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As A&F Sales Continue To Dip, Brand Repositioning Is Next Move

Abercrombie & Fitch has posted its 14th straight quarter of sales declines, leading the retailer to scale down its expectations for comparable store sales improvement in 2016.

Q2 net sales of $783.2 million were down 4.2% versus last year, with comparable sales for the quarter also down 4%. Both the Abercrombie & Fitch and Hollister brands experienced a 7% and a 2% dip in same store sales, respectively, taking the retailer back in the wrong direction after a brief improvement in 2015.

Arthur Martinez, Executive Chairman at Abercrombie & Fitch, attributed the bulk of the sales declines to poor traffic in flagship and tourist locations.

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The apparel retailer is still in the midst of a brand repositioning, moving away from its often-criticized marketing and in-store experiences that featured shirtless models and loud music. As part of the pivot, the retailer has set its sights on being a “casual luxury brand for today’s 20-something consumer,” according to Fran Horowitz-Bonadies, President and Chief Merchandising Officer of Abercrombie & Fitch. Given the retailer’s previous focus on selling to consumers who may have exemplified a “popular” or “good-looking” demographic in the past, the switch could very well serve to endear A&F to more casual shoppers.

“Research into today’s young adult consumer demonstrates a shift in what confidence means,” Horowitz-Bonadies said in a recent earnings call. “It is no longer outer directed but center directed. Image is less important than character and it is more important to feel confident than to appear confident, which is why we are positioning A&F to deliver a casual luxury experience that brings out our customers’ best self and inner confidence in casual, timeless looks, and special care, quality and attention to detail.”

A&F is certainly not the only teen-oriented retailer to face stiff challenges: Aéropostale and a horde of other brands have filed for bankruptcy in recent years.

A&F Continues Remodeling Stores, Shifting Online

While Abercrombie & Fitch expects to open 15 stores in 10 global markets in 2016, the company anticipates closing up to 60 U.S. stores by the end of the fiscal year once their leases expire. The retailer remodeled an additional 32 Hollister stores in Q2 and expects to remodel approximately 20 more by the end of the year. Additionally, the brand is working on a new Abercrombie & Fitch prototype location to be tested in early 2017.

Despite its brick-and-mortar woes, online sales appear to be giving the retailer a slight pick-me-up. Direct-to-consumer e-Commerce sales in Q2 grew to approximately 23% of total company net sales, up from 21% last year. These e-Commerce sales are up nearly 5% compared to Q2 2015.

Abercrombie & Fitch has made efforts to improve its online business overseas as well. The retailer recently entered into a wholesale agreement with Germany-based online retailer Zalando SE so that the brand can sell Abercrombie clothes on its web sites.

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