Abercrombie: Near Its End?

On Wednesday, American retailer Abercrombie & Fitch reported that it will continue its trend of deep discounts in effort to boost lagging sales.

After seeing consistent double-digit drops in comp store sales last season, the company said it will heavily POS merchandise to bump sales, acknowledging the "gross margin erosion" that will ensue.

A&F will also look into shutting its least profitable doors, having identified 200+ underperforming stores. The company hopes that in doing so, they'll not only free up cash for better investments, but also improve their brand equity by regaining exclusivity.

But what about in the long run? The company cannot survive on a business model of markdowns to fuel sales. For long run growth, I really think the company needs a complete re-positioning and re-branding. I've been saying this for years -- the company's apparel is stale and repeated. Nothing changes from year to year. I went into an Abercrombie a few weeks ago for the first time in years -- and it looked exactly as how I remembered it back from my high school days. Polos, suggestive graphic tees, dangerously short pleated skirts, destructed denim, and of course, the overwhelming stench of cologne.

I understand that since its inception, A&F has distinguished itself as a very distinct lifestyle brand with a specific aesthetic, which breeds a very loyal customer -- but it seems that as of late, that customer is looking for something else. This may not be as applicable to the A&F male customer, but certainly for the female customer. She is no longer interested in replenishing her A&F polos with the season's newest colors or adding another graphic crew neck tee to her collection. She wants fashion; she wants to mimick what her favorite celebrities are wearing; she wants relevant trends. And thats why she's turning to retailers like H&M and Forever 21. They are responsive to fashion trends and celebrity style.

I guess to be fair, I can't really compare A&F to fast fashion players as they're in a very different business. But there are a lot of other mass retailers out there that have been able to stay on point with trend. A&F, like any other lifestyle brand, has stayed true to its roots and the DNA of its brand, but perhaps too much so; it really hasn't ever been able to reflect the trends from runways and magazines in its own apparel like other mass retailers have.

Take American Eagle Outfitters for example. It is A&F's biggest competitor. I've also recently visited AE stores and can vouch that they have picked up on some of the season's big trends - non-denim pants, embellished knits, boyfriend shirts. Even more so for the company's other brand, Martin & Osa, which competes more closely with J.Crew.

Another point -- why the hell would A&F create another brand - Hollister - which sells exactly the same product as its flagship label???? I can't think of anything that differentiates the two brands other than price point - even the quality looks the same to me. With AE outfitters, they were very smart to create Martin & Osa so they could extend their reach to an older audience with a more polished aesthetic. Or J.Crew - it birthed Madewell to target a trendier, riskier customer with a whole different lifestyle than the J.Crew customer.

I guess I've got a lot of beef with A&F - I really could go on and on about this...but no worries, I won't. Back to REAL fashion..