Dive Brief:
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Abercrombie warned of a challenging holiday season as it reported its 15th straight decline in quarterly sales, causing shares to tumble 15.5% in premarket trading Friday.
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Third quarter sales fell 6.5% from last year to $821.73 million, missing Thomson Reuters I/B/E/S forecast for $830.6 million, and Q3 same-store sales fell 6%, missing a Wall Street forecast for a 3.9% decline.
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The company’s Hollister brand fared better, with Q3 net sales falling 13% to $358.3 million at Abercrombie, but falling just 1% to $463.5 million at Hollister, compared to the year-ago period. Q3 direct-to-consumer and omnichannel sales grew to approximately 23% of total company net sales for the third quarter, compared to approximately 21% of total company net sales last year.
Dive Insight:
After years of promising a pivot from its dark, perfumed stores and highly sexualized marketing, teen apparel retailer Abercrombie & Fitch finally began to unveil a brighter, more streamlined approach to stores and a concerted effort to be more inclusive in its marketing.
The changes have been slow, and appear to be going largely unnoticed by shoppers. Conlumino CEO Neil Saunders said the initial promise of the re-branding efforts has disappeared and that the turnaround is now “firmly off track.” He noted in an email to Retail Dive that the changes to the quality and design of Abercrombie’s apparel lines are genuine improvements, but that its new marketing campaign is confusing.
“A&F has much more work to do in building a new base of customers and we maintain that this is a long term effort that may not have a tangible impact on sales for many quarters,” Saunders said. “We also believe that a focus on more staple products with less emphasis on branding – even though correct in terms of what the customer is demanding – could necessitate lower price points, which could ultimately erode margin and profit."
The turnaround is going in the right direction but will take time, endurance during continued hard times and possibly heavy promotions, Sanders adds. "[T]he company cannot turn on a dime and there will likely be a number of bumpy quarters ahead before recovery comes.”
