Have eaten a price reduction of the loss of the A & F (Abercrombie Fitch wholesale) for several years been convinced that price cuts would harm the brand value.
But now the family to locate the United States, known for high-end casual apparel brand has also changed his mind.
May mid-, A & F announced its full line of products will be price cuts this quarter, and “an aggressive plan to further cut prices”, especially for secondary school students in Hollister and for children Little Abercrombie Fitch wholesale two Vice-cards. June 4, A & F also announced further price cuts, and its high-end brands Ruehl in the future “strategic reassessment.”
In fact, just a two weeks ago, A & F is also talking tough to claim that “no price reductions.” In November 2008 an investor conference, company CEO Mike? Jeffrey (Mike Jeffries) has said, “We know how do you think, but the promotion is the brand long-term effects of short-sighted solution.” But a significant than-expected loss to A & F finally could not withstand the pressure.
Bad trend in March was already obvious. Month, A & F same-store sales (same-store sales are an important indicator for assessing the performance of retailers, that same store sales in the same period of comparison, under) decreased by 34%, which is the same month in the performance of retailers, the worst of the .
May mid-, A & F announced 2009 first quarter results, the company quarter sales fell by 24%, from 800 million U.S. dollars last year fell to 612 million, a loss of 26.8 million U.S. dollars last year than profit of 62.1 million U.S. dollars during the same period a decrease of nearly 100 million U.S. dollars.
Mike? Jeffrey was apparently not the situation. He took office in 1992, in his hand, A & F has successfully defeated the rival Gap, to become the most contemporary trend of American youth brands.
A & F had refused to lower prices of hard-line stance was not accidental. Although a casual wear brand, but it was intended for high-end customer base. It is with “casual luxury” to define the brand connotation, “with the best cashmere, pima cotton and leather to create high-quality casual clothing for self-cultivation” and to use time-tested, the best equipment to create “top denim fabric” .
More importantly, A & F brand has been damage to the painful lessons of price cuts.
That was in 2000, A & F just a few years ago, with its pleasant texture and sexy design of teenagers in the United States established the status of high-end casual brands, good days in a few days to suffer an economic recession. Also in the intense competition, A & F announced across the board price reduction of 15%.
Despite the promotional price cuts in the short term look for the company has won some customers, but when the economic recovery, A & F’s sales did not rise with it, the company was aware that damage to the brand is far lower prices than they expected.
A & F decided to bring back the high-end casual brand’s image. Mike? Jeffrey reduced the A & F’s marketing plan, product price increases, the price of a pair of jeans close to 100 dollars more expensive than the original 15-20 U.S. dollars.
Not only that, A & F will be the majority of shops open in the upscale shopping center, the design of the store were also strictly controlled. Although there are some stores still use the old carpet and colleges in Scotland Check style wallpaper and posters, but most stores have adopted a more modern white walls and black shutters decorated dome light inside the dark, multi-purpose lamp lighting, interior use A & F own brand fragrance Fierce, playing electronic music.
A & F also in 2004 established the “influence to control the team,” (Impact Team), this sector under the one called “brand representatives” of the position responsible for controlling the store all the details – Be sure to include lighting, display items, posters, promotion and fragrance of the companies are required to follow the use of “visual policy”, and customer service problems that arise from a rapid response. And these representatives are carefully selected brands can only be wearing A & F clothing, fresh actually played a “civilian model role.”
It took almost two years, Jeffrey was recognized by young people will be middle-class family culture and attitude towards life into the A & F’s brand design. At that time A & F’s brand is so influential that young people are no doubt: put two expensive Polo shirt with the deer signs is the style of performance. In the A & F’s Fifth Avenue flagship store, throwing the long queues of young people lining up every morning to work or even block the crowd, the company’s stock price also will soar to 80 U.S. dollars.
With this lesson in A & F began to stubbornly stick to their strategy – although since then analysts have been criticized for its high prices continue.
But now the situation has changed. Summer Discount become the wave of the entire industry, and clothing brand for young people to bring considerable sales. A & F’s main rival Aeropostale was held in May Big Bargain: 10 U.S. dollars T-shirt and a skirt 20 U.S. dollars for this company to bring 11% of the sales growth, another opponent Buckle has also taken inventory clean-up strategy and a substantial price cuts, sales volume has also been double-digit growth. The A & F’s performance overshadowed a decline in sales is still there.
Consumers are more price sensitive, value-oriented brand performance not as good as before. Today depressed economic environment in the United States to spend 90 dollars for a hole in an old pair of jeans to do foot the bill, looks are no longer very cool thing. A & F’s competitors Gap also reported a 5.4% decline in same-store sales, a little more high-end Banana Republic brands dropped by 13%, while the Gap Group’s most low-end Old Navy brand performance was a surprise to the upside.
