Abercrombie Preps For Possible Buyout

Abercrombie Preps For Possible Buyout

Embattled teen retailer Abercrombie & Fitch is in preliminary discussions with “several parties” regarding a potential transaction. The company is working with an investment bank to find a buyer, according to a report from Reuters. Apparel chains Express and American Eagle Outfitters are two suitors for the brand, according to the Wall Street Journal.

Abercrombie has seen sales and net income decline for four straight years, and the brand has not been able to financially capitalize on recent rebranding efforts that have pivoted the company away from its formerly controversial image.

In an era where e-Commerce growth is almost a given, Abercrombie has been incapable of drawing new consumers to its web site. The retailer saw a paltry e-Commerce sales growth of 2.9% in 2016, with online growth actually declining 0.2% in 2015.

A Business Insider article noted that the Abercrombie web site appears to have an overreliance on deep discounting, even on trendier merchandise such as dresses, indicating that the company likely has an overabundance of unsold inventory.

The brand has experienced many of the same issues — the inventory problem being one — that its mall-based teen contemporaries Aéropostale, American Apparel and Wet Seal have faced, with fast-fashion brands and off-price retailers beating them to the punch in price and supply chain speed.

A sale would at least put Abercrombie in a better position than the now defunct American Apparel and Wet Seal brands, especially since Abercrombie has downsized significantly. The company announced in March that it was closing 60 U.S. stores with leases expiring in 2017, bringing its total store count down to approximately 674, a 20% drop since 2013. The decision came after a dismal Q4 in which same-store sales at the A&F brand declined by 13%.

With approximately 50% of its U.S. store leases expiring by the end of fiscal 2018, Abercrombie will have more flexibility in determining its brick-and-mortar footprint, making the brand a more attractive commodity for any potential buyer.

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