High-end clothing retailer Abercrombie & Fitch (ANF) is testing the adage “sex sells” to see if that’s true even in periods of weak consumer spending. After suffering yet another drop in sales in May, the company is once again rolling out a racy magazine-style catalog that will sell for $10 in ANF stores to consumers age 18 and up.
The move is sure to raise temperatures, and not just of the teenage girls flipping through the magazine. Abercrombie abandoned the catalog in 2003 after harsh criticism that the magazine was a horrible influence on young people. As the head of Concerned Christians of America said in 2001, “The exploitation of sex and young people in A&F’s catalog is not only atrocious but also a psychological molestation of their teen-age customers.”
If the catalog isn’t toned down, it could be another PR disaster for Abercrombie. Then again, with ANF shares suffering in 2010 and weak consumer spending holding back sales, the store might not think it has that much to lose.
Here’s the reality of Abercrombie’s fiscal situation: Shares of ANF stock are down 7% year to date in 2010, while the broader market is essentially flat. Key competitor Gap (GPS
) is down only about 3%, while other, smaller retail operations like Aeropostale (ARO) have seen dramatic gains this year. ARO stock is up 30% since Jan. 1 because of very brisk sales growth.
The reasons for the stock’s declines are clear — a failure to connect with consumers. A few weeks back, we got the May sales data for retailers, and Abercrombie posted a 3% decline in same-store sales — even worse that the predicted 2.3% decline. That’s after the company has failed to post a profit in two of the past four fiscal quarters.
It’s worth noting that from the beginning of the year until the end of May, revenue in stores open at least one year is up 1% overall. But items aren’t exactly flying off shelves.
Clearly, something has to give at Abercrombie. Consumer spending isn’t bouncing back as nicely as most economists would like, and Americans are having trouble justifying those $100 pairs of jeans. The company certainly isn’t going bankrupt, but it is definitely off track and needs to start growing its profits if it wants to succeed.
So why not hearken back to Abercrombie’s heyday in the early 2000s? In fall 2001, shares of ANF traded in the $17 range — and by summer 2005 they were pushing $70. The brand was a hot commodity among high schoolers, college kids and stylish 20-somethings.
Who knows if the catalog can help rejuvenate Abercrombie. At $10 a pop, the offering could add considerably to the bottom line in the coming months, especially as back-to-school shopping brings more prospective customers to the store.
Whether the hopes of stronger sales is worth the renewed criticism, however, is anybody’s guess.
