Comparable store sales are down a whopping 14% in the third quarter, and outlook for the holiday season isn’t good.
While Abercrombie has made many missteps over the years, three key mistakes have hurt the brand, Brian Sozzi, chief equities strategist at Belus Capital Advisors, said in a note.
These mistakes have helped put longtime CEO Michael Jeffries’ fate in question.
- Starting two dud brands, Ruehl and Gilly Hicks. Ruehl closed in 2010, while Gilly Hicks will close its stand-alone locations soon. These brands were expensive and confused customers. “The build outs of the store were so elaborate and amusement park attraction-like that any new retailer seeking to enter the space will have to completely gut the store and start fresh,” Sozzi writes.
- Aggressive expansion overseas. The brand has opened huge stores all over Europe, even though demand is questionable. “International expansion has been too aggressive, plain and simple,” Sozzi writes.
- Over-promising to investors. The company hyped a turnaround in the spring, only to report disappointing sales and warn that outlook for the future will be bad. This sent the shares tanking and potentially alienated shareholders, Sozzi said.
It’s going to take a major overhaul for the brand to recover.
Abercrombie also faces other problems, like getting its preppy fashions in-line with what teens want.