New Albany, Ohio -- Abercrombie & Fitch Co. on Monday said it has entered into a new employment agreement with CEO Michael Jeffries, effective upon the expiration of his current contract on February 1, 2014. The new contract ties his compensation more closely with the company’s performance.
Jeffries was key to the retailer’s ascendance as a teen powerhouse. But the chain has struggled recently amid increased competition, particularly from more value-oriented teen favorites such as Forever 21. Jeffries himself has came under fire for his comments regarding the type of customers Abercrombie targets and why it does not offer plus sizes. Last week, Abercrombie investor Engaged Capital sent a letter to the board asking that Jeffries be replaced.
In announcing the decision to renew Jeffries’ contract, Craig Stapleton, lead independent director of the board of Abercrombie, stated: "Today's announcement is the result of an extensive review by the board and detailed discussion with shareholders over several months, and the specific terms of Mike's new contract reflect direct feedback from those discussions. The new agreement employs a more simplified, performance-based compensation structure that is designed to align incentives closely with the success of the company and the interests of shareholders."
Stapleton noted that under Jeffries’ leadership, Abercrombie & Fitch has grown from just 36 domestic stores and $50 million in sales in 1992 to having a global presence and over $4 billion in sales today.
“Mike and his team have developed a long-term plan that builds upon past successes, while targeting the specific challenges that the company faces today, Stapleton said. “We believe he is the right person to embark on this plan, which we believe will deliver substantial and sustainable value."
In a regulatory filing, the company that Jeffries will still have an annual base salary of $1.5 million, which will be reviewed every year. The new agreement has no retention or sign-on grant, and the formula for semi-annual equity grants contained in the 2008 agreement was eliminated. Similar to the 2008 contract, Jeffries can use the company aircraft for up to $200,000 of personal travel.
In other news, Abercrombie announced three new management positions: brand presidents for abercrombie kids, Hollister and its namesake brands. The company has hired Herbert Mines Associates to assist in its search of external candidates to fill the new roles/
Abercrombie also announced that Leslee Herro will retire from her position as executive VP of merchandise planning, inventory management and brand senses in the spring of 2014.