Abercrombie & Fitch loses its cool

The retailer's stock price plummets after it gives disappointing guidance for the year.

By Kim Peterson Feb 2, 2012 4:08PM
Image: Woman looking at mannequins in boutique, smiling © Michael Hitoshi/Digital Vision/Getty ImagesRetailers are having a fantastic 2012. Except for one.

Abercrombie & Fitch (ANF) can't get its act together. The stock was down more than 11% Thursday after the company said it whiffed the fourth quarter.

In an earnings preannouncement, the retailer said it expects profit of between $1.10 and $1.15 a share -- far below the $1.55 per share that analysts expected.

Traffic to stores was not where it should be. Same-store sales -- a key measure of a retailer's business -- were flat, which was below the company's expectations. Sales in U.S. stores in particular were disappointing.

Hear why one analyst cut her estimate on Abercrombie in the following video.

Post continues below.
There are some bright spots for the company. Direct-to-consumer sales, which includes website sales, helped bring overall U.S. sales up 4% to $962.2 million in the quarter. And total international sales soared 62% to $366.6 million.

Gross margin is taking a hit, the company said, largely because of low sales and higher markdowns in what it describes as a "more aggressive promotional environment."

This is not the story at other retailers. Target (TGT) blasted through expectations, with same-store sales growing at 4.3% for January. Macy's (M) didn't meet expectations, but it still saw same-store sales rise 2.4%. Nordstrom's (JWN) sales rose 5% and Saks' (SKS) sales nearly hit 11% growth. Limited Brands, which owns Victoria's Secret, said its sales grew 9%.

Gap (GPS) sales fell 4%, but that was better than the 4.9% drop analysts expected, according to The Wall Street Journal. The company was sanguine about the fall, however, saying it was able to clear through holiday inventory with markdowns.

January is a tough time for any retailer. There's a huge lull after the holiday rush, volume is down and the main focus is on clearing out the store to prepare for spring.

So are we seeing a temporary stumble for Abercrombie or are there larger issues here? "It's just not cool anymore," proclaims Business Insider.

I don't think this is a short-term problem. Abercrombie guided down for its full year, saying same-store sales would continue to be flat and estimating earnings at between $3.50 to $3.75 a share. Wall Street expected $4.16.

So how does Abercrombie begin to fix this mess?

Tags: ANFGPSTGT
49Comments
Feb 2, 2012 10:39PM
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Why would anyone ever want to shop at A&F, Hollister or the other stores that masquerade as a night club?  With the pulsing lights, loud music and overly strong perfume, I get a headache anytime I'm in there more than 10 seconds.  Even standing outside of the stores makes me nauseous.   They are nothing but overpriced tshirts and jeans with their logo on it.  And their advertising is nothing but naked models - where are the clothes?  I think the overly-sexed advertising has gotten old.  Plus, you end up paying $60 for a t-shirt that advertises their store for them.   I'm glad parents, and maybe the kids, are wising up and realizing there are cute clothes at Old Navy, Target, etc.  It's a much more pleasant shopping experience!
Feb 2, 2012 7:11PM
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I guess folks are weary of wearing popped collars and seeing the "we only hire bitchin' young people" attitude that is prominently flaunted at A&F stores. The image this company portrays is so phony.  Hopefully this marks the beginning of a slide back into the septic tank from whence they crawled . BYE BYE! Open-mouthed

 

Feb 2, 2012 7:05PM
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Can't believe anyone would buy their cloths. The quality is poor and their prices too high.
What a scam. Hope they go belly up.

Feb 2, 2012 7:53PM
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Too much perfume, bad lighting, thumping music,over priced clothes, lame tag lines.  I can't imagine why their stocks are falling
Feb 2, 2012 8:07PM
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I used to be a store manager for A&F back in the 90's and I didn't like where they were going with their business model. They told us to stop calling our floor people sales associates and start calling them "brand representatives". The message was that they wanted customers to walk into the store, look at the A&F employee and want to be like them - they could care less if the employee could sell, they just wanted them to look good.

 

Case in point, I had a guy that worked my stock room and he was more street than wasp, but I moved him out to the floor because the guy could sell his tush off - greeted everyone, smiled, and SOLD - but the district manager told me to put him back in the stock room because he didn't fit the image. I left not too long after... felt it was pretty close to discrimination and was disgusted. Loved the old A&F when it was true hiking, camping gear and it was about quality - not what the gorgeous blonde who just stands there in A&F looks like. Now with Holister, American Eagle, etc... it's all cookie cutter. Blech.

Feb 2, 2012 9:37PM
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Its simple really.  A& F was trendy at the beginning of the zero decade.  Kids who were shopping there are imprinted with that style.  Some of them will not change it.  That group of kids are in their mid 20's now.  Mom and Dad no longer purchase their clothing so they buy knock offs of that style at Target.  Younger kids would not be caught dead in last generations clothing so they shop elsewhere. 

This is the Gap conundrum.  The Gap was the go to store in the late 80's.  Look at most suburban 40 year olds and they still look like the Gap.

Feb 2, 2012 8:35PM
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@cr8tr - i was a manager for AF starting in the late 90's. I had the same issues. I had an employee that didn't fit the "look book" but she was great with customers and was the best cashier I had on busy days. My DM walked in and told me to get out from behind the counter - i told him no and got in good bit of hot water. It became more & more discriminatory the longer i worked there... not to mention the catalog had nudity in it and we had to start ID'ing kids who wanted to buy it. I was pretty sure I didn't work at the "quicki-mart" and wasn't up to selling that crap and checking ID's. I still have some good clothes from there, jackets & sweaters mostly. Used to be good stuff and somewhat affordable... not so much anymore. I won't shop there.

