Abercrombie & Fitch posted a surprising 8 percent gain in January sales in stores open at least one year, helped by a gift-card promotion and clearance sale. It was the first month-over-month increase since April 2008. . . . more
There is a vast amount of promise for the retail space as the economy improves. However, not every the stock in this exciting space will rise with vigor. Be particularly wary of trendy stores that are known for selling pricey merchandise. With that in mind, let's take a look at Abercrombie & Fitch.
Abercrombie does carry fashionable merchandise, has survived through tough times and a good number of younger people, despite the economic situation, continue to shop the stores with a smile. However, Abercrombie's major flaw is that some of its merchandise is quite expensive to purchase especially for a younger crowd that isn't always flush with cash. . . . more
So as you probably are aware, a bunch of retailers released their December sales data and comps yesterday. Generally, most companies’ sales sucked less than analysts’ consensus—although beating year-over-year comps for December 2008 is a pretty low bar (like being the most beautiful person at bingo night at the retirement home). Two companies in particular that were of interest to me yesterday were Urban Outfitters and good old Abercrombie & Fitch. The two companies reported results that told two stories in this recession.. . . more
While other retailers have cut prices in the recession, Abercrombie has clung to an 'aspirational' image. But sales have tumbled. Will A&F come back strong when the economy rebounds?
With more than 270 leases up for renewal through 2011, Abercrombie & Fitch Co. may cut back some of its stores, most probably in its namesake brand, executives said at the company’s second quarter conference call.
Abercrombie & Fitch recently announced it will pull the plug on its RUEHL chain, a concept with 29 stores in high-profile malls across the country that targeted well-heeled consumers in their 20s. Abercrombie blamed “the severe economic downturn” for sinking the stores, which launched in 2004, generating an operating loss of $58 million during the company’s prior fiscal year.
But maybe it’s not just the economy’s fault in this case. REUHL is just another example long line of concepts rolled out by established chains over the last few years that were either closed or abandoned. The lesson here is that some of these retailers might be better off sticking to their core concepts instead of pushing ever more demographic-specific options out to the consumer.
Here’s a quick look at some of these troubled spin offs:. . . more
After a one-month “strategic review,” Abercrombie & Fitch decided to shutter its 29-door Ruehl unit and amend its credit agreement, giving the firm additional financial cushion as it winds the business down this year.
Ruehl had pre-tax operating losses of about $58 million last year and was deemed to be less promising than the company’s overseas expansion.. . . more
The economic downturn that began last year has cut significantly into Abercrombie & Fitch sales, but the company doesn't plan to change its approach to selling clothes, shareholders were told at the company's annual meeting yesterday.
Michael Jeffries, chairman and CEO of the New Albany-based apparel company, said, "The current economic environment has created an aversion to spending on premium brands unlike anything I have seen in my retail career." . . .more
Dominating Fifth Avenue at 56th Street clearly isn't enough for Abercrombie & Fitch. The company plans to open another outpost three blocks south of their tourist-swamped flagship in what's now Hickey Freeman's flagship store at 666 Fifth. Those who aren't fans of the brand might see some significance in that address, but the property's owners mostly sound thrilled to get a huge, sidewalk-clogging line of their very own: "Hickey wasn’t appealing to the tourist trade, which drives volume on Fifth," one rep pointed out to WWD.
NEW YORK (AP) — Teen-oriented clothing chain Abercrombie & Fitch Co. said Thursday it is in the process of cutting its headquarters staff by about 9 percent to save money.
Spokesman Eric Cerny confirmed that the company is cutting about 170 positions at its 2,000-strong Columbus, Ohio, headquarters.
As consumers limit spending, Abercrombie & Fitch's sales have slumped as it kept its relatively high price points steady and invested in international growth, while competitors such as Aeropostale Inc. and American Eagle Outfitters Inc. have slashed prices.. . . more
Six months ago, I wrote an article highlighting the dangers of seeing a retailer running sales called, “Discounts - Good or Bad?” Little did I know that in the six months following the article, we’d see almost all consumer discretionary retailers discounting more aggressively than we’ve seen at any time in the last decade.
Just to summarize the aforementioned article, promotional markdowns are typically used in an attempt to entice a higher volume of purchases to juice declining revenues and clear inventory. The main pitfalls to such a strategy include:
1. Increased volumes at lower margins are not translating into higher revenues. Few buyers will buy a poor product even at a discounted price.
