2. Abercrombie's Asinine CEO
Sorry, Michael Jeffries. Just because Abercrombie & Fitch (ANF) announced a Street-beating and short-skewering quarterly earnings report doesn't mean you are piloting the sexy teen retailer with aplomb. Your private jet proclivities still have us convinced that the company's long-suffering shareholders would be better off if you flew off into the sunset.
First, the good news. Abercrombie shares popped 30% Wednesday after the company said it earned $71.5 million in the third quarter, or 87 cents a share, compared with $50.9 million, or 57 cents, last year. Wall Street's analyst community proved to be way off on their Abercrombie estimates, penning in 59 cents on average. Sales rose 9% to $1.17 billion, led by a 37% rise in international markets.
Next, the not-so-good news. While the Q3 results and full-year guidance were admittedly impressive, the surge in the stock had a whole lot more to do with the scrambling of short sellers, a group who at last check held more than 15% of the company's shares in their accounts, than Abercrombie's performance. The company's same-store sales fell 3% in the third quarter, and while that's an improvement over its 10% drop in the second quarter, it's still not particularly heartening for investors seeking a retail name to try on.Abercrombie's stock certainly has not been fashionable for a long time. It's down almost 30% in the past year even after Wednesday's run-up, while shares of competitors like The Gap (GPS), American Eagle (AEO), Urban Outfitters (URBN) and Buckle (BKE) have risen 68%, 44%, 35% and 10% respectively. Not that Abercrombie's 14% decline in 2011 kept Jeffries from collecting a league-leading $48 million in total pay of course. Macy's (M) CEO Terry Lundrgen, by comparison, pocketed $17.6 million over the same period for guiding a company almost 5 times Abercrombie's size, and his stock went up 28.5% to boot. But that's old news. Here's the really disturbing new news. A judge this Tuesday ordered Jeffries to grant a second deposition in an age-discrimination lawsuit brought by a former corporate jet pilot in April 2010, according to Bloomberg. Instead of sitting in his corner office in New Albany Ohio, Jeffries will be forced to sit through seven hours of questioning in Philadelphia over the next two weeks as a result of what U.S. District Judge Paul Diamond called Abercrombie's "disturbingly belated production of highly damaging evidence." Jeffries was originally deposed two years ago as part of the lawsuit, which was filed in federal court in Philly by corporate jet pilot Michael Stephen Bustin, who is now 55 and claims he was canned illegally and replaced by a younger man. The suit revealed Jeffries's wacky specifications for the airplane's flight attendants, from the way they address him to the kind of cologne they spritz on. For example, Jeffries's detailed flight instructions command male staffers to wear Abercrombie polo shirts, flip-flops, a "spritz" of the firm's cologne, sunglasses and boxers. And, according to Bloomberg, when Jeffries or his boyfriend Matthew Smith make a request, the reply must be "No problem" as opposed to "Just a minute" or "Sure." He even has rules for displaying the toilet paper! What a load of crap. His company is in a veritable free-fall and this joker is making sure that the washcloths are "tri-folded." Unfortunately, Jeffries most recent contract reportedly nets him an obscene payout of more than $100 million if he loses his job due to a change in ownership. That makes it difficult for shareholders to boot him before his contract ends in late February 2014. But if they could find a way to jettison the jet-crazy Jeffries before then, we would certainly be on board. Heck, we would even wear flip-flops and fold the washcloths if it would help the cause.
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