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A&F Shareholders: Limit CEO Pay

Abercrombie & Fitch shareholders want a lid placed on CEO pay and a greater voice in nominating board members, voting on other major decisions such as deposing board members and capping excessive severance packages for senior executives.

With Abercrombie & Fitch share price down more than 25 percent from last year, investors are justifiably unhappy with results and with management.A & F’s upcoming annual shareholders’ meeting, consequently, could be contentious.  Hedge fund Engage Capital LLC, although it reportedly owns less than one percent of A & F, is aggressively demanding to seat five of its hand-picked surrogates on the A & F board to propose a new strategy and challenge CEO Mike Jeffries and his failed initiatives.

Other unhappy shareholders include the New York City’s public employees pension system, with a 0.66% stake in the company.  The NYC pension system has submitted a proposal to allow groups with more than 3 percent equity in A & F to nominate its directors for election to the board.

Despite shareholder displeasure with Mr. Jeffries, his contract was renewed for another year when it expired in February of this year.  His base salary was reportedly $1.5 million.  He was relieved, however, from his chairmanship of the board.

Under Mr. Jeffries leadership over the past few years, Gilly-Hicks lingerie stores were closed; its key demographic — eighteen to twenty-four year olds — were drifting away to shop at fast fashion retailers, and by November last year the firm posted its seventh consecutive quarter of declining same store sales.

Reported net sales in February for A & F, including the holiday season numbers, were down a disappointing 11 percent to $1.3 billion, with net income down 58 percent to $66 million, off 85 cents a share.

In the wake of declining sales, A & F announced late last year that it would close some 30 percent of its under-performing, mall-located stores.