You know the saying, "Pretty is as pretty does"? Well, in keeping with that golden rule, Abercrombie & Fitch (NYSE: ANF ) can be downright ugly, and I'm not talking about its stock price, either.
Abercrombie's longtime obsession with some weird sense of "perfection," integrating it into its brand, is well known (and easy to lampoon). Mad TV has knocked Abercrombie a few times in some risque but hilarious skits featuring ridiculous, posing employees who look down on everyone (and whose last concern seems to be actually helping customers or doing any work). Improv Everywhere's real-life prank (sending more than 100 shirtless male shoppers, some with less-than-Abercrombie-perfect physiques, into a store) was also absolutely hilarious to anyone who has contempt for Abercrombie's often silly schtick.
Some of us might argue that Abercrombie's got a fixation on being the "it" store for the kind of high-school mean kids who end up considering prom a major life achievement. Aiming for shallow elitism is bound to get a company in hot water along the way -- it's already happened and it looks like it's happening again.
Hot or not
A Foolish reader forwarded me an article last week from the Dallas Morning News that, unfortunately, didn't surprise me. According to the article, Abercrombie sales personnel (dubbed "models" by the company) are rated on their faces, given one of two numerical ratings, either a "0" or a "5." The article discussed several local employees whose ratings meant they were taken off the sales floor and sent back to the stock room to fold clothes.
Apparently Abercrombie's vice president of diversity and inclusion (ahem) explained the "face" metric actually refers to "full presentation," not just the person's literal face. I'm sure we're all breathing a sigh of relief. (Right.)
The article points out that it's not against the law to discriminate against "ugly" people, it's only unlawful to discriminate according to race or gender. Of course, regardless of the law, common sense tells us this kind of behavior is just not very nice, even if it is the type of shallow stupidity that sometimes goes on in the halls of high school.
Rating employees' faces instead of, oh, I don't know, helpfulness or ability to do the work certainly crosses a line, even if it's just an ethical one. Abercrombie did get into hot water years ago for allegations of racial discrimination, and the idea that not only did its ads feature a lot of skin, but that skin was always awfully white. (Obviously, it's no Benetton (OTC BB: BNGPY.PK) with the United Colors of Benetton campaigns that made that company's mark.)
Aspiring to be what?
Abercrombie's creepy, homogenous, skin-deep brand impression has always turned me off to the company and the stock. Sure, it appears cheap now trading at just nine times earnings (although its recently floundering comps suggest it's lost its way), but appearances can be deceiving. Its idea of an "aspirational" brand -- somebody's subjective idea of youth and the "beautiful people" -- strikes me as a qualitative element that's a major risk, especially if its youthful customers start to realize it's, like, really lame.
Meanwhile, there are plenty of quality retail stocks that haven't made snobbery part of their brand identity. Urban Outfitters' (Nasdaq: URBN ) three concepts celebrate individualism, for example. Aeropostale (NYSE: ARO ) has been firing on all cylinders lately, and I'm pretty sure it doesn't give its customers inferiority complexes when they walk in the door. J. Crew's (NYSE: JCG ) merchandise may be geared to preppies, but it never seems to offend. I'm not sure why The Buckle (NYSE: BKE ) has been going like gangbusters, but it seems to be doing just fine with very little media attention.
And of course, speaking of cheap stocks, American Eagle Outfitters (NYSE: AEO ) may need some turning around like Abercrombie, but I've never heard creepy things about its practices that make me wonder if it's a training ground for Aryan Youth, or the Stepford Wives.
Too ugly for words
Despite the unpleasant undercurrents of Abercrombie's brand identity, the company has often done well with teen shoppers over the years, despite the stock's recent stumble. Of course, if it rated its customers' faces on a numerical scale at the checkout and let them in on the rankings (or, an even more ironic thought, banned any facial 0's from wearing its clothes splashed "Abercrombie"), it wouldn't flourish in the marketplace. Talk about hypocrisy.
Am I crazy to put this much of a qualitative spin on a stock? No, because if I'm going to invest in (and be a partial owner of) a company, I'd want one that has a bright future and a far more positive message. If we try not to tolerate or encourage ugly behavior in our lives, why invest in it? I see no reason to.