Today's earnings report from Abercrombie & Fitch
The teen retailer reported a 3% increase in profits for the first quarter as net income grew to $62.1 million, or $0.69 a share. Revenue was also up 8%, while same-store sales at flagship stores rose 3% over last year. But as fast as its models strip down in its racy online videos, comps at the Ruehl segment dropped 17%.
Although it makes up only a small portion of Abercrombie's total operations, that was the most notable drop among its brands. Hollister's same-store sales fell 8%, and the abercrombie kids line was down 7% for the quarter. Its new undergarments store, Gilly Hicks, set up to compete with The Limited's
The problem with retailers is that they're broadening their offerings to touch every consumer rather than sticking with their core audience. We saw this from rival teen retailer Pacific Sunwear
Abercrombie, on the other hand, hasn't learned that lesson yet. Ruehl, and to a lesser extent Gilly Hicks, if only because it's newer, seems to have a lack of focus. Revenue doubled in Ruehl's first full year of operations, but rose by only 50% last year. That might sound good, but that's only because eight stores were added. Comps actually fell 9% from the year before. Now same-store sales are tumbling even more.
Sure, the economy's worsening, but it's also because Abercrombie is a teen retailer. It doesn't resonate the same with adults despite the fact that the company wants to carry them from their preteen years (Abercrombie) through their teens and early adult years (ANF, Hollister) and on into maturity (Ruehl).
So why Gilly Hicks, which purports to be the "cheeky cousin from Sydney, Australia"?
Do one thing and do it well is a motto retailers should remember. Particularly when an economy is in decline, spreading yourself like too little butter over toast simply leaves investors with a crummy taste in their mouths.
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