News Now! | Abercrombie & Fitch ISS QuickScore + Stock, New Director...

         NEARING HALFWAY through the second quarter and the greater FY2014, progress for the betterment of Abercrombie & Fitch Co. has been resolutely taking hold in awe. Apart from the fresh flourishment of creativity and diversification of product offerings still on going, store redesigns, and overall forward retail infrastructural change-ups, corporate governance has been irrefutably on the frontline of this paramount new period for the Company.

On June 20th, the Institutional Shareholders Services announced A&F as having pulled a "complete 180" in the past year as reflected on the ISS' QuickScore rating system.

"ISS Governance QuickScore 2.0 is a scoring and screening solution designed to help institutional investors identify governance risk within portfolio companies. QuickScore 2.0 provides investors with the tools and insight they need to assess governance attributes categorized under four pillars: Board Structure, Shareholder Rights, Compensation/Remuneration, and Audit. As these governance factors play a heightened role in investment decision-making, investors are increasingly using data and analytics to support their analysis. The need for data-driven tools to complement qualitative research has emerged as an important trend." – ISS, QuickScore, About

Upon the 2013 introduction of the QuickScore system (see methodology and more) A&F scored an alarming 10 (the lowest rank) which only preceded the brazen criticism of its governance structure and performance in light of quantitative proof of progress stagnation and deteriorating business health. Today, after the rollout of multitudinous new initiatives still taking effect, the Company stands with a golden 1 high mark.

"I can't recall another company that had that dramatic improvement, literally from the highest risk to the lowest risk. It’s a pretty unique turnaround. It’s a great outcome," commented Chris Caras, ISS vice president. "They separated their chairman and CEO roles," Caras said. "[Those two roles together] is a clear red flag for any company."

Other aspects noted to have had a significant role in the ranking jump: changing up the A&F Board of Directors by expanding and introducing independent directors; revising executive compensation plans (Mike's namely) to a more pragmatic form; and getting rid of the Company's "poison pill" (read report here). This considerably sharpened corporate checks-and-balances at A&F, and it improved shareholder rights/audits.

Nevertheless, the one thing singled out for still need of fine tuning is pay based on performance. "Sometimes that takes time to smooth out," added ISS' vice president.

The news comes at a time when stock for ANF on the NYSE has now risen this month to the highest its ever been – up at 42.77 by the time of the publication of this post (refer to the bottom of #THEHOTTESTBLOG on desktop for interactive ANF stock chart) – since the steep August 2013 decline; it's around six points short of being on par and surpassing levels before the fall. Stock has been steadily climbing since the start of FY2014 ("game-changer year" as most would well agree to call it).

Furthermore, these recent milestones this month settle in after the May 29th release of Q1 results and the June 10th announcement of Christos Angelides – beginning work October 2014 – as president of the Abercrombie & Fitch and abercrombie kids divisions.

"We are excited to welcome Christos to the Abercrombie & Fitch team and to deepen our bench of senior leadership talent. Christos [(who's spent his entire career with Next plc, a highly successful six billion dollar fashion retail and internet chain based in the United Kingdom)] brings 28 years of experience working with a multi-billion dollar international retailer. His experience with all aspects of running a business made him the perfect candidate for this newly created role. Christos' appointment is a critical step in our long-term strategy of being organized to win and we are excited to welcome him to the Abercrombie team." – Michael "Mike" S. Jeffries, CEO

"I am honored to join one of the most iconic apparel brands in the world. Abercrombie & Fitch is a storied brand with global appeal and a clearly defined aesthetic, and I am excited to help the brand continue to grow. I look forward to working with Mike Jeffries and the rest of the A&F team at what is a very exciting time for the Company." – Angelides

Settle that Moose-branded baseball cap real nice and fit, kiddos. The game's only just getting better...

Stay FIERCE!

Follow @TheSitchonFitch

News Now! | Abercrombie's Mike Jeffries CEO Contract, New Leadership Initiatives....

Mike leaving after a visit to A&F Paris which recently suffered from fire damage.
Image used for illustrative purposes only.  |  (image source)

         MORE DEFINING DEVELOPMENTS have now made their resounding effect as we experience the storming development of an unprecedented transition phase at Abercrombie & Fitch Co. While the most significant and multitudinous future initiative aspects were addressed along with the Q3 FY3013 results (see the post here), those were more so contained within the operating fields of retail, direct-to-consumer, merchandising, and international expansion efforts. However, of the most pivotal of matters overall in heated reconsideration has been the state of leadership at the Company. After a long-term period of indepth assessment and discussion, the Board of Directors has finalized its deliberations...

Michael "Mike" S. Jeffries is to retain his position as Chairman & CEO of Abercrombie & Fitch Co. upon the 2 February 2014 activation of the all-new "2013 Agreement" which was finalized on December 9 of this year. Henceforth beyond 1 February 2015, Mike is susceptible to remain although the contract – now focusing primarily on performance – may be expired within a 12 month notice by either Mike or the Company...

