Recommendations for AF
From the case, we see that Abercrombie and Fitch have created controversial products. Despite the controversies acting as free marketing, they have associated a negative picture with the brand. For instance, the t-shirts produced around 2002 stereotyped the Asian community by use of some cartoon characters. Other than the cartoons, the clothing featured rather offensive slogans. This was a step in the wrong direction for the company. The Asian community is obviously part of its clientele. There have also been incidences of the company’s promotion of underage drinking. The company’s main market consists of the younger segment in society. It is therefore necessary that the firm orientate its products towards this market.
Abercrombie’s work culture relies on appearances. It is a requirement for workers to meet stringent dress codes, when showing up for work. For instance, mustaches and beards are unacceptable for sales associates at work. The Abercrombie Associates handbook lists the other rules. Due to this corporate culture, several Abercrombie & Fitch employees raised concerns to the California Department of Industrial Relations. They claimed that the company forced them to purchase clothes from the store, as their work uniforms. State regulations stipulate that employers should provide the uniforms they expect their employees to wear. As a result, the company lost $2.2 million in litigation to the affected employees. It is my recommendation that, Abercrombie and Fitch, reform its organizational culture.
In 2003, AF’s employees raised new lawsuits. In the first, they accused the company of failure to pay overtime, through shadowy human resource practices. In the second instance, the company faced accusations of discriminatory practices against minority groups in its staff. The company placed members of such groups in less important jobs and tougher shifts, according to the litigants. As a result, its human resource management practices are questionable. Abercrombie & Fitch should reform its hiring policies, especially its focus on discriminate looks. The company should provide its sales associates with adequate pay. Extra work should run parallel to overtime payment from the firm. From the company’s financial reports, it is obvious that the company can spare some revenues for its employee’s salaries. After all, such increments would be much less than litigation costs.
Since the year 2000, A&F has changed its executive line-up over 10 times. This especially holds for the CFO position, which has had three executives over the years between 2003 and 2006. The company’s leadership is therefore questionable. To maintain stability, A&F should improve its retention rates of executives. This will ensure consistent financial results for the company. They may do this by properly vetting executives and their ambitions. A controversial board operates Abercrombie & Fitch. This is attributable to the suspiciously high number of converging interests within its members. Board members have colluded several times. For instance, a board member received remunerations for the company’s sale of its headquarters in 1999. Appropriate steps need undertaking, during, the process of identification of future board members.
The conduct of A&F’s CEO, Michael Jeffries, is also a person of suspicious conduct. Right before a profit warning, Jeffries sold around $120 million worth of his shares in the company. Under his leadership, the company also stands accused of making inaccurate statements towards its investors. Therefore, it has failed to disclose to its shareholders of its declining revenues and profits. Such practices brought the company and its leadership into the SEC’s scrutiny. Jeffries has been relatively successful in his role as CEO, since 1992. However, changing market demands, and the recent controversies cause a need for his replacement. It is therefore my recommendation for the replacement of Jeffries by Abercrombie and Fitch.