Abercrombie Profit Tumbles Amid Rebranding Efforts

RetailDow Jones Newswires

Abercrombie & Fitch Co. (NYSE:ANF) posted its third straight quarter of declining same-store sales, as the once-popular retailer's rebranding efforts are showing little signs of winning back shoppers. Shares tumbled nearly 10% in pre-market trading.

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"The challenges of the brand are deep and longstanding," said Executive Chairman Arthur Martinez. "All of this is complicated by a very challenging environment." He cited soft sales at tourist and flagship locations, weak traffic patterns, and underperformance in seasonal categories.


The New Albany, Ohio, retailer on Friday said profit tumbled 81%, as sales at stores open at least a year fell 6% in the fiscal third quarter ended Oct. 29. Analysts had expected a 4.4% sales decline. Comparable sales at the company's flagship brand fell 14% from a year ago and were flat at Hollister, a brand targeting younger shoppers.

The Abercrombie brand recently launched a new marketing campaign and a redesigned logo in an effort to cultivate a new image, after former CEO Mike Jeffries alienated shoppers by making it too exclusive. Instead of shirtless male models and dim lighting, the new approach features brighter lights, looser styling and a friendlier message.

Executives are trying to attract consumers in their 20s by tapping into their "inner self rather their outer self," said Fran Horowitz, the company's president and chief merchandising officer. "The marketing is full of people with character and charisma�people with inner confidence."

Abercrombie is among a handful of teen players struggling to lure back shoppers as fast-fashion chains such as H&M and Zara steal market share. Gap Inc. on Thursday posted its seventh straight quarter of lower sales. Abercrombie's new brand message comes as rival chain American Eagle Outfitters Inc. has had success using untouched ads and a more-inclusive approach to marketing.

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Mr. Martinez said the company cleared inventory in the third quarter through unplanned promotions after buying too few "wear now" items and too much outerwear for the unusually warm season. In past quarters, he has tried to hold the line on discounts.

"We still believe that healthy brands are built on less promotional intensity, but we don't operate in a vacuum," he said. "We were a little more competitive than we would have liked to have been."

Total revenue fell 6.5% to $821.7 million for the quarter. The company posted a profit of $7.9 million, or 12 cents a share, down from $41.9 million, or 60 cents, a year ago. Analysts had expected a profit of 20 cents a share on $831 million of revenue, according to FactSet.

In the fourth quarter, the chain expects comparable-store sales to be "modestly improved" from the recent period. It also plans to open two new U.S. stores and close 35 by letting leases expire. The company has closed about a third of its U.S. locations over the past six years, leaving less than 750 stores in its home market.

Despite the challenges, Mr. Martinez said executives are still convinced they have the right strategy. "The work that the team is doing is absolutely on target and has the full support of the board," he said.

Abercrombie shares closed Thursday at $16.93 and are down 37% year to date.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com