Sluggish moving inventory and negative same store sales are the problem and it’s not operating efficiency that’s going to fix Abercrombie. They need to know what sells — easy to say but hard to do. Comparable sales in the second quarter of 2013 were -10%, keeping with their recent unhappy history of negative same store sales. All the ANF retail concepts including Abercrombie & Fitch, Hollister, Kids and abercrombie were in the red in the second quarter and the first quarter was even uglier:
First quarter 2013 comps
CEO bullet points from the conference call
In the face of such devastating results you might think management would be taking a long hard look at what they are doing. That didn’t happen at least this quarter.
Michael S. Jeffries:
1). I think that from the top, there is a weakness in the young teen business
2). I’ve read quite a few research reports this past quarter talking about how good our stores look, and I think they are right
3). When times are difficult it’s easy to start throwing this group or that group under the bus for having executed poorly. I don’t think that’s the right thing to do from a cultural point of view, but more importantly, I don’t believe it
4). I’ve been around this business as you know, long enough to know that sometimes however good a job you are doing, there are factors beyond your control
5). Sometimes they are in your favor and sometimes they are against you and they tend to even out over time.
Jeffries indelible vision of how great the business was and is keeps him from acting on the bad numbers while he continues to believe it’s an external problem that will sort itself out. Instead of taking a hard look at the current state of Abercrombie he will stick with business as usual and keep rolling out new stores with slow sales to satisfy growth. It might work out eventually if all things old become new again, but that can take a long time. What was conspicuously missing from the call was any discussion of looking at teensup trends now and making some fundamental changes to their inventory.
Former Abercrombie consumers are probably spending more dollars at the trendier Forever 21 , Brandy Melville , H&M and Uniqlo looking for the cheap fashion basics and then adding a pricey pop with a Michael Kors bag.
Things are different than when Jeffries was a boy. There is this thing called the Internet with Instagram, Facebook and Twitter that shares ideas fast. Phone cameras and texting mold lives and tastes. There are countless teen blogs devoted to fashion ins and outs that transmit what consumers want at the speed of light. Instead of reading research, Jefferies should look at and listen to his potential customers in their natural habitat. They are not looking for overpriced sweatshirts and Abercrombie logos.
