Abercrombie & Fitch's (NYSE:ANF) secret plan for growth is slowly coming to light. The company has four concepts open right now -- Abercrombie & Fitch, abercrombie, Hollister, and RUEHL -- so it's no surprise that its newest development is code-named Concept 5.

We don't know much about the project, save some speculation regarding comments by the CEO, a mention in the latest conference call that Abercrombie will be spending more money this year to roll out the concept soon, and some guesses based on growth avenues pursued by other retailers. Let's take a moment to brainstorm, then think about whether this may or may not be a good idea.

First, the gossip
I read an article in the Columbus Dispatch quoting Abercrombie CEO Michael Jeffries as saying he's been "a jerk" by not expanding into accessories fast enough. Perhaps Jeffries is relenting. After all, Claire's Stores (NYSE:CLE) has done well for itself by staking out a nice claim on younger girls' accessories. And its returns on invested capital, at greater than 20%, have to be pretty mouth-watering to a company like Abercrombie & Fitch.

Or maybe it's lingerie and sleepwear that Abercrombie will be introducing. After all, Victoria's Secret is arguably the flagship business at Limited Brands (NYSE:LTD). Chico's FAS (NYSE:CHS) recently rolled out its Soma stores to capture more of its customers' wallets. So that certainly seems like a plausible business for Concept 5.

Or maybe, despite warnings from management that it's not going after an older demographic, it's going to do just that. Abercrombie's RUEHL stores appeal to customers in their 30s, but other competitors are pursuing even older demographics. Urban Outfitters (NASDAQ:URBN) has its Anthropologie stores, and Gap (NYSE:GPS) is rolling out its Forth and Towne concept. There's good money to be made selling fashions to older customers, especially women with money to spend. A crowded space and Abercrombie's lack of experience in selling to an older demographic probably rule out this choice, but I wouldn't completely write it off, regardless of what management says.

What are the risks?
Opening new types of stores is a risky but often necessary strategy for fashion retailers, since they can only grow so far with one or two concepts. But managing three to five separate concepts can create a separate set of challenges. Chico's FAS and Gap are two ready examples of such pitfalls.

Chico's FAS purchased White House/Black Market in 2003, created Soma in 2004, and acquired Fitigues in 2006. Expanding that quickly requires lots of resources and energy. Some have blamed the recent fall in Chico's stock price on management becoming spread too thin to run and grow these businesses, and neglecting merchandising at its namesake Chico's stores.

Gap has also seen its concepts struggle over the past few years. Gap and Old Navy have suffered declining same-store sales despite numerous attempts to turn sales around. Only the company's Banana Republic stores seem to be doing OK during the turnaround. Numerous concepts require different merchandising strategies, and additional resources to execute those strategies, and facing a variety of different competitors is never easy.

Is management up to the task?
Given its track record, I think Abercrombie management certainly has the odds in its favor. Here are the company's average sales per store.

Net retail sales per average store (in thousands)

YTD 2006

YTD 2005

Growth

Overall

$1,443

$1,346

7%

Abercrombie & Fitch

$1,650

$1,618

2%

abercrombie

$868

$717

21%

Hollister

$1,505

$1,384

9%

RUEHL

$1,380

$1,151

20%
Source: Latest 10-Q

Its biggest brands, Abercrombie & Fitch and Hollister, are growing the slowest, which is to be expected. Meanwhile, its smaller, newer concepts are advancing nicely. And while sales data is certainly not the be-all and end-all, when you combine that with returns on invested capital of more than 20%, I think it's safe to conclude that management is up to the task of properly allocating capital to new stores.

The Foolish bottom line
Surprisingly, management has been tight-lipped about the nature of Concept 5. While it does make evaluation of the company's prospects more difficult, it also allows my creative juices to flow a bit regarding what may be up management's sleeve.

Whatever form it takes, Concept 5 will likely be another hit for the company. Abercrombie knows its customers well, and it knows how get them the product they want, as evident in its expanding sales and increasing returns. Alas, we'll have to wait a little longer before the truth about Concept 5 is finally unveiled.

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Retail editor and Inside Value team member David Meier does not own shares in any of the companies mentioned. He is currently ranked 115 out of 13,993 investors in CAPS rating service. You can view his TMF profile here. The Fool takes its disclosure policy very seriously.