Report: Abercrombie & Fifth Hired Goldman Sachs to Seek “Strategic Alternatives”

Customers leave an Abercrombie & Fitch store at South Park mall in Charlotte.

New Albany, OH—Abercrombie & Fitch has reportedly retained Goldman Sachs to help it seek “strategic alternatives.” The move comes at the behest of one of its activist investing fund Relational Investors, which increased its stake in Abercrombie & Fitch in the second quarter, and reportedly sought cost-cutting measures and curtailed expansion in conjunction with the company’s August earnings.

CNBC has reported that Relational is now seeking a seat on Abercrombie’s board of directors, too.

News of the Goldman Sachs hire sent prices of Abercrombie up in trading on Friday. Indeed, the fact that the company’s shares have been down almost 40% over the last year (with a 52-week trading range between $28.64 to $77.49) has been driving the activist efforts.

Relational typically tries to engage the management of companies it invests in and may start a proxy fight if it is rebuffed, John Kernan, an analyst at Cowen & Co., said in May, after the firm revealed a 2.5% stake in Abercrombie.

“Abercrombie’s depressed valuation and very low levels of profitability in their domestic business is probably attracting activist investors, as well as what we see as some low-hanging fruit in improving the inventory management in the domestic business,” Kernan told the Columbus Dispatch. “An activist could accelerate some well-needed changes in a strategic direction.”

That might include selling off its flagship Abercrombie & Fifth brand plus Abercrombie Kids, Hollister or Gilly Hicks, its girls’ retail brand.

Some analysts said it could take two quarters to see the results in Relational’s measures which might prompt Relational to make other moves, such as seeking a board seat for David Batchelder, a founder and principal at Relational said to be spearheading the Abercrombie investment.

 

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