2. Reliance on discounting is often a result of structural weakness in a company’s merchandising decisions.
3. The repeated use of voluntary discounts runs the risk of turning into a permanent loss of pricing power through what I call, “the sale spiral.” Customers become accustomed to bargain basement prices and lower their reservation price for the company’s products altogether.
In my previous article, I assumed discounting was the direct result of difficulty enticing customers to buy product. But, what about discounting in the face of a recession and overall tightening of wallets? If the industry as a whole begins discounting, do the same principles of loss of pricing power, profitability, and brand image apply? One company, Abercrombie and Fitch (ANF), believes so and has chosen to stay away from running promotions in addition to their annual clearance in hopes of maintaining its brand image and, more importantly, pricing power. . . . more
Eight years ago, Abercrombie & Fitch was the bee's knees of discreetly sexy casualwear. Overpriced sandblasted jeans and button-up plaid shirts were boxed up and put under the tree (or menorah) of any 16-year-old with a Suburban in the driveway. Those were the good, pre-recession, naked-models-riding-horses-in-catalogues days. But now Abercrombie is suffering much worse than its competitors, like American Eagle, in the economic downturn. Though the competition is discounting prices to get consumers to shop, Abercrombie has kept its prices the same because they don't want to look cheap. The Wall Street Journal reports:
NEW YORK - After a steady decline in Abercrombie & Fitch Co. shares for several months, an analyst on Friday upgraded the teen-apparel retailer, saying the stock is unlikely to fall further.
Since the beginning of June, New Albany, Ohio-based Abercrombie's shares have plummeted 63 percent.
Jefferies & Co. analyst Randal Konik said in a note to investors on Friday that while the stock is "one of the worst performing stocks in retail," further decline is not warranted.. . . more
Consumers flock to low-cost stores such as Wal-Mart, Costco and BJ's in back-to-school season, abandoning higher-end retailers such as Abercrombie, The Gap, Limited.
NEW YORK (CNNMoney.com) -- Consumers nervous about the weak economy abandoned higher-end clothing store chains for discount retail giants such as Wal-Mart, Costco and BJ's, which reaped back-to-school sales in August.
"Americans haven't slowed their spending," said Ken Brown, president and retail analyst with ResearchConnect.com. "They just moved their spending, from some of the retailers with bigger-ticket items to the discounters."
That was why the August same-store sales for Wal-Mart, BJ's and Costco increased and trounced analysts expectations, while sales plunged for Abercrombie & Fitch and The Gap, experts said.
"This is Wal-Mart's year to eat share," said Dean Hillier, retail expert with management consultant firm A.T. Kearney.
The discount stores
Discount stores tend to thrive in a weak economy, because many consumers perceive low-cost retailers as the best places to stretch their dollars in purchasing necessities. Some analysts had expected - incorrectly, it turned out - that discount retailers would experience a softening in sales as the government-issued stimulus payments that came out in the spring and summer dried up.
Wal-Mart (WMT, Fortune 500), the leading retailer in the world in terms of annual sales, said Thursday that sales at stores open at least one year increased 3% during the four weeks ended Aug. 29, compared to the same period last year. The figure didnot include fuel sales.
A consensus of analysts interviewed by Thomson Reuters had expected a gain of 1.6%.
"Quite honestly, I think their brand is a comfort zone for consumers during bad economic times," said Hillier. "They're the trusted brand in uncertain times."
Wal-Mart, the biggest food retailer in the world, attributed the gain to strong sales in groceries and "health and wellness" products. The company also was lifted by back-to-school sales, and said that sales in certain electronics - such as flatscreen TVs, cell phones and GPS units - continued to do well.
Wal-Mart's U.S. sales, not counting its Sam's Club division and fuel sales, rose 2.8% in August, compared to the same period last year. Analyst consensus from Thomson Reuters had expected a gain of 1.4%.
BJ's Wholesale Club (BJ, Fortune 500) said Thursday that same-store sales jumped 15.4% in August, lifted largely by rising gas sales from inflation. BJ's beat analyst expectations of a 14.1% gain, according to a consensus of projections compiled by Thomson Reuters.
But even without gas, BJ's outperformed higher-end retailers with a same-store sales gain of 8%, matching the consensus projection from analysts. The company said that food was among its biggest sellers, with an 11% gain in sales of perishable foods.
