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Is Abercrombie & Fitch Losing Its Shirt?

Posted by Deborah Dunham on January 25, 2010 05:25 PM

Apparently, half-naked models aren’t enough to entice customers anymore -- at least in the case of upscale retailer, Abercrombie & Fitch. Their once-enticing skimpy image is now resulting in nothing more than skimpy sales.

The trendy teen chain has again reported a troubling decline in sales -- 21 straight months of declines, actually, in stores that have been open for over a year. Reports showed a 19 percent drop in December, a month that most retailers depend on to bolster their year-end profits.

Even with last year’s decline worse -- at 24 percent -- analyst Eric Beder of Brean Murray, Carret & Co. described the last two years as a “jaw-dropping 40 percent” decline. He also added what many of us had suspected all along: the store's "business model now appears fully broken."

With stock prices that once topped $80 a share, today it's worth nearly a third of that, which doesn’t come as any surprise. What is surprising though is the retailer’s response to the crisis: Nothing.

The chain that has long-since believed in “aspirational” (a.k.a., “expensive”) pricing, while also being resistant to sales or promotions for fear it would cheapen their brand, is standing by its no-price-cuts philosophy.

Walk into any store and you will see men’s jeans that run for a whopping $98, a hooded sweatshirt at $80, and even a pair of underwear for $22. Women’s prices aren’t much better. Their jeans will set you back $80 and a pair of denim short shorts (think Daisy Dukes) is $50.

Granted, when the economy was still strong, A&F was able to get away with these prices. In fact, by selling most of its merchandise at full price, they boasted some of the highest margins in the industry. But, it’s no secret that the economic downturn has left many a retailer in downward sliding sales. And the ones who are pulling through are the same ones appealing to budget-conscious buyers today.

Take a look at any of A&F’s competitors, like the Gap, American Eagle, or Aeropostale, and you will see the same types of trendy apparel for significantly less as these outfitters respond to the recession with red-lined price tags and “buy one get one” promos. This is especially appealing to teens who take on jobs for extra spending money, only to realize that working 11 hours (at the $7.25 minimum wage) to afford a pair of A&F jeans is not worth it when they can go around the corner and get two pairs for their same hard-earned cash.

Then there’s the issue of what’s cool and not-so-cool anymore. In the ongoing quest to fit in, status-conscious teens used to embody what everyone else was donning. So much so that they lined up in front of Abercrombie’s stores to get inside. Loud music, sexy ad campaigns, dancing salespeople, cologne wafting through the air and half-dressed models were enough to distract buyers from the over-priced merchandise. But today’s youth are all about individuality -- seeking their own style from any number of stores. That, and saving a few bucks along the way, just like the rest of us.

So how much longer can A&F pretend the recession isn’t happening? Unless they do something quickly to recapture the what’s-hot-today-may-not-be-so-hot-tomorrow teen market, they may just lose them for good. Meaning, that once must-have embroidered moose logo will become “Dude, that’s so yesterday.”

Comments

Laurence Bernstein Canada says:


Three things come to mind:

1. A&F were brilliant at experiential branding -- every salient aspect of their advertising and merchandising effectively triggered the feeling they knew their target cohort were looking for in their lives. Their story showed how their clothes contributed to this by enhancing the physicality of the wearer. However, today's late teenagers are probably looking for entirely different (or at least manifestly different) experiences. It takes a powerfully relevant and brilliantly expressed experience to overcome the serious price difference.

2. The original A&F imagery and related activities were cleverly designed to communicate that their clothes enhanced the experience (life) of the wearer. The imagery and approach has morphed (as clearly shown in the clip) to the point where the message is that the wearer enhances the clothing (hence the cleverly constructed ad that avoids, pretty much entirely, showing clothing). The idea that my physicality enhances the clothes I wear is generally not credible, and relevant only to a very few who have the physicality to make this happen. Most kids, with their insecurities and angst, are unlikely to buy into the notion  that they will make the clothes look drop dead sexy. Besides which, even if they believe they could, is this really what people want. As someone once said: ask not what you can do for your clothing, ask what your clothing can do for you.

