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The Cautionary Tale of Abercrombie & Fitch

  
  
  

Of all the major fashion retailers who have suffered in the past year, none have suffered quite like Abercrombie & Fitch. A&F just released their second quarter results, and comp-store sales declined 30%, following comp-store decreases of 25% and 26% in the prior two quarters.  

In a conference call with analysts last November, A&F Chairman and Chief Executive Michael Jeffries was quoted as saying that "promotions are a short-term solution with dreadful long-term effects." It was, at the time, a quote that separated A&F from everybody else in their response to the dramatic drop in business last fall. It reflected A&F's long-held strategy of positioning the retailer as a premium brand. A&F gallantly refused to break price.  

During a conference call last week, Jeffries stated the obvious, "Consumer spending patterns domestically continue to be dictated by cost and value propositions, and this is clearly a headwind for our premium brands."  He went on to say, "We have admittedly missed some other fashion opportunities that drove the business in the spring," Mr. Jeffries said. "We feel like we have corrected these fashion misses."  

Unfortunately, that's not all that A&F missed. They also missed that the world has changed. They missed that their business model is no longer relevant to their target customer, as that customer exists today. They missed that their customer no longer sees their products as premium; they now see them as merely overpriced.  

But it's not just A&F. Fashion retailers across the spectrum are struggling with an environment where the old strategies and formulas no longer work like they used to. A&F is just the most obvious example of how the customer reacts when you fail to recognize and respond to fundamental changes in the marketplace.  

The consumer is not likely to go back anytime soon to paying a premium based solely on brand/store cachet. Intrinsic value is the new driver. It's a change that every independent retailer must take note of, regardless of the category they trade in. To be successful in this new environment requires that the store "brand" be inextricably linked with the intrinsic value of the store's products, service and experience.

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