven quarters, the retailer has reported increases in comparable-store sales only once — by 1 percent — and flat sales once. They fell 14 percent in the latest quarter.