American retail company Abercrombie & Fitch (ANF, Financial) was founded in 1892 by David T. Abercrombie and Ezra Fitch, in the Manhattan borough of New York City, New York. A & F initially started as an premium outfitter of sporting and excursion goods, mostly known for its expensive tents, shotguns, fishing rods and fishing boats.
It was acquired by The Limited Inc., a clothing-chain operator based in Columbus, Ohio, in 1988 and in 1992 was repositioned as a retailer that focused on more fashion-oriented casual apparel for young consumers.
Abercrombie & Fitch has over 400 locations in the United States and is growing internationally. The company manages two offshoot brands: Abercrombie Kids and Hollister Co.
Reinventing image
Abercrombie & Fitch declared bankruptcy in 1977, closing down its flagship store at Madison Avenue and East 45th Street. In 1978 A & F was acquired by Jake Oshman, owner of Oshman's Sporting Goods, a Houston-based chain, for $1.5 million. Oshman’s reopened stores under the A & F banner as a mail-order retailer specializing in more modern sportswear like hunting wear, tennis clothes and novelty items. Shops were opened in Beverly Hills, Dallas, and New York City, but sales still did not pick up.
The entire scene changed when in 1988 The Limited Brands Inc. (LB, Financial) purchased A & F from Oshman’s and revamped its image. Since then A & F has acquired a niche in casual apparel for the youth market.
Initially, a public offering was conducted in 1996, where The Limited Inc. kept 84% of the company. It became free in June 1998, when the rest of the company was given off to shareholders of The Limited.
Declining sales
Since 1997, A & F has managed to keep a high profile in the public eye with its clothing designs, premium prices and advertisings. The company has grown rapidly with soaring sales which led to the opening of many outlets. From 1995 to 2008, sales grew 20 times and net income increased more than 56 times each year. Abercrombie grew from 36 stores and $50 million a year in sales in 1992 to 1,000 stores and over $4.5 billion in sales 20 years later.
But the last few years have seen Abercrombie struggling to attract unpredictable teen shoppers, who are no longer as willing to spend as much on apparel as their predecessors did. A & F has seen a steady decline in its sales, which dropped 12% in the third quarter of 2014, especially at the Hollister brand. In an attempt to improve U.S. margins, Abercrombie has been closing stores and reorganizing its intimate-apparel brand Gilly Hicks. The company has even decided to strip its much-prized Abercrombie logo from its apparels to lure teens, who now tend to seek more uniqueness in their clothing.
While A & F’s brand image has seen a serious slump, because of lack of stylish and season appropriate inventory, notorious comments from its CEO Mike Jefferies made things worse. The overall sales for the quarter, which ended on November 1, 2014 dropped to $911.4 million from $1.03 billion.
Future prospects
Despite global net sales falling 12 percent to $911.4 million in the third quarter of 2014 – and stock plunging to its lowest level in a year at $30.31, Abercrombie & Fitch is trying hard to get back to its former glory. A & F has been trying to reshape itself by supplying more fashionable clothing and has also amplified its importance on online shopping.
There is also restructuring within the organization, with Arthur C. Martinez taking over Mike Jefferies’ role as the chairman of the company, and the promotion of its CFO, Jonathan E. Ramsden, to the position of COO.
For Abercrombie & Fitch, it will definitely be an uphill task to regain its former foothold, but with the right kind of management, slash in prices and trendier apparel, it does not seem impossible.