Costco Wholesale (COST, Fortune 500), another top low-income merchant, reported Wednesday that same-store sales jumped 9% in August, compared to the same period last year. But the company still fell short of a consensus of analysts pooled by Thomson Reuters, who had expected a gain of 9.9%.
Costco said that its sales gain was bolstered by the 40% surge in the price of gasoline. Without gas, Costco said same-store sales rose 6%.
Higher-end retailers
August is generally a good month for retail sales, as parents and college students stock up on clothing and supplies before the start of the school year. But these shoppers stayed away from retailers of higher-end clothes, according to analysts, who noted that many consumers are simply continuing to wear the clothes that they own.
The Gap (GPS, Fortune 500), which owns Old Navy and Banana Republic, said that same-store sales fell 8% in August. This was much worse than the 1% decline experienced in August 2007, but it wasn't quite as bad as the 9.7% decline expected by a consensus of analysts surveyed by Thomson Reuters.
The worst-performing part of its business with Banana Republic North America, with a 14% plunge.
"I don't see those guys coming back any time soon," said Brown of ResearchConnect.com, referring to The Gap and other clothing retailers.
Abercrombie & Fitch (ANF) said same-store sales fell 11% in August, which wasn't as bad as the 7.9% projected by analyst consensus from Thomson Reuters. Limited Brands (LTD, Fortune 500), owner of Victoria's Secret and Bath & Body Works, reported that same-store sales fell 7% in August, slightly worse than the 6.9% decline projected by analysts.
America's shopping venues are getting an international makeover as moderately priced apparel retailers from Europe, Asia and Canada increasingly set up shop in the U.S.
In coming to America, these retailers are following high-end European designers, who planted their flags in recent decades, expanding first to big cities and then to smaller markets. Now, more foreign retailers are taking advantage of the weak dollar, which reduces the cost of their initial investment, and favorable terms on store leases as landlords look for new tenants to attract shoppers as midpriced U.S. chains like AnnTaylor Stores Corp. and Talbots Inc. contract.
Sweden's Hennes & Mauritz AB, with 156 U.S. stores, calls the U.S. its "largest expansion market." Since the beginning of its fiscal year in December, the "fast-fashion" chain has opened 11 stores in the U.S., including its first store in Seattle on Friday. It plans about 27 more openings this fiscal year, including a store at Westfarms Mall in Farmington, Conn., in August.
Canadian yoga-wear retailer lululemon athletica Inc. plans to open 32 U.S. stores this fiscal year, almost doubling its U.S. presence to 66 stores. South Korea's Who.A.U, which is taking aim at Abercrombie & Fitch Co.'s Hollister chain, hopes to open 450 stores in the U.S. in the next 10 years. And Canadian teen retailer Garage hopes to have 500 stores in U.S. malls in seven to 10 years.
Also expanding in the U.S. are Spain's Zara (owned by Inditex SA) and Mango chains, Germany's luxury sport brand Bogner, Russia's Kira Plastinina, Iceland's Kisan, Japan's Muji and Britain's Topshop chain and Karen Millen brand. "There aren't too many important global apparel retailers that aren't looking at the U.S. market for its potential," says Ken Nisch, chairman of JGA, a Southfield, Mich., retail-strategy and design firm.
Opening shop in the U.S., of course, isn't a slam dunk. There's no guarantee that the economy -- or apparel sales -- will recover from the current slump any time soon. Furthermore, the U.S. is a low-growth market where retailers have long had to fight for market share. But "the U.S. is still the world's largest consumer market," says Christine Day, lululemon's chief executive. "Even if it contracts, it would be a mistake not to be in it."
The retailer, which is opening both urban and suburban locations, has been able to negotiate lease terms that are more favorable across the board than a year ago. The terms, which vary by lease, include fewer built-in rent increases, the option to terminate leases after three years rather than five years and higher sales thresholds before lululemon has to pay a percentage of sales in addition to base rent.
Many international retailers are approaching U.S. expansion cautiously. Muji and Topshop, which is set to open its first U.S. location in New York in October, plan to wait and see how their stores in New York perform before opening stores elsewhere. That's the lesson of Japanese clothing chain Uniqlo, part of Fast Retailing Co., which launched its U.S. operations three years ago with stores at three New Jersey malls. Last summer, Uniqlo closed the stores in favor of building brand awareness via the flagship store it opened in New York's SoHo in late 2006. A spokeswoman says the retailer is looking at further expansion in the U.S.
