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Abercrombie & Fitch To Ditch Logo

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Abercrombie & Fitch (NYSE: ANF) might not be as popular as it was a decade ago, but it is making some substantial moves in order to cater to today’s teenage consumer. One of those moves is to remove the Abercrombie & Fitch logo from its North American apparel by spring of next year; the logo will remain on apparel in Europe.

Will the drop of the once-popular branding matter?

Losing Share

The Wall Street Journal noted how Abercrombie & Fitch is losing share to fast-fashion retailers like Forever 21 and H&M. These retailers don't just update fashion trends faster, but also offer teens an opportunity to express their individuality, not their superiority. This is an addition to more attractive prices.

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Abercrombie & Fitch plans on speeding up its supply chain in order to capture share in the fast-fashion market. According to the company, back-to-school sales have already shown an improvement.

Recent Results and Future Expectations

Abercrombie & Fitch's second quarter sales declined six percent year over year to $891 million. Comps sales declined five percent., which may indicate a lack of demand and loyalty. Abercrombie & Fitch’s net income increased to $12.9 million versus $11.4 million in the year-ago quarter, primarily due to cost-cutting measures.

The problem is that the increased profitability didn’t offset declining sales enough to excite investors. This is something investors might need to get used to, as it’s clear that Abercrombie & Fitch is focused on profitability while adjusting to today’s teen consumer demands.

This will take time.

According to Cowan & Co. analysts, Abercrombie & Fitch has also suffered merchandise margin contraction of 67 percent since 2007. This once-dominant teen retailer must find a way to attract teen consumers without lowering prices too much. That’s a difficult task.

Fortunately, unlike other teen retailers, Abercrombie & Fitch has time thanks to a profitable business. Profitability increases are likely to continue since Abercrombie & Fitch plans on closing 60 stores this year.

Posted-In: Wall Street Journal Media


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