A & F price in relation to young people in today’s purchasing power, perhaps a bit too high. Even Jeffrey has also eased the tone, “said the proud is that this brand quality and a unique shopping experience rather than price, the customer cares about is the immediate right price I had not foreseen.”
But the problem is that for A & F’s competitors, the lower prices to keep them depressed retail environment for superior performance on the A & F, the lower prices might be a reckless move.
A & F last experienced a recession only lasted eight months, this has been a over a year. Retailer does not seem likely in August 2010 before the recovery. When the A & F eventually forced to take the pressure of investors and competitors, price-cutting strategy, it rich?
A & F want to value-oriented brands with discount strategy will regain some market share, could be real problems to be solved Jeffrey seems to be, A & F of such a high-priced casual apparel brand relative purchasing power of young people today is too expensive, and is it really obsolete?
Credit Suisse First Boston analyst Richard? Baum>> (Richard Baum) that the A & F quarter, core consumer group for women who are too young and too much for Logo T-shirt, did not closely follow the seasonal trend.
A & F also acknowledged the existence of right now the trend and trend of the wrong question. And investors in a recent conference call, Jeffrey explained the first-quarter loss. He said that A & F women’s missed some of the key fashion trends, “Obviously we do not have as in the past, to be popular and are a popular printing, design trends to give close attention to. We are wrong, we are working to correct the error.”
If, however, are in the fashion industry, but it does not stay in a continuous 10 months, the trend of cusp, you may already through the eyes of those young people angry. “In our view, the question is whether A & F has lost its appeal on the campus of the brand?” Bear Stearns analyst Brian? Tunick (Brian Tunick), said he lowered the A & F’s share price is expected.
JPMorgan’s Thomas Filandro also cut its A & F’s earnings expectations and that the weak sales performance in the time, if it does not do a good job cost control and inventory management, things will become worse. Filandro said that now A & F Women’s weakest, men have not shown significant improvement.
A & F’s response approach is to Hollister this summer to introduce new product lines, which is available for high school students a blend of Western-style product line. This is the A & F the next fiscal year, the focus of the performance.
Another key point is that A & F is able to launch rapid-response trend for women, has won the hearts of girls back to school shopping. To do this A & F has set up a university campus “reconnaissance team” to the early prediction of potential popular trend, the New York-based conceptual design studio are also predicted a new style, color trends and trends.
A & F but in fact the greatest threat comes from rivals such as Aeropostale, which is similar with the A & F style, the reaction faster, but the price is less than half of A & F.
Aeropostale in 2002 isolated from the department stores, Federated Department’s retail brands, the same for teenagers. Channel experience set the foundation of its responsive nature of the market, CEO Julian Geiger, and A & F will soon adopt a similar strategy of product and image of the open market. Aeropostale profit margins lower than the A & F, but the revenue higher price-earnings ratio is higher than in most of the quarter, A & F, and ample cash flow, almost no debt.
“The Big Money” in the fashion industry’s Caitlin McDevitt said that more clear now that these young consumers are accustomed to buying from other similar but more expensive brands of clothes, A & F is no longer cool. Those pockets are not enough young people turning to a more expensive version of the A & F clone American Eagle and Aeropostale.
Price of these brands already lower than the A & F, together with continuing price cuts and promotional strategy to buy one gift a seasonal hot single items, A & F very difficult to account for what is cheaper in price wars. A price cut after the A & F Polo T-shirt asking price 50 U.S. dollars, almost exactly the same Polo shirt 19.5 U.S. dollars to spend can buy at Aeropostale, if the discount is more as long as 7.99 U.S. dollars. American Eagle a little of your points, 24.50 U.S. dollars, but not to the A & F half. An unprecedented price-sensitive consumers to abandon a pair of old shoes, as did the A & F abandoned.
In addition to price cuts, A & F pin their hopes on overseas markets, announced the company’s capital expenditure from last year’s 175 million U.S. dollars to 200 million U.S. dollars, the money will mainly used for international expansion, in Milan and Tokyo and other places to open new stores.
But the question is, even though the company tried to expand in Europe and Japan, it lacks its competitors have on the local market control.
In March 2009, Abercrombie Fitch wholesale in the United States operates 1112 stores, but the shops are outside the United States only in Canada and the United Kingdom have very few of the 15. In contrast, Gap in the United States, Canada, UK, France, Ireland, Japan and other markets operates 3149 stores, another rival Tommy Hilfiger Corporation is shop the shops to more than 70 countries and regions.
The limited experience of overseas markets for A & F, the mean higher business risk. It can accurately grasp the extent to which the local market trends and cope effectively with the local market fluctuations, the smooth processing of all kinds of unexpected trouble?
What’s more, Europe and Japan at the moment, feeling the brunt of the hardships of economic recession, Europe’s problems even more serious than the United States. A & F will have much chance? It is still uncertain.