" 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. Mike is a visionary in this industry and has been responsible for reinventing, creating and evolving today's Abercrombie & Fitch and Hollister brands. Under his direction, 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. We believe he is the right person to embark on this plan, which we believe will deliver substantial and sustainable value. " – Craig Stapleton, Lead Independent Director of the Board

As set forth in this new 2013 Agreement as filed on December 9 in a Form 8-K with the Securities and Exchange Commission, Mike will be receiving his current annual base salary of US$1,500,000 under annual review; will still take part in the Company's annual bonus plan allowing him a 150% annual target bonus opportunity and 300% maximum bonus opportunity of base salary; entitled US$10,000,000 life insurance coverage and employee benefit programs and senior officers' arrangements; personal usage of up to US$200,000 of the corporate aircraft for "security purposes"; and eligibility to A&F Supplemental Executive Retirement Plan benefits.

However, this time around, Mike is afforded no retention or sign-on grant and the 2008 Agreement semi-annual equity grants structure has been done away with. Mike is now only eligible as recipient for annual long-term incentive awards with a US$6,000,000 target value susceptible to yearly review and, should performance justify, the Compensation Committee may also allow an increase by its sole discretion. In regards to individual, annual long-term incentive awards, discretion by the Compensation Committee in basis of performance will also determine an at-minimum 60% vesting.

In regards to possible variables of ending employment:

• Should the 2013 Agreement terminate in subsequence of the set expiration date (by mutual consent between Mike and Company), by A&F Co. for Cause, by Mike for anything other than Good Reason, or for Retirement, the Form 8-K states that Mike is entitled to "his then current accrued and unpaid base salary through the date of termination; any earned or accrued and unpaid bonus or other incentive compensation for any completed fiscal years preceding the year of termination; any previously deferred compensation, reimbursement of reasonable expenses; and any other benefits and payments to which he is then entitled under the Company’s employee benefit plans (collectively, the “Accrued Compensation”)." Furthermore, circumstances for long-term incentives accelerated venting have been limited unlike in the 2008 Agreement. If agreement ends because of anything other than Good Reason or for Retirement, Mike would also forfeit unvested long-term incentive awards that were granted to him at least two years beforehand "unless the Compensation Committee determines otherwise." To become fully vested upon termination date will be any unvested long-term incentive awards held by Mike: "to the extent such awards contain performance-based vesting criteria, vesting will occur at the end of the applicable performance period and vesting will be based on actual performance over the entire performance period."
• Should the 2013 Agreement terminate by A&F Co. without Cause, or Mike for Good Reason before a Change of Control and subject to personal general claims release execution, Mike will be entitled to: "Accrued Compensation and will continue to receive his then current base salary and medical, dental and other associated welfare benefits for two years after his termination date. [Mike] will also receive an additional payment equal to 150% of his salary pro-rated for the portion of the year of termination that he was employed by the Company. The Company will also continue to pay the premiums on [Mike’s] term life insurance policy until the later of the last day of the Term or the last day of his welfare benefits coverage." If agreement ends because of Good Reason before Change of Control, Mike would also forfeit unvested long-term incentive awards that were granted to him at least two years beforehand "unless the Compensation Committee determines otherwise." To become fully vested upon termination date under this circumstance also will be any unvested long-term incentive awards held by Mike: "to the extent such awards contain performance-based vesting criteria, vesting will occur at the end of the applicable performance period and vesting will be based on actual performance over the entire performance period."
• Should the 2013 Agreement terminate by A&F Co. without Cause, or Mike for Good Reason within two years after a Change of Control and subject to personal general claims release execution, Mike will be entitled to: "same severance benefits as those payable prior to a Change of Control, except that his two years of base salary will be paid in a lump sum rather than ratably over the term of the two years."
• Should the 2013 Agreement terminate under the circumstance of disability, Mike is entitled to: "[receiving] Accrued Compensation and will continue to receive his then current base salary for 24 months following the termination date and 80% of his base salary for the third 12 months following the termination date (reduced by any long-term disability insurance payments he may receive) and medical, dental and other associated welfare benefits during that time period. In addition, each outstanding long-term incentive award held by [Mike] will become fully vested either as of the termination date or, with respect to awards with performance-based vesting criteria, at the end of the applicable performance period and vesting will be based on actual performance over the entire performance period. The Company will also continue to pay the premiums on [Mike’s] term life insurance policy until the later of the last day of the Term or the last day of his welfare benefits coverage."
• Should the 2013 Agreement terminate under the circumstance of Mike's death, "his estate or his beneficiaries will be entitled to receive the Accrued Compensation and pro rated target bonus for the year of termination. In addition, each outstanding long-term incentive award held by [Mike] will become fully vested either as of the termination date or, with respect to awards with performance-based vesting criteria, at the end of the applicable performance period and vesting will be based on actual performance over the entire performance period."

