Abercrombie & Fitch Stock Slips As Former CEO Arrested On Sex Trafficking Charges: Retail Turns ‘Extremely Bearish’

Abercrombie & Fitch Co. ($ANF) shares dipped 2% as markets opened on Wednesday after the company’s former CEO Mike Jeffries was arrested on charges of sex trafficking.

According to a report by ABC News, Jeffries, along with his partner Matt Smith and a third man Jim Jacobson, was arrested by the FBI on Tuesday as a part of a criminal investigation into the alleged sex trafficking of more than a dozen victims. 

Federal prosecutors allege that the trio operated a prostitution business, recruiting young men for lavish parties held in the U.S. and abroad.

Authorities allege that Jeffries and Smith leveraged their financial resources, Jeffries’ influence as Abercrombie’s CEO, and a network of employees, contractors, and security personnel to conceal the operation. 

According to the indictment, the scheme was "dedicated to fulfilling their sexual desires and ensuring that their international sex trafficking and prostitution business was kept secret," as reported by ABC News.

The trafficking operation is believed to have run from 2008 to 2015, with 15 victims identified so far, though prosecutors suggest the actual number could be higher.

"We will respond in detail to the allegations after the Indictment is unsealed, and when appropriate, but plan to do so in the courthouse – not the media," Brian Bieber, an attorney for Jeffries told ABC News.

Despite the fact that Jeffries is no longer at the helm of Abercrombie, retail sentiment on Stocktwits has plummeted to ‘extremely bearish’ (7/100) from ‘bearish’ just a day ago.

Abercrombie said it is aware of the investigation and was named as a co-defendant in a civil lawsuit filed last year. 

The company acknowledged the risks in its latest SEC filing, noting that while they believe the claims are baseless, "the allegations have resulted in negative media attention and may lead to further litigation or other adverse consequences for our brand and business."

Jeffries stepped down as CEO in 2014 following years of declining sales, but the company has experienced a resurgence under CEO Fran Horowitz, who has led a turnaround since 2017. 

Abercrombie’s stock has gained 68% so far in 2024.

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