Feb 2, 2012 9:52PM
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And as the parent who spends the money on clothes I can't stand to be inside that store for more than  a few minutes.  The clerks are stuck up and rude, the nasty perfume they sell permeates my nostrils for the rest of the day and the music is so loud my daughter and I can't communicate while in the store.

Now, I can get new or past season's styles for cheap on ebay without having to step into the store.
Feb 2, 2012 8:01PM
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My daughter, now 23, wanted their clothes and for several years we went. Hollister, Urban Outfitters, Express, Old Navy, Gap, and Banana Republic as does Hot Topic and Zumiez have better prices, merchandise quality, and staff. The biggest reason we no longer set foot in the A & F stores is the loud, blaring music which exceeds 90 decibels-WOW! Between the prices, rude staff, quality, and noise, why bother? Too many wonderful retailers out there to deal with these losers. Good luck A & F but I believe your retail outlets are on the way O U T !
Feb 2, 2012 7:53PM
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What do you expect of a retailer that has basically alienated everyone ?
Feb 2, 2012 7:25PM
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I quit shopping there when the models on their store walls and bags finally crossed the line from "absurdly undressed for a clothing store" to "borderline soft porn" (honest to God, one of them literally had no clothes on...) 
Feb 3, 2012 12:45AM
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I have been a customer for at least 12 years, but no more.  As the others below wrote, my primary reasons:
  •  I am tired of buying overpriced clothes which otherwise could have, and should have been made in America.
  • I am now an older-twenty-something with a real job (finally) and no longer want to shop in a dance club.  Not to mention, the cologne sprayed on everything is a bit overkill.
  • Customer service never was a strength with the company in my opinion.  Even when I shop at Old Navy associates ask if I need help finding a size or anything.
  • Their clothes are tailored to fit a cookie-cutter "type" of person which only reflects a small proportion of the paying consumer base. Maybe they'll realize not all of their customers are going to be 6'3 and have the body of an Olympian, or 5'6 and as thin as a railing?
Sorry ANF.  The frat party is now officially over, and its time to reinvent your brand or cut your loses.
Feb 2, 2012 8:54PM
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I had an experience at A&F that quite amused me. Any time I go in there with my street clothes because I dont fit the "mold" of an "ideal"  customer who should wear their clothes, Im never offered any help and felt ignored. I work at a bank, and one day I walked in wearing my work clothes which consists of slacks and a suit jacket, and I was treated WAYYYY differently. Had 3-4 people great me and ask me if I was shopping for anything in particular. They must have thought I was someone from their corporate office or a secret shopper. Had a similar experience in Wal-Mart too. I should go shopping in a suit more often, but that is no reason to treat customers differently. I used to wear their clothes in high school, I still wear the same size from back then but noticed that they started cutting their clothes alot smaller, mainly in the bust area. I guess woman with a little meat or big boobs arent allowed to wear their clothes....
Feb 2, 2012 11:12PM
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who would want to buy their overpriced crap

Feb 2, 2012 8:15PM
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I think A & F has had their 15 minutes of fame.  Their prices have gone over the top for what you get and in an economy like this one, jeans from AE are just fine.  You're right... I sneeze the whole time I am in the store with the overwhelming "odor" of their cheap perfumes/colognes.  Sorry, having the letters A&F on the sleeve or the tush is not worth an extra $40!  Besides, most of their stuff looks practically worn out when you buy it new!
Feb 2, 2012 8:35PM
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I don't understand how any parent would allow their child to work there. These poor teenagers will have a permanent hearing loss after a few weeks of working there. No wonder they always seem agitated. i can't even spend 10 minutes in there without getting a headache from all that noise.
Feb 2, 2012 8:31PM
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I think A & Factually trains their store people to be rude and aloof .  Is status so important that one is willing to support that kind of behavior and marketing? 
Feb 3, 2012 12:38AM
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I worked there for three years. Surprisingly, I loved it. However, I loved my individual store and coworkers. I hated the company. They are so full of themselves. My favorite moment was when the district manager said ANF was on the same level as Versace. He honestly believed it was true! I could write a book about all the crap they put their employees through. Minimal makeup, no eyeliner, no ponytails, flip flops or converse, you can only wear navy, white or gray unless it's a special item they want you to promote. No dangling earrings, no bracelets, no necklaces, no tattoos, no piercings (other than ear lobes, and then only one per ear), no oddly colored hair (that includes obvious highlights).  I've actually seen a secret shopper evaluation from them. It actually asked if the salespeople who helped the customer were attractive. Customer service? That's a swear word to ANF. Customer service is solely used to prevent theft. Want to call ANF customer service? Too bad. There's only an email. Good luck getting a response! My very small store lost on average five bottles of cologne per day. This happened because the store is so dark with so many places to hide. They make it so easy to steal. I wonder how much profit they lose annually to theft? They project such an image of exclusivity and shoppers are intimidated. I think the ultimate problem is that customers feel alienated and unwelcome.
Feb 2, 2012 10:31PM
Feb 2, 2012 8:23PM
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It's about time. A & 's arrogance and ignorance is blowing up in their face. It would be great to walk in a mall without being assaulted by their nasty cologne.
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