Abercrombie Needs Customers, Cool or Not

09 Dec Abercrombie Needs Customers, Cool or Not

Former Abercrombie CEO Mike Jeffries (yes, I said ‘former’, he stepped down today) said some pretty dumb and offensive things about who he wanted his clientele to be. If the company’s numbers were good nobody might have cared, but in this retail environment he rightly got beat up for them. As far as selling the clothes goes though, is it going to be too little too late?

I have written about the saga of teen retailers before, most notably when Delia’s put itself on the market. Clothing is a difficult category in general these days. The dollars spent by and on teens these days are disproportionately going to cool electronics. As well, clothing as a category is a difficult one, and tastes are fickle. Abercrombie (ANF), as well as American Eagle and Aeropostale have felt the sting of that in recent years, and have also had to compete hard against lower priced market entries like H & M. There are lots of places to spend money these days, so you have to have something special if you want it to be in your store.

Now back to Mr. Jeffries and his lack of public relations skills. Way back in 2006, Mr. Jeffries was quoted as saying that they did not make larger sizes (nothing above a 10 for women) because they want the ‘cool kids’ wearing their clothes. His actual quote was ‘In every school there are the cool and popular kids…we go after the attractive all-American kid…a lot of people don’t belong (in our clothes) and they can’t belong. Are we exclusionary? Absolutely.”

Yikes. Although at the time not a lot of people paid attention to his remarks, by 2013 (when sales figures were dismal and the stock price was slipping) they were back in the headlines and Mr. Jeffries had to issue an apology. Now, following some quite dreadful financial results, he apparently has to clear his desk, put everything in a cardboard box, and vacate the building. Fair enough.

Thing is, Abercrombie may not want to sell to non-cool people, but they have to sell to somebody, and they are barely doing that.

The results for the last quarter (which were released on December 3^rd) showed post-per-share earnings for the year ended in January of $1.50 to $1.65 a share, as compared to previous guidance of $2.15 to $2.35. The disappointing results were not a complete surprise though, given that the company had already reported a 12 percent drop in third quarter sales.   It has been a tough period for the store. As well as the company’s problems with the market (and with Mr. Jeffries) Abercrombie is also known for putting logos on things, which used to be cool and no longer is (you’re welcome if you are older than a teen and did not know that).

So to fix all that, Abercrombie has ditched Mr. Jeffries, is in the midst of ditching the logos, will close 60 stores, and now even sells some plus-sized clothing online. Is that all going to be enough? That is to be seen.

Despite some mixed sale results for U.S. Black Friday weekend, the economic omens for the U.S. economy look pretty good at least for the short term. That might mean that newly-employed or promoted parents will shell out more for teen clothing, but that is not exactly a done deal. On the flip side is the fact that the economic prospects for young people (those aged under 24), who presumably are the actual wearers of the product, are not particularly good. A new report from research group Young Invincibles finds that while the job prospects for this group are improving, their inflation adjusted wages are falling. That means that while younger teens might persuade mom or dad to buy them some new jeans, the group that has to pay for them themselves might just make do with what they have.

Let’ s see what the next management group at Abercrombie has to say about who they want buying their clothes. If they are at all cognizant of the trends, hopefully they will say nothing at all about who they consider cool, and gratefully ring up sales from anyone at all.