Abercrombie's CEO Provokes Even as Investors Cheer

NEW YORK ( TheStreet) - Teen retailer Abercrombie & Fitch ( ANF) delights in provocative advertising which might explain CEO Mike Jeffries' comments about the company's unwillingness to carry larger sizes.

Jeffries has pointedly said that Abercrombie targets "the attractive all-American kid with a great attitude and has a lot of friends. A lot of people don't belong in our clothes and they can't belong. Are we exclusionary? Absolutely."

While Jeffries' comments aren't new, social media has been abuzz this week commenting on a blog post by marketing executive Amy Taylor entitled An Open Letter From a "Fat Chick" to Mike Jeffries, CEO of Abercrombie & Fitch.

Taylor describes herself as "not only a fat chick, I'm also 'not-so-cool' kind of kid." She says that as a marketer herself she appreciates Jeffries' business strategies, but argues that excluding consumers based on body type has it social costs. Jeffries grandstanding, she says, is a form of bullying and should not be accepted.

"Funny thing about wearing your struggle on the outside: it makes you stronger. It teaches you how to adapt. It forces you to dig deep and do more. And while people like you are sitting at the cool kids table intent on holding others down, the ragtag team of not-so-cool kids is busy pulling others up...and we've become an unstoppable force driving the world forward," she writes.

Taylor further writes in an intro before the letter: "I'm not slamming Abercrombie, proposing that they start carrying larger sizes or suggesting they welcome everyone into their stores. What I am questioning is why, in a country where two out of every three adults are considered overweight, is it acceptable for anyone, let alone the CEO of a major company, to proudly and publicly sling what could be considered by some to teeter on hate speech?"

Her post hit a nerve with readers in the social media realm and inspired a YouTube video in which one fed up man scoured thrift shops for Abercrombie & Fitch clothing to give to the homeless in L.A.

The YouTube video has more than 1.2 million views and was picked up by the Huffington Post.

Taylor 's post was made in response to a May 3rd article on Business Insider highlighting customer reaction to Jeffries' and Abercrombie.

Still the investment community has, for the most part, shrugged the news off.

For as much as Jeffries' comments may disturb people, the fact of the matter is, being provocative has been helpful to the company's success, analysts say.

And investors already know that. Abercrombie's stock hit a 52-week-high on Wednesday of $54.52. The stock is up 19% over the past year and over 8% this month alone. Shares closed little changed at $53.69.

"Controversy kind of helps the brand. They're not going to change their DNA to be politically correct," says Marie Driscoll, equity analyst at Driscoll Advisors. "I don't really think it hurts the brand. Jeffries' comments just remind people of who the brand is and they're provocative."

Gabriella Santaniello, senior vice president of research at Wedbush Securities, says it's not surprising that the comments -- even if they are dated -- are brought up again.

Abercrombie & Fitch "perpetuates an image that maybe doesn't fit well with people," she says, except, "for them any news is good news because it keeps them in the forefront and top of mind."

This year that's particularly important because Abercrombie struggled last year to keep up with competitors, she says.

"Last year they completely missed the colored denim trend and they were just struggling and had a very myopic view - all fashion basics -- and missed out on the fashion trends. That to me is part of the reason American Eagle ( AEO) did so well because they were the only game in town," Santaniello says. "This year Abercrombie really focused on that and they have a great fashion offering. Any way you look at it they're in a great position."

Abercrombie is scheduled to announce first-quarter earnings on May 24. Analysts, on average, expect the retailer to post a loss of 5 cents a share compared to a loss of 25 cents a share in the year-earlier period.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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