Abercrombie Profit Tumbles Amid Rebranding Efforts
November 18 2016 - 8:20AM
Dow Jones News
Abercrombie & Fitch Co. posted its third straight quarter of
declining same-store sales, as the once-popular retailer's
rebranding efforts are showing little signs of winning back
shoppers.
"The challenges of the brand are deep and longstanding," said
Executive Chairman Arthur Martinez. "All of this is complicated by
a very challenging environment." He cited soft sales at tourist and
flagship locations, weak traffic patterns, and underperformance in
seasonal categories.
The New Albany, Ohio, retailer on Friday said profit tumbled
81%, as sales at stores open at least a year fell 6% in the fiscal
third quarter ended Oct. 29. Analysts had expected a 4.4% sales
decline. Comparable sales at the company's flagship brand fell 14%
from a year ago and were flat at Hollister, a brand targeting
younger shoppers.
The Abercrombie brand recently launched a new marketing campaign
and a redesigned logo in an effort to cultivate a new image, after
former CEO Mike Jeffries alienated shoppers by making it too
exclusive. Instead of shirtless male models and dim lighting, the
new approach features brighter lights, looser styling and a
friendlier message.
Executives are trying to attract consumers in their 20s by
tapping into their "inner self rather their outer self," said Fran
Horowitz, the company's president and chief merchandising officer.
"The marketing is full of people with character and charisma—people
with inner confidence."
Abercrombie is among a handful of teen players struggling to
lure back shoppers as fast-fashion chains such as H&M and Zara
steal market share. Gap Inc. on Thursday posted its seventh
straight quarter of lower sales. Abercrombie's new brand message
comes as rival chain American Eagle Outfitters Inc. has had success
using untouched ads and a more-inclusive approach to marketing.
Mr. Martinez said the company cleared inventory in the third
quarter through unplanned promotions after buying too few "wear
now" items and too much outerwear for the unusually warm season. In
past quarters, he has tried to hold the line on discounts.
"We still believe that healthy brands are built on less
promotional intensity, but we don't operate in a vacuum," he said.
"We were a little more competitive than we would have liked to have
been."
Total revenue fell 6.5% to $821.7 million for the quarter. The
company posted a profit of $7.9 million, or 12 cents a share, down
from $41.9 million, or 60 cents, a year ago. Analysts had expected
a profit of 20 cents a share on $831 million of revenue, according
to FactSet.
In the fourth quarter, the chain expects comparable-store sales
to be "modestly improved" from the recent period. It also plans to
open two new U.S. stores and close 35 by letting leases expire. The
company has closed about a third of its U.S. locations over the
past six years, leaving less than 750 stores in its home
market.
Despite the challenges, Mr. Martinez said executives are still
convinced they have the right strategy. "The work that the team is
doing is absolutely on target and has the full support of the
board," he said.
Abercrombie shares closed Thursday at $16.93 and are down 37%
year to date.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
November 18, 2016 08:05 ET (13:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Abercrombie and Fitch (NYSE:ANF)
Historical Stock Chart
From Aug 2024 to Sep 2024
Abercrombie and Fitch (NYSE:ANF)
Historical Stock Chart
From Sep 2023 to Sep 2024