Under the 2013 Agreement, as in the prior 2008 one, should whatever termination occur whenever, Mike would henceforth be prohibited for one year from soliciting Abercrombie & Fitch Co. employees and customers and also from competing with the Company. Furthermore, Mike would continue to be subject to a standard confidentiality covenant.

The finalization, filling, and press release comes days after Engaged Capital (an investment firm with major shareholdings at Abercrombie & Fitch Co.) expressed its attitude towards Mike in a very direct, bold letter to the A&F Board of Directors. The letter recognizes Mike as having been crucial for the global rise of the Company and for giving it the most valued brands in youth retail, Abercrombie & Fitch and Hollister Co. However, it openly shares that Engaged Capital invested in the Company primarily because it believes it to still be deeply undervalued despite the brands' current stance and that there is more beneficial potential to be realized. It cites the vulnerably expansive retail footprint created in the 2000s, and investment in it in the domestic American market, only to be suffering impacting consequences in the 2010s: "years of store closures and asset impairments"; pale operating margin; deteriorating, poor return on investment; asset impairments and operating losses of up to US$500 million in the most recent six years; and up to 35% of Company stores to be closed by Fiscal 2015. Also noted among many more things were the so-called "high-risk" flagship store strategy; the costly failure of RUEHL No.925 and Gilly Hicks; and Mike's US$140 million compensation in five years with -31% five-year total shareholding returns in that same period. All of it is blamed on poor leadership: "Given the Company’s history of operational missteps, taken together with Mr. Jeffries’ age and his increasingly controversial reputation, the Board must not let this [contract expiration] opportunity pass."

As the letter posited, "With ample evidence of dissatisfaction and persistent underperformance on almost every credible measure, shareholders can only wonder how the Board has remained oblivious to their concerns; or worse, why the Board remains so obstinate in its defense of Mr. Jeffries?"

Well, as C.E.R. (Editor-in-Chief of The Sitch on Fitch) singularly stated – as published in the early-November Q3 FY2013 evaluation gone viral – against others' overtly critical reports, "[Mike] is rather much needed to oversee stabilization throughout this transition[.]" And as Stapleton on the A&F Board of Directors echoed in the December 9 press release, "[...Mike] is the right person to embark on this plan, which we believe will deliver substantial and sustainable value."

"I am honored to lead Abercrombie & Fitch forward, augment the best team in the industry, and capitalize on the value of our iconic brands. We are taking aggressive action to manage through the challenging teen retail environment by increasing our speed to market and enhancing our brand engagement. We are also focused on completing the restructuring of our cost base and ensuring we are properly organized to execute against our long-term plan. We are adapting to changing markets and consumer dynamics to drive top-line growth, and I am confident that we are taking the right steps to deliver value for shareholders. As ever, I am grateful to our team of dedicated and talented Abercrombie & Fitch associates and to the Board for their guidance and support." – Mike, 9 December 2013 press release

As time progresses, the new strategy will foster the development of internal candidates for successor planning.

Furthermore, the Company is now anticipating the creation of individual president positions for the Abercrombie & Fitch, abercrombie, and Hollister Co. divisions. External candidates to bring in their utmost expertise and freshness will be searched for in collaboration with Herbert Mines Associates. As Stapleton shared, "Abercrombie & Fitch has always been highly focused on recruiting and cultivating the best talent for the company's success, and we believe that these new senior additions to the management team will help the company achieve its potential. These new leadership positions will provide fresh perspectives on brand development as well as deepen our bench of talent at this critical time. The Board fully supports the long-term plan that Mike and the management team have developed and the value that this plan and the actions we are taking will deliver for shareholders."

On a concluding and very sentimental note, Leslee Herro will finally be retiring in spring 2014. Leslee has been with the Company since even before the appointment of Mike as president and the subsequent, historic 1992 Revolution of Abercrombie & Fitch. Do to her strong value and wisdom, she will remain at the Company in a non-named executive officer capacity for an unspecified period and offer "advice and counsel to the company's Leadership Team and completing certain special projects." On her departure, Mike beautifully expressed, "Leslee has been an incredible [business] partner to me for the past 22 years. Her deep insights in to the business, strong sense of culture, and constant good humor will be sorely missed by me and everyone else with whom she has worked. Abercrombie & Fitch will never be quite the same without Leslee, and she will always be part of the Abercrombie & Fitch family. We wish her all the best as she chooses to focus on her own family."

Ultimately, these are very critical times only to become more so within the following months. All we can do is stand firm in support as things progress in ensuring the continuation of the legacy of Abercrombie & Fitch as a champion of all-American achievement...

Stay FIERCE!

Follow @TheSitchonFitch

News Now! | Abercrombie & Fitch Future Business Plans, Q3 2013 Results...

In the preceding months, we have come to feel the beginnings of a monumental transition phase for the future of Abercrombie & Fitch Co. as we proceed well into the 2010s. Pragmatically, the most significant for the early years of this decade has been the introduction of the "smarter commerce" initiative in 2012 which brought on higher level business integration and relationship between company and consumer – the sophistication of cross-channel solutions including intelligent mobile commerce, advanced consumer transaction options, and the launch of The A&F Club and Club Cali establishing an expansive database of 1+ million and growing.

