Abercrombie & Fitch Makes Design Team Switch

Charles Martin and Michele Donnan-Martin, the husband and wife in charge of the company's design effort, have been reassigned to its special projects division.
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The husband and wife in charge of

Abercrombie & Fitch's

(ANF) - Get Report

design effort have been removed from their positions, according to a person familiar with the company.

The duo, Charles Martin, vice president of men's design, and Michele Donnan-Martin, vice president and general merchandise manager of women's design, have been reassigned to the company's special projects division.

Abercrombie & Fitch spokesman Lonnie Fogel didn't return two phone calls seeking comment. Martin and Donnan-Martin couldn't be reached to comment.

Michael Jeffries, Abercrombie & Fitch's chairman and chief executive, has been dissatisfied with the slower-than-anticipated growth in the women's business that Donnan-Martin oversaw. Even though the women's apparel market in general is roughly twice the size of the men's apparel market, Abercrombie & Fitch's women's business still accounts for less than half, or roughly $367 million, of the $816 million the company had in total sales for the most recent fiscal year. Jeffries would like to see the contribution from the women's division climb to more than $500 million, this person says.

Abercrombie & Fitch's shares traded off 2 1/16 at 38 Friday afternoon, as rumors regarding the executive changes made the rounds on Wall Street and spooked momentum players, who widely hold the stock and often sell at the slightest hint of trouble.

However, changes in executive ranks, even in the crucial area of design and merchandising, don't always portend rough times for a retailer. When Marie Holman-Rao, who was widely credited with developing the

Banana Republic

division for

Gap

(GPS) - Get Report

, left to join

Limited

(LTD)

in 1997, her defection had little impact on Gap's overall business. And today Banana Republic remains one of the stronger arms in Gap's portfolio. That is due in part to the involvement of Gap CEO, Millard Drexler, who still approves all design decisions at the San Francisco-based company.

Jeffries is credited with taking a similar hands-on approach at Abercrombie. He has personally transformed the chain from a nondescript clothing retailer to a company that dictates coolness on college campuses across America. Martin and Donnan-Martin had reported directly to Jeffries. Their subordinates will now report to the CEO until replacements for the head designers, which may likely come from within, are named, the person familiar with the company says.

Tuesday, the Reynoldsburg, Ohio-based company said it earned $18.4 million, or 17 cents a share, compared with $10.6 million, or 10 cents a share, a year ago. A consensus of

First Call

analysts had expected the company to earn 14 cents a share. Sales grew 35% to $98.9 million for the period.

"If Jeffries were to leave the company, that would be problematic," says this person. "But one or two other people leaving has a negligible impact on the business."