Abercrombie & Fitch Celebrates Its Return to Profit -- By Closing 60 Stores
Abercrombie & Fitch (ANF) is thinking global. Though it just announced a long-awaited return to profitability and the U.S. stores did well in the last quarter, A&F is taking the long view of where the brand is going -- and that's overseas and online. So the company is speeding up its planned domestic store-closures and shutting 60 stores this year, a move which should help rebuild A&F's brand cachet here.
The company said back in March it would close 100 stores over the next three years... which would make one think maybe 35 or so store closures a year. But apparently, A&F saw an opportunity with a lot of expiring leases at dog stores and decided to jump on it, even though it means more closures happen now.
The writeoff for closing all 60 stores is just $2.2 million -- minuscule compared with what A&F would pay to negotiate out 60 leases. So given that the company wanted to close the stores, managers are smart to get the shutdowns over with while the cost is low.
This quarter aside, A&F's domestic store chain has seen plunging comparable-store sales in recent years. It's possible that's in part due to too many stores too close together, resulting in self-cannibalization. If so, the closures will help relieve that problem.
But closing 100 A&F stores creates an interesting dynamic between A&F and its other brands, abercrombie kids and Hollister. Already, Hollister has 500 stores and is adding 20 more overseas, so Hollister will become even more dominant as time goes on.
Also, once the 100 A&F stores are shut, that chain will be barely larger than abercrombie kids, which has 200 stores. To sum up, the flagship brand is slowly fading into the background as a domestic retail presence in favor of A&F's other brands. International is this company's future -- sales abroad shot up 85 percent in the most recent quarter, while overall company sales were up just 17 percent. While not every international store is a hit, in general the brand still has a newness abroad that it's long worn out here at home.
This is one case where focusing overseas could actually pay off in the States, too. Given that A&F has resisted raising prices until recently, having fewer stores will give the chain a more exclusive feel and help the chain keep prices firm.
Photo via Flickr user Jeff Sandquist
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