Abercrombie To Pay $50 Million In Bias SuitsNov 10, 2004 | San Francisco Chronicle
Teen retailer Abercrombie & Fitch said Tuesday it will pay $50 million to settle charges that it discriminates against women and minorities in hiring, saying it hopes to avoid a prolonged conflict over the matter.
The settlement, which remains subject to judicial review, would resolve two federal class-action discrimination lawsuits filed last year in San Francisco and Camden, N.J., and a third suit filed Monday by the U.S. Equal Employment Opportunity Commission.
The private lawsuits accuse the retailer, based in Ohio, of overlooking Latino, Asian and other minority recruits in favor of white job candidates.
Plaintiffs' attorneys claimed that Abercrombie's minority hires were disproportionately assigned to behind-the-scenes positions such as stockroom clerks, while white employees were placed in conspicuous jobs where the company believed they projected a look more in keeping with its classic, clean- cut image. The retailer denied the discrimination charges.
The commission filing Monday in U.S. District Court in San Francisco made public a previously confidential investigation by the federal agency. The commission had responded to allegations that the retailer consistently failed to equitably recruit, hire and promote candidates regardless of race, national origin, gender and skin color, said commission attorney Anna Park in Los Angeles.
"It's a nationwide case. We allege that Abercrombie, on a nationwide basis, discriminated" against large categories of job candidates, including female applicants, Park said Tuesday.
Details of the proposed settlement were not made public, pending a hearing that's expected to take place within a few weeks, sources said.
Abercrombie & Fitch spokesman Tom Lennox declined to say whether the retailer admitted to wrongdoing as part of the settlement. He cited an agreement by all parties involved not to discuss the settlement until it's finalized.
Lennox said that the company has hired a vice president of diversity, Todd Corley, who started on Monday. The spokesman declined to comment on Corley's responsibilities or whether shoppers will see any changes inside the company's more than 760 stores as a result of the company's diversity initiatives.
Robert Singer, Abercrombie's president and chief operating officer, said in a conference call with Wall Street analysts Tuesday, "We decided to settle this because we felt that a long, drawn-out dispute would have been harmful to the company and distracting to management."
The company booked a $32.9 million charge due to the anticipated settlement, which slashed 22 cents per share off its earnings. That resulted in a 21 percent drop in third-quarter earnings, to $40.1 million (42 cents per share) from $50.5 million (51 cents) during the same period a year earlier.
The company also warned of weaker-than-expected profit in the current quarter. Shares of the retailer fell several percentage points after the report was released but recovered to close down 16 cents to $42.
The $1.7 billion-a-year retailer operates stores under the names Abercrombie & Fitch, Abercrombie, Hollister Co. and Ruehl, a wilderness outfitter that counted Ernest Hemingway among its customers.
Abercrombie more recently has been involved in a series of scandals.
In 2002, it caused a high-profile ruckus when it sold T-shirts featuring caricatured Asian faces with slanted eyes and rice-paddy hats.
Last year, Abercrombie paid $2.2 million in California in a first-of-its- kind settlement to resolve allegations by state labor regulators that it illegally forced store employees to buy and wear the company's clothes on the job.
The discrimination lawsuits against Abercrombie have been watched closely by employers and workers' advocates alike at a time when discount giant Wal- Mart Stores Inc. faces high-profile lawsuits alleging mistreatment of women and minorities.