The good, the bad, and the ugly for Abercrombie
The once hip retailer, Abercrombie & Fitch, has struggled for more than a decade as it tries to find its footing with teens who research the latest trends on the internet, often buy there too, and are willing to settle for less than top quality.
As Euromonitor analyst David McGoldrick told CNNMoney, "Who needs a sweater that will last 10 years when you're just going to buy a new one three months later?"
Meanwhile, according to Mr. McGoldrick, fast fashion retailers like H&M and Forever 21 have stepped in to meet the need for cheaper, less durable clothes. To make matters worse, according to a Piper Jaffray survey also reported on CNNMoney, 71 percent of teen girls and 57 percent of boys are shopping at off-price stores such as T.J. Maxx and Marshall's.
A late January New York Times article noted that Abercrombie's most direct competitors — American Eagle Outfitters and Aéropostale — as well as Wet Seal, Zumiez and others, equally felt the teen angst this past holiday season. Beyond heightened price competition from online players as well as Forever 21, H&M and T.J. Maxx, other contributors to the teen sector slump were identified as: high unemployment within the age group and more discretionary spending heading towards smartphone apps and gaming systems.
The problem didn't seem to be fashion-driven as in past years, although Abercrombie's mix was said to be too bland.
So, what's A & F doing about fickle teens? You guessed it — lowering prices, even though they had said back in November that prices would rise. Now, with profit down 58 percent and same-store sales off eight percent in the latest quarter, they plans include:
- Getting more competitive on price;
- Closing up to 70 stores in the U.S. while opening 16 stores abroad;
- Reducing lead times;
- Improving fashion for its womenswear; and,
- Increasing marketing.
The company will also buy back some stock and attempt to cut costs.