More consolidation may be on the horizon for teen-apparel retailers.
Continue Reading Below
After a host of bankruptcy announcements earlier this year from once-adored brands like Payless ShoeSource, the Limited and Wet Seal, private-equity firm Cerberus Capital Management is working on a bid alongside American Eagle Outfitters (AEO) for 90’s teen-retail sensation Abercrombie and Fitch (ANF), according to the Wall Street Journal.
Abercrombie’s shares, down more than 50% in the last 52 weeks, have fallen in recent years as customers flock to less expensive, fast-fashion alternatives like Zara and H&M, that give them immediate access to on-trend fashion items. The rise of e-commerce shopping has also helped fuel a shift away from once dominant bricks-and-mortar mall-based brands as Americans spend more money on platforms like Amazon (AMZN) and off-price retailers offering treasure-hunt experiences like TJX (TXJ) companies TJMaxx and Marshalls.
Earlier this month, Abercrombie told investors it was in preliminary discussions with “several parties” about a possible transaction, though it declined to provide additional detail.
In the final three months of 2016, Abercrombie said net sales dropped 13% from the year prior as comparable-store sales – a key metric for retailers – saw a 5% drop and earnings declined 16%. The company will report first-quarter results before the opening bell on Thursday.
By contrast, American Eagle – which carries a market capitalization more than double that of its rival, has seen sales trends on the rise at the same time Abercrombie’s have declined.
Continue Reading Below
Cerberus, with more than $30 billion under management, is no stranger to investing in well-known brands that have fallen into tough times: In 2015, it bought 80% of direct-to-consumer cosmetics retailer Avon (AVP) for $605 million, taking a nearly 17% stake in the company.
- Target Shares Rise on 1Q Earnings but CEO Not Ready to ‘High Five’ Yet
- Slowing Sales Growth at TJMaxx, Marshalls Parent Stokes Retail-Industry Concern
- Rue21 Joins Growing List of Retailers in Bankruptcy
- Sears CEO 'Taking a Stand' Against Craftsman Supplier, Shares Drop
- JCPenney Shares Drop Again as Wall Street Loses Faith in Turnaround