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Abercrombie Fitchs turnaround is proving difficult

AbercrombieWhat's going on with Abercrombie &Fitch?Abercrombie/MattJonesTheyearis1999.ThesummerisrollingintofallandLaborDayweekendisspentshoppingforlast-minuteback-to-schoolclothes.Teengirls,inparticular,areflockingtoonestore.Afterall,theLFOhit"SummerGirls"isplayingnon-stopontheradio,anditslyrics("IlikegirlsthatwearAbercrombie&Fitch")solidifythechain'sstatusasthehottestteenretaileroftheday.

Flashforward17yearsandAbercrombiehasallbutlostitsluster.Same-storesaleshavebeenfallingforyears.Initslatestearningscallwithinvestorsthisweek,thecompanyannouncedplanstocloseabout60stores,signalingthatitsattempttosavethebrandhasprettymuchfailed.

Abercrombiehasbeentryingtosaveitselfaroundforawhilenow,reinventingitsimageand,asaresult,becomingtotallyunrecognizabletothegenerationofkidswhogrewupshoppingthereinthelate'90sandearlyaughts.Thegoalwastoappealtooldershoppers—18to25yearolds,notteens.

Thebrandlesseneditsuseoflogosanditsmalemodelsputsomeclotheson.Thecompanylooseneditsnotoriouslystringent"lookpolicy,"whereinsalesclerkswerereferredtoas"models"andwereforbiddenfromhavingmustaches.ThecompanytappedaformerJ.Crewexecandaformertoleaditsrebrandingefforts.

Intheory,thiswasasmartidea.BettyChen,managingdirectorofMizuhoSecurities,pointedoutthatthiswouldopenthegatestoademographicwithmorespendingmoney.ThemovewouldalsohelpAbercrombiesetitselfapartfromitsmoreteen-friendlysisterbrand,Hollister.

Butthebrand'sattempttoexecuteaturnaroundisprovingtobeverydifficult.

ZackeryMichael/Abercrombie&Fitch

Inthefourthquarteroffiscal2015,thecompany,whichalsoencompassesAbercrombieKidsaswellasHollisterCo.,sawitsfirstpositivequartersince2012,thoughtheAbercrombiebrandsawadecreaseof2%.Bythefirstquarteroffiscal2019,salesfortheparentcompanyweredown4%.TheAbercrombiebrandwasdown8%then.Onereasonwasdroppingtouristandinternationaltraffic.

InlateAugust,rightbeforesecondquarter2019earningswereannounced,EricBederofWunderlichSecuritieshighlightedthatAbercrombie'seffortstorebrandcouldbefutile.

The"shifttoanoldercustomermakeslittlesensetous,"Bederwroteinaresearchnotetoclients.

"WhiletheshifttoanoldercustomerisastrategyforAbercrombie,weseelimitedreasonsforoldercustomerstoshiftbacktoa'teen'brandand,frankly,therearebetterbrandsandlifestylesforthe20+customertofocuson,"Bederwrote.

YoungadultsnowhavefastfashionbrandsZaraandForever21thatbeatAbercrombie&Fitchwhenitcomestoaffordability.Abercrombiecostsmorethanthemajorityoffastfashionapparel—andunlikeZara,itdoesn'tturnoutrunwaytrendsatlightningspeed.Moreaffluentyoungadultsmaychoosetoshopatmoreunder-the-radar,unknownbrandslikeAmericanGiant,ChentoldBusinessInsider.

Abercrombie/MattJones

Competitionaside,thecompany'sstrugglessymbolizehowtoughitisforabrandtoshiftgearsasdramaticallyasAbercrombieistryingtodo.

"Inthehistoryofretail,itisverydifficultwhenabrandtriestorepositionitselfanywherealongtheagedemographic,"Chensaid."Youcanalmostpredictfailurewhenyou'regoingolderoryounger."

AndAbercrombie'simagedoesn'thelp.

"Asyoucanimagine,there'ssomepreconceivednotionswiththebrand'simage,"Chensaid.

Abercrombie&Fitch'ssordidreputationforpreppyclothesandsexuallyexplicitadsisembeddedinmillennialshoppers'minds,thesamewayitslogosweresewnpermanentlyintoitsapparel.

EverythingthatAbercrombie&Fitchstoodforjustdoesn'tjibewithconsumerstoday.

"Youclearlyhaveagroupthatcareslessaboutlogoandbrandandmorejustaboutquality,"Chensaid,"andthey[haven'tbeen]prioritizingapparel[instead,they're]usingdisposableincomeonelectronicslikesmartphones,healthandfitness,[and]evenmoresoonexperiences."

InNovember,Abercrombie&FitchchairmanArthurMartinezacknowledgedthatapparelrepresentsasmallerpercentageofyoungconsumers'spendingthesedays.

Abercrombie/MattJones

AsBederwroteinanothernotetoclients,thebrandislosingtrafficbecauseit'slosingmarketshare— and that's because people aren't interested in the brand, which may account for this quarter's 7% drop in same-store sales.

Beder pointed to Urban Outfitters and American Eagle as two brands that posted positive comparable sales this quarter, suggesting that Abercrombie & Fitch just isn't the king of the mall anymore.






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Date: 15.12.2018, 01:17 / Views: 85273