Abercrombie & Fitch has been affected by a dramatic decrease in sales in the US. ANF’s stock had once been gaining 20%, when the stock market barely moved. However, everything came to an end on May 24, 2013, when ANF reported its earnings. ANF’s store sales declined 17%. Their shares then went down 8%. Even though they reduced their loss to $7.2 million from $21.3 million, it completely blew Wall Street’s prediction of $0.05 loss per share.
What could be the cause of these huge losses that Abercrombie is facing? Is it the result of CEO Mike Jeffries’ comments that resurfaced recently from a 2006 interview, on how the Abercrombie and Fitch brand don’t carry plus sizes for teens, because the brand exclusively only goes after the cool, good-looking kids? Or could there be something more?
Well, it turns out that Abercrombie started declining before the CEO’s comments reemerged this year. Even though there has been a lot of consumer out lash at the company, the CEO insists that the main problem facing Abercrombie is inventory shortage issues. Abercrombie hasn’t been able to bring in their spring merchandise quickly into the stores, compared to most of their competitors like H&M, who believe in fast-fashion. To gain a competitive advantage and to get back on their sales track, Abercrombie is changing the way they order their inventory, for a quicker turnaround. The CEO stated that most of their inventory issues have been resolved now, however, their sales profits forecasts has been lowered for the rest of the year, compared to previous years. With the company operating 1,053 stores currently, they also predicted to close 40 to 50 stores in the United States. Abercrombie has been acting really quickly on addressing key issues throughout their company to get their profits back up.
In class, we learned about the ten critical decisions which includes inventory management, then we learned about ethics and social responsibility and finally forecasting. Abercrombie’s situation ties in all of these things we’ve learned and teaches us how important these factors are in a business.
The company is now dealing with their losses and their shares plunging, just because of the inventory issue. Another issue, I think they’re facing is the social media. As a reputable company, they have a social responsibility to respect all of their customers. Ever since the CEO’s comments appeared in the media, many people have been fighting against Abercrombie (Examples: A man donating Abercrombie clothes to homeless, a plus size blogger posing in similar Abercrombie ads, a teen activist who petitioned for an apology from the CEO with 68,000 signatures). Do you think that Abercrombie is dealing with these losses solely because of their inventory management or because of the recent outlash at the company? Also, will Abercrombie remain confident in their solid brand equity, when its competitors like H&M, American Eagle, and Aeropostale are attracting teens with their prices and fast fashion layout, bringing in new merchandise to the stores more often?
Plus size blogger: http://abclocal.go.com/kgo/story?section=news/business&id=9113106
Man giving homeless people, Abercrombie & Fitch clothes: http://www.youtube.com/watch?v=TPmqZAhLVuI
6 thoughts on “Abercrombie & its Hitch.”
This is why CEOs, stock holders and upper management need to just keep their mouths closed. If they want to keep their clothes exclusive then they will lose a following for it. Then they will decrease sales. That is why it is good for business people to keep their comments to their selves or else the consumers may backlash. The consumer is the most important person to please because without a consumer there is no business. In this case the consumers were upset and there was a backlash which affects their sales. This is a good lesson for other businesses.
This was a great post, and definitely has been receiving TONS of media attention and critiques of Abercrombie and Fitch. Who would have thought that an inventory issue could generate so much scrutiny of a retailer, but then when you hear the reason behind it an it is much more clear. I agree with the commenter above me, it is one thing to just change the companies size inventory, and another thing for the CEO to make outlandish statements that completely alienate a large part or their customer base, and upset even more who may not even be included in those they were trying to stray from. Thanks for bringing these articles up, I’m sure that this company will be featured in a lot of upcoming press.
As mentioned, the customer is definitely most important. When the customer does not feel comfortable, the company cannot do well. Many consumers are not attracted to companies who discriminate on certain types of people. This is especially true when there are plenty other brands within the same market. I think that the popularity of Abercrombie and Fitch has decreased over the past few years. This may be due to their lack of competing with style and fashion and focusing more on showing the least amount of skin as possible. I especially think that the recent comments from the company have contributed and will continue to contribute to the decrease in popularity of this brand.
I believe that the CEO’s comment regarding oversized people has contributed to the decrease in the company’s profits. I understand that each brand has a specific image that they want to portray to the public such as the store, Lane Bryant which caters clothes to plus sized females. Likewise, Abercrombie and Fitch display a cool beach kind of look for people. However, it is one thing to have a brand image and another to outright discriminate against others. The CEO has no right to marginalize people by saying who can or cannot wear Abercrombie clothes. This just puts a foul taste into the consumer’s mouth and deters consumers from wanting to make purchases from Abercrombie because of the representation of the brand according to the CEO.
While I do think that the CEO’s comments had an effect in the decline of sales, it’s not as much as the Inventory problem. I think it was very disrespectful of the CEO to make such comments to offend thousands of teens around the country. I feel that even though A&F only markets to “fit” teens, it should expand on that a little and have regular sizes. Their competitors like H&M provide a variety in sizes and I feel that it will come back to hurt A&F later. Also, the inventory management has to improve because you can’t have your Spring collection come out in Summer. Continuing to have inventory shortages will really hurt them.
Our generation is definitely more concerned than previous generations with the impact that businesses have on the environment and on society. The CEO releasing that statement and the inventory issues had an impact on A&F’s decline in sales and popularity but their biggest downfall was their lack of variety. In a down market when people have to be more scrupulous about where they spend their money people are looking for a retailer with a good value. A&F was trendy for a while but they failed to deliver on the value and it does not help when their CEO does such a bad job with representing the brand.