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.”