Reading a Wall Street Journal article on Abercrombie & Fitch (A&F) brought us back to earlier days when we would hear some older person asking, "If everybody decided to jump off a cliff, would you do it?"
A&F is intent on deciding its own path and, for the retailer of preppy clothing, that means refusing to mark down merchandise just because everyone else is doing it. The question, ultimately for A&F, will be - is everyone actually jumping off a cliff into greater danger or is the most dangerous position to be found sticking to the high ground?
Analysts and investors have begun to question A&F's positioning and its stock price has dropped significantly. The company's shares are trading at about 20 percent of their high in January. Same-store sales in November were down nearly 28 percent from the year before.
Michael Jeffries, chairman and chief executive officer of A&F, believes that discounting the chain's clothing will ultimately lead to a devaluation of the brand's equity in the minds of consumers. He told analysts, "Promotions are a short-term solution with dreadful long-term effects."
Kimberly Greenberger, an analyst at Citi Investment Research, questioned how long Mr. Jeffries and company would be able to maintain their position if the recession continues to hang on.
"The worry here is at a certain point they have to cry 'uncle' and capitulate on the pricing," she told the Journal.
David Cupps, A&F's general counsel, said the chain is "well positioned to deal with a tough market" and reiterated that it would not be following "the promotional pied piper."
Discussion Question: Is Abercrombie & Fitch taking the right path or is there some middle-way between no discounts and tactics that would in some ways devalue the brand?