3. When I hear the word "aspirational" I reach for my pistol -- when I read about "aspirational  pricing" I reach for my broker to sell my shares. There may have been a time (and there may still be pockets of consumers in North America) when absolute price added value in and of itself as an expression of financial prestige. This was most likely never true for teenagers who have limited resources and need to make it go as far as they can -- certainly brand adds value, but saving money on brands means more stuff. So, what teenagers (and many others) look for is brands (prestige) and effect (experience) at good value pricing. When A&F delivered on a relevant experiential promise, it was uniquely able to do so, and therefore price was not an issue. As they are now not only not delivering a relevant promise (the cohort has changed as mentioned above), they are communicating it in an almost alienating manner. No wonder people say it's not worth the money.

A&F proved that you can change your essence -- they started as an upscale outfitter and magically became a very successful teen brand. I am sure they will figure it out, and will not be surprised if they do something completely different and unexpected (with their clothes on!).

January 26, 2010 09:30 AM #

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April 22, 2010 02:14 AM #

Nick Staal United States says:

Why pay full price at Abercrombie when you can get the same thing at Hollister for half the price. Hollister (http://www.hollisterco.com) is an Abercrombie brand and I would say at least half of the clothes are identical to A&F, aside from replacing the moose icon with a seagull. Aside from "status" of owning the more expensive brand, why do it? Abercrombie is taking away their sales by offering them at Hollister. But, when other companies such as American Eagle and Aeropostle mentioned above are "knocking off" your clothes and offering them for less, why not "knock off" your own clothes, create a spin-off brand and sell them at the lower price point of the competing brands? Some of the customers they lost at A&F they are regaining at Hollister. Brand diluting or genius? I think they would be smarter to keep the Hollister style, but not offer identical clothing as A&F. There needs to be some brand/product differentiators to keep both relevant. That way A&F and Hollister can have the same customer, rather than fighting over them. I'm not sure about the numbers of sales between the two brands, but would be curious if sales back up my theory.

January 26, 2010 11:03 AM #

ryan United States says:

Look do a simple test. Look around at people, teenagers or otherwise. Are they wearing ANF?
In my area the answer is no way. A few years ago that was all people were wearing (or wanted to wear) today it just isn't the case anymore.

Value is "in" right because it has to be. People have/are cutting back on everything. The go go spend like mad decade is over.

January 26, 2010 06:55 PM #

Justin United States says:

There are very few cases where I smile when I hear a business is struggling...but A&F is an exception. They are responsible for some of the most hilariously bland clothing in the industry, which translated into the blanding of American youth, given the brand's huge popularity back in the day. The only bad thing about their demise will be not being able to identify the annoying kids immediately by their A&F-branded shirts. Good riddance!

January 26, 2010 10:51 PM #

Garrett Myers United States says:

I have just one word for you Deborah: Unresearched.

If you had gone onto the companys many company websites you would have learned they have restructured their sales approach. Since mid December they have been doing many promotions such as 50% of all jeans, or like you had mentions their competitors doing with the redlines. All redlined merchandise had been 50% off until yesterday.

I understand where you are coming from with this article because of the PAST issues A&F has had financially, but you took absolutely no effort into researching your claim. If you had truly researched and visited a store or gone to their websites in the past four weeks you would have deffinately seen plain as day on their homescreen discount AD's.

I have worked for the company for the past two years and watched the ups and downs they have taken. They are attempting to turn that around and it would be nice to see positive feedback for a company for all their efforts made than just negative feed.

Next time write an article about the horrible ethics the company holds for their employees and the racism that bleeds through its image and through daily associate work life. Despite all attempts to stop such a thing through lawsuits. Just a story more true to the brand and that will damage its reputation for an honest reason, not overpriced items that arent actually overpriced.

January 29, 2010 01:56 AM #

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April 22, 2010 02:22 AM #

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