This year, the Company has faced considerable questioning and criticism over its relevancy and level of "cool" nowadays in comparison to what is now thought of as the golden A&F Co. of the pre-Great Recession Modern Era. This is more so concentrated in the American market where the Company notably harbors what is being perceived as a waning appeal in American pop culture and malls. This, nevertheless, can be more appropriately addressed as being affected by a continuously fickle, post-Recession retail environment; faster, altering trends and attitudes; and the coming wave of generational change in the consumer pool. However, internal, controllable factors in Company practices, in level of innovation and enticement of marketing and offerings, too, is crucial; though, it is something which has been considered lackluster, in intrigue, in recent times, even by devoted customers of the pre-Recession years.

Performance of Abercrombie & Fitch Co. as the 2013 Fiscal Year (FY) has progressed has been very trying:

• The first quarter (Q1), which ended on May 4, experienced a total Company decrease of 15% (this including comparable store sales (CSS) and direct-to-consumer (DTC)) with a 14% decline in the US and -16% in international operations. "The first quarter proved to be more difficult than expected on the top-line due to more significant inventory shortage issues than anticipated, added to by external pressures. However, comparable sales trends progressively improved during the quarter and with the inventory headwinds largely behind us," read Company earnings release.
• Q2 ended on August 3 and reported a total Company 10% decrease in CSS and DTC with -11% and -7% in the US and internationally, respectively. "The second quarter was more difficult than expected due to weaker traffic and continued softness in the female business, consistent with what others have reported. In that context we are planning sales, inventory and expenses conservatively for the remainder of the year. Despite the challenging environment, we are very pleased by strong growth in our direct-to-consumer business and continued strong growth in China. We have also made excellent progress on our profit improvement initiative during the quarter, and we now expect savings from this initiative to exceed $100 million annually. In addition, we are nearing completion of our long-term strategic review, and we are confident that this will provide us with a clear roadmap for sustainable growth in sales, profitability and return on invested capital."
• Q3 ended on November 2 reporting yet another decrease in CSS and DTC: -14% for a Company total, with -14% and -15% in the US and internationally, respectively. Furthermore, the Company ended the quarter with a massive leftover of inventory of old merchandise and, for weeks, has been pushing aggressive discounts and offers to aid the predicament. (Competitor American Eagle announced in its Q3 FY2013 earnings that it was actually clean of inventory and earnings above expectations). "Our results [at A&F] for the third quarter reflect continued top-line challenges, with overall spending among younger consumers remaining weak. Until we have seen a clear trend improvement, we are continuing to take a cautious approach into the fourth quarter and are working to end the year with appropriate levels of fall carryover inventory. During the quarter, we completed our long-term strategic review, and believe that we now have a clear roadmap for sustainable growth in sales, profitability and return on invested capital."

Furthermore, discussion has been very much incrementing lately – across analysts and A&F community spheres – over the finally approaching February 2014 expiration of Michael "Mike" S. Jeffries contract as Chairman & CEO which is subject for renewal. For the first time ever since his foundation of the modern Abercrombie & Fitch Co., Mike has overseen a extremely difficult period in which he has managed to keep the Company afloat and rekindled after the Recession. Nevertheless, people across the world following the Company cannot help but be critical now of prior overconfident hubris; decline in fresh, boundaries-pushing, alluring marketing (of pre-Recession splendor); and the failure of now two retail concepts (RUEHL No.925 and Gilly Hicks)...and the regression of what were enveloping and unique retail fantasies at play in favor of a more basic, pragmatic mall format for all Company stores. Although the likelihood of Mike departing from the Company is highly unlikely – he would never go quietly; he is rather much needed to oversee stabilization throughout this transition; and he once said in 2004 he would not retire until he felt the Company was in optimal state for a future beyond him – sentiments over his passing in preference for a younger, progressive successor are very much echoed across the global Abercrombie & Fitch community.

In light of all this, and very much incidental with the timing, dramatically altering plans have begun rolling out in regards for the future of Abercrombie & Fitch Co....

RETAIL PRESENTATION & OPERATIONS

One of the significant leading points of the new changes is the implementation of window-display strategies across all Abercrombie & Fitch Co. stores. The original concept of an exclusive, intimate retail environment is being completely regressed in favor of, as aforementioned, a pragmatic mall store format in effort of resurging consumer traffic. Long gone have been the luxurious, romantic RUEHL No.925 "brownstone homes"; the lovely Gilly Hicks "beach manor houses" were recently announced to all be closed by the end of Q1 FY2014; and, begun in Q3 FY2013, the removal of all louvers over the front windows of Abercrombie & Fitch-branded stores will continue across the entire chain of Canoe stores.

