This story has been updated from 11:10 a.m. EST with statement from Engaged Capital and analyst commentary.
NEW YORK (TheStreet) -- Abercrombie & Fitch (ANF - Get Report) shares were tumbling more than 2% on Monday after the teen retailer renewed yet "restructured" the employment agreement with its controversial Chairman and CEO Michael Jeffries.
The news comes less than a week after investor Engaged Capital, which owns 400,000 shares of the struggling teen retailer, sent a letter to Abercrombie's board in an attempt to deliver what it said is a much-needed shake up at the company's top management.
Shares were falling 2.5% to $33.99.
|Abercrombie renewed its employment contract with Chairman and CEO Mike Jeffries.|
"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," Craig Stapleton, Abercrombie's lead independent director, said in a press release. "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."
Abercrombie also plans to look inward for the eventual successor to Jeffries, who is 69. As part of that, the company announced on Monday that it is creating leadership positions for its flagship brand, abercrombie kids and Hollister brands. Abercrombie has hired executive search firm Herbert Mines Associates to assist in filling these leadership positions.
Jeffries started the company in 1992. His current employment agreement, structured in 2008, expires on Feb. 1, 2014; the new agreement will take effect the day after.
"The contract basically extends his tenure as CEO through February 2016, and simplifies the conditions under which he is compensated for performance (and is better aligned with shareholders)," Wells Fargo Securities analyst Paul Lejuez wrote in a note. "We believe these changes have their merits, but may also cause disruption and uncertainty among employees, a near term negative in our view." Lejuez has a "market perform" rating on Abercrombie.
Under the 2013 agreement, Jeffries will continue to receive his current annual base salary of $1.5 million, which will be reviewed annually, according to a Securities and Exchange Commission filing.
Jeffries will continue to participate in the company's annual bonus plan, with an annual target bonus opportunity of 150% of his base salary and a maximum bonus opportunity of up to 300% of his base salary, the filing said.
However, Jeffries' long-term incentive opportunity was revised. He will no longer have a "retention or sign-on grant, and the formula for semi-annual equity grants contained in the 2008 Agreement has been eliminated," the filing said.
Instead, the new agreement said Jeffries is eligible to receive long-term incentive awards each year with a target value of $6 million, which will be reviewed annually and may be increased "if company performance warrants such an adjustment," the filing said.
Additionally, Leslee Herro, Abercrombie's head of merchandise planning, inventory management and brand senses, will retire in the spring.