Abercrombie & Fitch Inc.’s new effort to attraction to customers with much less sexy, extra inclusive advertising merely isn’t attracting customers, as the namesake brand’s 14% drop in third-quarter similar-store sales indicates.
the identical-store gross sales decline was partially as a result of headwinds at flagship and tourism stores, mentioned Fran Horowitz-Bonadies, Abercrombie’s chief merchandising officer, on the company’s income name, in line with a FactSet transcript. in addition, Horowitz-Bonadies mentioned the assortment was “distorted against outerwear and other heavier-weight categories.”
Analysts recognized some other problem.
“We believe the logo’s merchandise and advertising and marketing campaign did not resonate with shoppers,” Stifel analysts wrote in a Friday observe. “It seems to us that the emblem’s new design workforce (Aaron Levine, head clothier for A&F men’s and Kristina Szasz, head dressmaker for A&F ladies’s), which was once hired in August 2015, has been unable to supply the patron inspiring merchandise and the brand’s new advertising and marketing marketing campaign is failing to resonate with the patron.”
Abercrombie & Fitch ANF, -15.18% stated third-quarter sales of $ 821.7 million, down from $ 878.6 million ultimate 12 months and under the $ 831.0 million FactSet consensus. Adjusted earnings per share had been 2 cents, also under the FactSet estimate of 20 cents.
related-retailer sales for the Hollister brand were flat for the quarter, while sales for that model fell 1% to $ 463.5 million.
along with a related-store sales decline of 14% on the Abercrombie model, sales fell 13% to $ 358.3 million.
Abercrombie shares are down 14.3% in Friday trading.
“this means to us that Abercrombie’s issues run deeper than simply external headwinds (foreign alternate and vulnerable tourist visitors),” Stifel mentioned.
Stifel rates Abercrombie shares cling with a $ 16 worth goal, which analysts mentioned they are reviewing.
“we’re transferring aggressively to adapt the A&F brand across all channels through comprehensive adjustments in product, purchaser experience, and advertising and marketing,” said government Chairman Arthur Martinez on the decision, highlighting the corporate’s effort to “more obviously articulate a redefined identification for the A&F brand.”
Horowitz-Bonadies stated the Abercrombie “identity” is the “available American informal luxurious model for today’s 20-one thing shopper.”
the patron simply doesn’t get it, in line with Neil Saunders, chief govt of retail research and consulting firm Conlumino.
the promoting effort “has taken the form of a relatively mysterious marketing campaign with the opaque strapline of ‘individuals have rather a lot to assert about us, they believe they’ve bought us discovered,’” Saunders stated in a Friday word. “whereas we take note the intention of the campaign—which is to stimulate hobby and get consumers to take a recent look—we really feel that it is too confusing and overly advanced. in brief, it simply does now not be in contact what’s happening at A&F.”
There are some certain things happening at the company. as an example, Saunders says Abercrombie has taken a “extra inclusive and gentler manner” with “trendy, high quality apparel.”
And regardless of the challenges, “it continues to maintain a conservative financial policy with reasonable debt and leverage ranges and superb liquidity,” mentioned Moody’s analyst Mike Zuccaro.
however the model’s turnaround will take time.
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“A&F has much more work to do in building a new base of shoppers and we handle that it is a long run effort that would possibly not have a tangible influence on gross sales for many quarters,” mentioned Saunders. “We additionally believe that a center of attention on extra staple products with less emphasis on branding—even though proper with regards to what the buyer is traumatic—might necessitate cheaper price points, which could not directly erode margin and revenue.”
Abercrombie shares are down 46.4% for the 12 months thus far whereas the S&P 500 index SPX, -zero.22% is up 6.8%.