The most dramatic alterations to storefronts will be for the Hollister Co. brand: we are to subsequently witness, within the following months in FY 2014, the disappearance of the globally-recognized and iconic HCo "surfer/beach shacks". It is really the initiation to the end of an era with the Hollister we grew up with and came to love...

Corporate, computer generated visual of the all-new HCo. store prototype.

Elements of higher-tier Hollister stores developed in the early-2010s (as seen with HCo Fifth Avenue and various other international locations) will now be applied beginning in the American market: "select, cost-engineered flagship elements," as it was put. As illustrated, the new frontage will provide great window space for window-display and views into the store. The entrance of this 2010s prototype includes the placement of electronic, video display technology visible to the passerby as well. Feed of Huntington Beach would be redundant as HCo stores already have interior video setups for that. Instead, we at The Sitch on Fitch believe the electronic display space at the entrance should be used for faster, innovative, and enticing advertising.

Full-priced stores with the new format will open as these new retail alterations occur; the Company-wide closure of underperforming stores will continue ahead; and outlet store penetration will be increased.

As for the Gilly Hicks division, it will from Q2 FY2014 henceforth only operate as a brand through direct-to-consumer e-commerce and via Hollister Co. retail stores.

INTERNATIONAL EXPANSION

Focus on international expansion from the mid-2010s on will be on great opportunities in China and Japan, Eastern Europe (namely, Russia), the Middle East, and Latin America...

In more recent detailed reports considering current trends, the Chinese economy is now anticipated to surpass the size of the American economy by around 2016. While the American economy will still remain the world's greatest in market value for decades to come, the Chinese entered the 2010s as consumers commanding an ever tremendously globally-influential power only to increment with the rise of China as a global superpower as we progress into the 21st century. It is already perceived of vital importance for internationally-operating retailers to initiate the establishment of successful operations in the Chinese market and to gain the appeal of Chinese consumers spending across the world as well.

Abercrombie & Fitch Co. first ventured into the greater Chinese market with the opening of its first Hollister Co. store in Hong Kong (a Special Administrative Region of the People's Republic of China); and then followed the first HCo. stores in mainland China before the historic 2012 arrival of the Abercrombie & Fitch brand on Chinese soil...nearly 100 years after Ezra Fitch traveled to the then-exotic land. The Company has continuously found incremental success with its Hollister Co. stores and A&F Hong Kong. Plans are set to open the first Abercrombie & Fitch store in mainland China (to be a flagship in Shanghai) in April 2014, and to also open the first A&F-branded mall store in China (which will also become the first-ever international A&F mall-based store). Ultimately, the Company anticipates operating a corporate total of 11-13 stores in China by the end of FY2014 with a potential of 100+ stores in the long run. Its Chinese operations are the only international with a potential to near, match, or surpass its American presence in sales by sometime in the far future. The Company has been providing specialized marketing and advertising in the Chinese market including the usage of the Sina Weibo social media platform.

Progress in Japan will continue on after having entered that market in 2009 to below expectations performance with the Abercrombie & Fitch brand. The A&F Ginza (Tokyo) flagship, while having witnessed the then-biggest opening for an A&F store, turned out to perform below all other global, preeminent locations; issues have been addressed since; and the location continues to perform well off and make improvements. The secondary flagship in Fukuoka, having opened in December 2010, has been gotten rid off after drastically terrible performance during its first year (FY2011). As progress is made in Japan, the first ever Hollister Co. store opened to overwhelming reception in September 2013. A second HCo. will open in December 2013 and the Company will continue a cautious approach in Japan with 3-5 HCo stores opening in the nation by the end of FY2014...long-term store potential is yet to be determined.

Furthermore, after its upcoming opening in Dubai being realized in joint venture with retail partners in the region, the Company also looks forward to opening in Mexico (20+ store potential), Brazil (20+ store potential), and Russia (10+ store potential) with its first-ever decision to franchise its stores for openings in those rising markets. Franchising has never been a part of the Abercrombie & Fitch Co. retail ethos in attitude of commanding exclusive, direct control over its stores. This rather curious (to put it politely) franchising move will be something to watch out for in terms of quality and atmosphere consistency. It actually goes against current rising trends with high-end fashion retailers of purchasing back their franchised agreements in favor of direct control across all regions of their retail operations.

MERCHANDISING

It has been recognized that Abercrombie & Fitch Co. has remained more closely fixated on traditional styling then the majority of its fast-fashion competitors embracing trends on a deeper level and who have gained more of an appeal to consumers in tune with the fast-changing fashion attitudes. This is more so true with womenswear and female consumers who've turned more and more to more affordable, fashion-forward retailers such as Forever 21 and H&M. Furthermore, in general, and as mentioned above, the Company has a massive remainder of old stock by the time of this post published, and it has been aggressively pushing major discounts and promotions to help in the preceding weeks.

