Recent headlines referring to Abercrombie & Fitch include: "Abercrombie & Fitch Sales Decline For Seventh Straight Quarter," "Abercrombie's Sales Continue To Decline With No End In Sight," "Is Abercrombie's Business Model Broken?" and "Why Abercrombie & Fitch Is Losing Its Appeal." Essentially, the once very profitable company seems to be all but finished in the American market and the signs have been anything but unclear for some time now. In addition to the obvious causes for such a fall in sales (think: a slow U.S. economy and high unemployment), Abercrombie suffers even more due to its higher price points (in comparison to similarity situated brands), its targeting of teens almost exclusively and its business model, which is based on high inventory and its brick and mortar stores. However, other signs that the brand has been struggling to regain the limelight have been in play for quite awhile.
It seems the retailer has relied quite a bit on various public relations stunts to bring the brand back into the spotlight. The examples are somewhat endless over the past several years. CEO Mike Jeffries' controversial remarks about the store's clientele: "We go after cool kids. A lot of people don't belong and they can't belong. Are we exclusionary? Absolutely." Jeffries made more comments about not wanting anything but "good looking" people shopping at the brand's store (which lead to a flood of criticism that Jeffries meant fat people, as A&F doesn't stock XL or XXL sizes in women's clothing) and then began talks about the impending and oh-so-appropriately timed plus-sized collection. The legal battles with the Jersey Shore's Mike "the Situation" Sorrentino. You may recall that they made a model strip and masturbate during a photo shoot, and offered to pay off Sorrentino to stop wearing their clothes on the TV show. Then the retailer sold that t-shirt that read, "More Boyfriends than TS," to which Taylor Swift fans reacted in their usual manner, with death threats. And who can forget that man-on-man shower video entitled, Other Sports Require One Ball. Wrestling Requires Two, by the legendary Bruce Weber. All the signs that Abercrombie was struggling for the limelight were there.
So, is relying on the media to make your brand relevant again a sure-fire tactic? Judging by Abercrombie's ever-falling profit margins, the answer is no. Despite the popular notion that no press is bad press, it seems that sometimes no amount of press can make up for lackluster merchandise and weak traffic weighed, and thus, a failing brand. Instead of focusing on PR stunts to make headlines, it seems that A&F should focus on re-vamping its wares and honing in on the international markets where "Abercrombie" is still a desirable name. Thoughts?
Update: As of last week, A&F investor Engaged Capital, which owns about 400,000 shares, sent out a letter yesterday urging the company to find a replacement for Jeffries in lieu of renewing his contract, which ends in February 2014. The general theme of the letter: "Investors in Abercrombie have endured poor performance due to poor leadership for far too long. The Board needs to come to the same conclusion that everyone else already has – it is time for new leadership."
Updated: As of this week, Abercrombie & Fitch shares are falling after the company announced it was renewing the contract of CEO Michael Jeffries for at least an additional year. A side note, though: Jeffries' compensation will be more performance-based, and the company will begin a succession plan to replace the 69-year-old CEO in coming years.