Foreign midtier retailers still account for only a small percentage of U.S. retail sales overall. Twenty-two foreign chains queried by The Wall Street Journal said they will operate about 475 stores in the U.S. by year's end. The U.S. had roughly 150,000 clothing and accessory stores in 2006, according to the latest government data. But the value of foreign retailers' investments in clothing and accessory stores in the U.S. continues to grow. Between 1997 and 2007, it rose more than 60% to $4.1 billion, according to the U.S. Commerce Department's Bureau of Economic Analysis, which released the most recent data Friday.
Furthermore, foreign retailers have had an outsize impact on the U.S. market. The invasion of fast-fashion chains like H&M and Zara has prompted U.S. retailers from Gap Inc. to J.C. Penney Co. to update their selections faster or more often.
Still, it is unlikely that the influx of foreign chains will offset American store closures that have pushed U.S. mall vacancies to 6.3% in the second quarter, their highest level since 2002, according to market-research firm Reis Inc. For example, over the next few years, AnnTaylor is closing about twice the number of stores lululemon plans to open in the U.S. this year.
International retailers "will provide some incremental demand for the better properties," says Rick Sokolov, president of Simon Property Group Inc., the largest U.S. mall owner by market value and number of properties. He says those most likely to benefit are top-tier malls in high-traffic urban areas generating the highest sales per square foot.
At many malls, developers looking for new concepts to excite shoppers are giving international retailers the deals traditionally reserved for top tenants. "These terms have always been there for the hot retailer, but historically the hot retailer was an American company," says Julie Taylor, senior vice president with real-estate-brokerage firm Cornish & Carey Commercial-Oncor International. "Now, more often than not, those are foreigners."
Source: Wall Street Journal
NEW YORK — The kids division of Abercrombie & Fitch Co., abercrombie, plans to move into the Fifth Avenue space Brooks Brothers is vacating.
Sources close to the situation said Brooks Bros. will exit 666 Fifth Avenue, on the southwest corner of 53rd Street, around February 2009, and abercrombie will build a prototype 22,000-square-foot flagship to open in 2010.
For Abercrombie & Fitch, the project reflects a strategy of placing flagships at high-profile venues in the U.S. and abroad. Abercrombie’s Hollister division is launching a prototype at 600 Broadway in SoHo in the first half of 2009. The two-and-half-year-old Abercrombie & Fitch flagship on Fifth Avenue and 56th Street generates in excess of $100 million in annual sales.
Brooks Bros.’ decision to create a second Manhattan flagship on Fifth Avenue about eight years ago raised eyebrows because of the proximity of the 93-year-old Brooks Bros. store on Madison Avenue and 44th Street. The Fifth Avenue unit, essentially a big glass box, failed to capture the Brooks Bros. aura, which is personified by the dark-wood-paneled Madison Avenue venue that oozes tradition.
“The Fifth Avenue location has not been representative of the brand,” said Claudio Del Vecchio, chairman and chief executive officer of Brooks Bros. “The other reason for leaving is I don’t believe in a two-flagship strategy within nine blocks of each.
“We have full intention to rebuild the Madison Avenue flagship, which will celebrate its 100th anniversary on Madison Avenue in 2015,” he said. “We want to make sure that Madison Avenue is the real ambassador.”
The company bought the 120,000-square-foot building last year for that purpose. About half the space is for selling and half for the company’s headquarters.
“Both stores are doing very well, but I am sure they’ve been cannibalizing each other,” Del Vecchio said. “We really want to refurbish the Madison Avenue store to represent the brand. We realized it was a better opportunity to invest there, and a better business opportunity than signing a new long-term lease” on Fifth Avenue.
Del Vecchio stressed that Brooks Bros. wants to increase its presence in Manhattan, aiming to open four or five stores comparable to the 9,300-square-foot unit on Broadway at 65th Street near Lincoln Center for the Performing Arts. Brooks Bros.’ fourth Manhattan store is at One Liberty Plaza in lower Manhattan.
The Fifth Avenue location is comprised of ground, second floor and lower-level space, with a double-height glass storefront and 28-foot ceilings, according to the Cushman & Wakefield marketing brochure. The site also has 192 feet of frontage wrapping around the corner.
Also at 666 Fifth Avenue, additional space is being created to accommodate another retail tenant that has yet to be determined. Rents on Fifth Avenue around 53rd Street are said to be about $1,500 a square foot.
Source: Women's Wear Daily