For FY2014, the Company anticipates improving its margins and phasing out of aggressive discounts. This will come in combination with the planned introduction of full-price stores; greater penetration of outlet stores; and stocking more styles in smaller quantities (in contrast of smaller lines with greater quantities). By Spring 2014, Abercrombie & Fitch Co. will be implementing those strategies while also broadening diversity of its existing apparel's washes, colors and fits (including expanding the women's tops collections as to remain a relevant player in current competition, and it will expand size offerings for its womenswear lines for the first time in the A&F Modern Era). And while the Company tested out its first shoes offerings, in partnership with Keds, through its Hollister Co. brand, shoes will be offered at Abercrombie & Fitch by Back-to-School 2014 to also include an even more diverse selection of accessories. The goal is to increase fashion relevancy with the times while maintaining a profitable and healthy business merchandising flow.

There will also be a reduction in floorsets and/or floorset updates; increase inventory turns with improvements in inventory visibility and accuracy; and an evolution of presentation standards and markdown strategies. The Company also looks forward to evolving its logoing strategies.

DTC & ECOMMERCE

In continuation of the sophistication of its operations, the Company will test run the new ability for customers to order merchandise instore in select locations. A full rollout will commence in 2014 following the results of the Christmas 2013 pilot test run. Also, it is in consideration of ship-from-store options. The Company furthermore believes that 2-3 day shipping times is the "new normal" in line with the faster business and consumer interaction of the decade.

Following the alterations of the retail locations, the Company will be completely relaunching the individual websites for Hollister Co. and for Abercrombie & Fitch by Fall 2014 and Spring 2015, respectively. The Clubs for both brands will also be revamped in the near-future with a planned form of rewards program to be integrated into the system. The Company continues in the pursuit of enriching the online experience offered via its direct-to-consumer channels.



In conclusion, you are advised to recognize that we are in the early-stages of an unprecedented transition phase to set the stage for the remainder of the 2010s and on in a rapidly shifting, faster, and ever-integrated global environment...

Stay FIERCE!

Written content composed by C.E.R. for The Sitch on Fitch. Research by C.E.R. and contributor Cameron J. for The Sitch on Fitch.  Intellectual property violations prohibited.

Abercrombie & Fitch Fiscal 2013, Quarter 2 Results...

Hello TSOF fans! Are you getting excited for Labor Day? I know I am: I have a five-day weekend.

Well, A&F has released Fiscal Year (FY)2013's Quarter (Q)2 sales information online. You can find it on the Company's investors website (here). However, as I know not everybody has time to peruse investors presentations and such, so I'm going to summarize the quarter...

Glance at A&F stock as of today. (CNNMoney / NYSE)

Net sales for the Company for Q2 FY2013 were $945, 698. Net sales for the Company last year Q2 were $951,407. As you can see, there's a considerable negative difference. What does this mean? Allow me to break it down:

U.S. stores sales this year have dropped from $562,105 (2012) to $504,674. That a considerable reason why the Q2 FY2013 total is so low. International stores and direct to consumer sales have increased since 2012. This is noticeably good at a glance, but let's go further.

A&F also reported that by brand, including direct to consumer: sales have gone down 6% at Abercrombie & Fitch;  3% at abercrombie; and a whopping 13% for Hollister. I don't see where or if they've reported on Gilly Hicks, but as you can see, this is bad.

The Company has tried to rectify their bad sales by repurchasing stock, a well-known tactic in the market. In Q2 FY2013 alone, they repurchased 2,033 shares!

Also worth mentioning: the store count. At the end of Q2, eight stores have been opened and four stores have been closed. Four stores being closed in the middle of the year is slightly alarming, as most Companies close stores at the end of Quarter 4.

The Company expects comparable sales in Q3 down slightly more than Q2.

Conclusions: this year has proven to be a rough one for Abercrombie & Fitch. If I were a tad cynical, I would say that the Company dug its own grave after CEO Mike Jeffries' rather bold remarks in his past interview. However, we probably all know that the world of fashion is fickle. A&F just has to do its best to stay competitive and relevant.

Anyway, I hope you enjoyed the read. If all this isn't your thing, you can expect fall outfits from me sometime after Labor Day.

Later!
Marcus

Abercrombie & Fitch in Munich! | Beautiful Diversity and Inclusion Video...

Together, we are one...

Check out this beautiful video from the A&F Munich team in honor of Abercrombie & Fitch Diversity & Inclusion. It carries the musical piece My Name Is Lincoln – originally composed by Steve Jablonsky for the 2005 film, The Island – which your Editor-in-Chief, C.E.R., and German correspondent, Sabrina, figured out after some quick thinking. ;) It's a piece that you may have heard before in other short videos or commercials carrying humanitarian, naturalistic, epic, or sweeping emotion themes. In essence, this video captures the epic majestic beauty of our human diversity, in a casual down-to-earth manner, as can be found in our everyday lives...amongst our peers...amongst our brethren...and how cool and significant it is for union, positive productivity, and the betterment of our selves as a whole. It is a message that is by a group of the greater worldwide Abercrombie & Fitch family, but that transcends the Company and all walks of life...

