Just as Abercrombie & Fitch Co. (NYSE:ANF) was showing major earnings improvements, the teen-oriented clothier is once again courting controversy. This time, the trouble stems from comments made by CEO Michael S. Jeffries in 2006. The comments resurfaced thanks to a book titled The New Rules of Retail. As petitions are circulated and social media masses post angry comments, investors are nervously watching their investments in the company.
But will Jeffries’ comments from seven years ago hurt the company? As Jeffries’ words went viral, the stock was up slightly, proving the old adage that there’s no such thing as bad publicity. But Jeffries’ words, which stated, in essence, that the store caters to thin customers to appeal to “cool kids,” didn’t exactly go against the A&F image. Anyone who has ever walked past an Abercrombie & Fitch Co. (NYSE:ANF) knows the store appeals to the six-pack abs set. But the fact that Jeffries says, “Candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends,” seems to have parents up in arms as they battle to keep children from feeling excluded.
A&F doesn’t carry size XL clothing, and the largest pair of pants in the store are a size 10. American Eagle Outfitters (NYSE:AEO), on the other hand, carries plus size clothes while still portraying a “cool” image. But the company isn’t quite as cool as A&F, going solely by earnings. In its most recent earnings call, American Eagle Outfitters (NYSE:AEO) reported lower-than-expected results, citing low spring traffic as a factor. The company’s shares immediately fell 11 percent.
As both Abercrombie & Fitch Co. (NYSE:ANF) and American Eagle Outfitters (NYSE:AEO) struggle to capture that cool teen market, The Gap Inc. (NYSE:GPS) is experiencing a streak of good news. Up 39 percent this year, The Gap Inc. (NYSE:GPS)’s stock is the one to watch. Earnings for the quarter ending May 4 were up 6.9 percent–a success The Gap Inc. (NYSE:GPS) executives attach to both Gap and Old Navy stores.
Unlike Abercrombie & Fitch Co. (NYSE:ANF) and American Eagle Outfitters (NYSE:AEO), The Gap Inc. (NYSE:GPS) has seen tremendous success with its different divisions. Gap stores tend toward younger, more hip customers while Banana Republic, also owned by The Gap Inc. (NYSE:GPS), appeals to a slightly older demographic. Piperlime covers online shoppers and Athleta is for athletic wear. But the company’s Old Navy discount brand has an appeal that extends far beyond young, “cool” customers. Moms, dads, young kids, and teens can all be found perusing the aisles at the store.
Hope for American Eagle Outfitters
But it’s important not to rule American Eagle Outfitters (NYSE:AEO) out just yet. Wells Fargo recently downgraded the stock to market perform from outperform, citing management team actions that may help the company see substantial growth. In other words, instead of stirring up controversy through online interviews, American Eagle Outfitters (NYSE:AEO)’ head honchos have been busy retooling the company.
While A&F has an image and is determined to stick to it, when it comes down to it great business practices are the key to success in the market. All three companies are showing tremendous potential, but to continue to thrive, they’ll have to keep working hard to win customers–and their parents.
The article Does Young and Hip Win the Clothing War? originally appeared on Fool.com.
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