An A&F and HCo Guy in Paris! | Corporate Caring: the Abercrombie & Fitch Initiatives...

Hi guys! Yes, I'm still the Paris contributor for The Sitch on Fitch, sadly I couldn't write a post for last week!

Few days ago while I was working at my HCo Store near Paris, I saw this paper on the staff board talking about the Christmas monetary donations for our collegues (Associates) all over the world. I wanted to know more about it, and I figured out that the Diversity, Inclusion and Diverse charity programs were a huge part of the Abercrombie & Fitch family...

 

 

I would love to talk more about the various Diversity and Inclusion ideas of the company - aspects which I believe are the main keys to a company’s/organization's success - but that would take more pages than a simple article ;) That is why I would like to focus today on the international initiatives and the A&F Challenge, events which respectivly help local communities in diverse countries and raises money to benefit various organizations and charities in Ohio from which A&F operates on a global scale.

You probably didn't know it, but Abercrombie cares a lot about communities, their associates and global worldwide problems (such as cancer, etc.). Yes, you must think "You are talking about sad things". Sad yes, but now you can say that Abercrombie & Fitch is cooler than you once though! Because cool is not only fun, but about also taking caring and contributing to solutions for worldwide and local issues by taking Initiatives.

   "Abercrombie & Fitch and our associates believe in supporting the communities where we do business. We are committed to being an exemplary philanthropic citizen by giving back and making a positive impact in our communities."- A&F CARES

And yes, the company is showing is commitment through monetary donations and volunteer work. As the company expands internationally, the efforts do not stop. You probably remember the Haitian earthquake in January 2010, and the Japanese earthquake and tsunami in March 2011? Both affected millions of people, and also associates and associates families (A&F is in Japan, as we should know). The Company raised money and gave assistance to help in the relief and aid for the rebuilding of those countries.

A&F Challenge - Run-Walk tour

Further more, one of the biggest initiative is the annual A&F Challenge, hosted on the Abercrombie & Fitch campus in New Albany, Ohio, USA. It's an event which combines athletic challenges such as a 20 miles (XX Kms) bike tour, a run-walk tour, a kid challenge zone, and the event finishes with gourmet food, amazing drinks, silent auction and live entertainment with artists such as Walk The Moon and Electric Guest (A&F Challenge 2012)...

A&F Challenge on the Campus... The party is starting!

Abercrombie & Fitch is each year underwriting all event costs to provide 100% of the donations for the Ohio State University Medical Center's program for health and others diseases center during those past few years

The 11th A&F Challenge this year was in August with one mission: Find a cure for cancer. I must say, the commitment of the Company, by contributing financially and through active volunteering work, is more than respected. As some people say: A&F is not only a brand, it's a way of life...

 "We Make A Living By What We Get. We Make A Life By What We Give." - Sir Winston Churchill  - ANFCHANLENGE.ORG

 Stay #FIERCE
~ Romain

Uncovered Document Reveals Abercrombie Chairman & CEO Mike Jeffries' Private Male Model Demands and New Insights Into His Personal Life...

Mike photographed at the National Retail Federation conference in New York City, 2012.
Photo by Mark Lennihan/AP Photo  |  (image source)

Since his revolution of Abercrombie & Fitch, Micheal "Mike" Jeffries has become known for his genius and his eccentricity. The man is the 68 year-old head of a globally iconic, youthful, multi-billion dollar Company which he presides over with a personal, thoroughly obsessive iron fist...Mike is A&F...A&F is Mike. Simulating youthfulness in physicality and mind, he maintains his hair blond and is no stranger to the word "dude." It can well be said that sometimes genius and eccentricity in character do go well hand-in-hand, but it is no partnering unaccustomed to misunderstanding, misinterpretation, and controversy.

Recently, an eye-raising document – the so-called "Aircraft Standards" manual – has surfaced from a age-discrimination lawsuit filed in 2010 by then-53-year-old pilot Michael Stephen Bustin. As Bloomberg Businessweek reported, Abercrombie & Fitch Co does not directly employ any pilots, but Bustin claims he was replaced purposefully by a younger pilot for Mike. Now while the Company holds that the lawsuit is of no value, Mike's demands have once again fallen under scrutiny....because of the contents of the aforementioned manual.

The 40+ page manual was composed by Matthew Smith - a man not employed by Abercrombie & Fitch Co, but who heads the Jeffries Family Office, an Ohio limited liability corporation founded circa 1998, which oversees the personal assets and interests of Mike. As an individual who is not a part of the Company, Matthew is nevertheless given quite deep insights into the Company's operations. He is even given detailed information on daily sales of the Company overall, and by brand, as well as other non-public corporate material. Matthew is described as a "live-in partner" of Mike's which can mean in general an arrangement between two unrelated people who purchase a home, sharing responsibilities for said property, and there may or may not be further commitments between the members of the partnership within the context of whatever their relationship may further be.

This manual was of the Jeffries Family Office, as being authored by Matthew, and it contains a set of rules, specifications, and conditions for those who are hired to serve Mike and Matthew. When it comes to the US$50 million Gulfstream G5550 Abercrombie & Fitch corporate jet, the Jeffries Family Office is responsible for the maintenance, operation, and staffing; it contracts onboard staff and "recommends" them to A&F for the jet. The Company then in turn contracts the recommended people. The New York City-based company Cosmopolitan Management LLC (see here) provides models and "actors" involved who surround Mike and Matthew and who must comply to the manual. A&F pays salary and travel expenses for four of such employees while onboard with Mike on the A&F corporate jet. Cosmopolitan Management also provides Mike and Matthew with house staff managed by the Jeffries Family Office.

The following are some of the disclosed demands from the manual that pertain to male models serving Mike...

• Must be clean-shaven and smelling of a specified A&F cologne
• They must wear a "uniform" which even includes what underwear to wear. This uniform consists of an A&F polo, boxer briefs undies, jeans, and flip-flops. When the temperature drops below 50 degrees Fahrenheit (10 degrees Celsius), they must wear an A&F jacket zipped up to the fourth lower button, the bottom button left unbuttoned, and the collar should be popped up. A drop to 40 degrees Fahrenheit (4.4 degrees Celsius) or below requires hats with the brim folded two inches. Other accessories include wearing a belt, gloves (when necessary), and having certain A&F cologne. Matthew described the uniform for the jet crew as being like that of an A&F Flagship "doorman".
• Absolutely no jewelry with the only exceptions applying to watches and wedding rings.
• When responding to a demand from Mike, Matthew, or one of Mike's "entourage", the models are to respond by saying, "No problem." Not by saying "sure" or "in a minute." The response is to be "no problem."
• When on the jet, they are to spray the bedding with "sleep spray" before the entourage take a nap.
• When serving at home, they are instructed not to expose toilet paper nor fold the end square.
• Black gloves are to be used when handling the silverware and white gloves are to be used when laying the table (this presumably being for at home, but could also include when dining onboard the jet?).
• Furthermore, Matthew has the models serve him Assam tea in the morning and Darlingjee tea at precisely 2:00PM on a "small tray with a small tray liner."

In addition, Mike travels with his three dogs – Ruby, Trouble, and Sammy. The seating arrangements on the corporate jet are set according to which of the dogs are traveling onboard. Ruby is to sit in Sammy's seat found opposite of Mike when only Ruby and Trouble come onboard. Ruby is then to sit in Trouble's seat when Sammy flies with them. (But then can only two of them fly at the same time?) There is even a reference to a "houseman" who handles boarding the dogs on the aircraft.

Other miscellaneous things are: the song Take Me Home (not clear whether Cher's or Phill Collin's version, but honestly which do you think?) is to he played when passengers board the aircraft; staffers must ensure that the aircraft is spotless with no fingerprints; there must be arranged flowers; when serving food, salt and pepper shakers are to be placed in the center of serving trays; and the seat buckles must be meticulously folded.

Mike prior to the opening of A&F Hong Kong.

Mike's most recent notable flight was in August 2012 when he flew in for the grand opening of the first Abercrombie & Fitch-branded location in China – the highly successful and most publicized A&F Flagship in Hong Kong's Central district.


During the years of consecutive profits, Abercrombie & Fitch Co did not question Mike's personal eccentricities and demands, nor his positive, yet bold and risky, management of the Company. However, since the Great Recession took a toll on the Company in the late-2000s, he has fallen under heavily scrutiny. His contract was renewed in 2008 and it limited for the first time his usage of the jet. That year alone, he figured US$1.1 million in expenses with the jet, and he had averaged US$850,000 a year between 2006 and 2008 on personal use. By 2010, the Company's board paid him US$4 million to agree to a limit of US$200,000 for personal use – a dramatic limit from the prior years. But more recently within the past month, a takeover of Abercrombie & Fitch, by a private-equity firm, was rumored as Ralph Whitworth’s Relational Investors LLC sought changes in A&F operations. Any takeover could have resulted in stripping Mike of his leadership. That would have cost the Company US$105.6 million in payment to Mike for removing him...that and Mike would not allow for a takeover.

Mike's contract with Abercrombie & Fitch Co is set to expire in 2014. To be renewed or not, that is the question. And many at A&F carry worries from what Boomberg Businessweek quoted as being a "leadership vacuum perspective." Craig Stapleton, currently on the A&F board of directors and a former United States ambassador to France, has stated that Abercrombie & Fitch "has a great number of talented individuals throughout all key operational areas. The talent pool for successors, not only of the CEO but also other key executives, is deep." Nevertheless, Mike is the founder of the modern A&F and a departure from such a monumental leader is never one with easy. So let's raise our FIERCE cologne bottles to Mike and the continuance of his genius and eccentricity at the helm of Abercrombie & Fitch...

Stay FIERCE!