You might not land a job as one of its bare-chested or bikini-clad models who are paid to hang out in front of their stores, but Abercrombie & Fitch (NYSE:ANF) now says ugly people are welcome to shop in its stores, too.
It's been a central tenet of the teen retailer's faith that fat people are personae non gratae at its stores. It doesn't sell clothes above a size 10, and its CEO has been recorded as saying: "That's why we hire good-looking people in our stores. Because good-looking people attract other good-looking people, and we want to market to cool, good-looking people. We don't market to anyone other than that."
Uglies, chubbies, and fatties are free to shop elsewhere. Just don't darken Abercrombie's doorway.
Well, all that's about to change. Because all the beautiful people aren't brightening their doorways and aren't spending their money in its stores, either -- same-store sales just tumbled for the seventh straight quarter -- Reuters reports that Abercrombie & Fitch is relenting and says that, come the spring, it will begin stocking (gulp!) larger sizes for women. Oh, the humanity!
Net sales at A&F fell 12% in the third quarter to $1.03 billion, short of analyst expectations of $1.07 billion, as comps plunged 14%. Same-store sales, which record sales made at stores open for a year or more, are an important retail metric, because they mark organic growth in the business and not increases made as a result of new store openings or acquisitions. The last time the retailer posted gains in total store comparables was in November 2011. They were flat the next quarter and have been negative every quarter since.
American Eagle Outfitters (NYSE:AEO), which doesn't publicly proclaim the same weight- or looks-restrictive policies but targets the same demographic, seems to be doing appreciably better. Its earnings will handily beat Wall Street's prognostications, and while sales are expected to be down 6% for the quarter (a much better outcome than A&F's), per-share profits will be well ahead of its prior guidance. It says they'll come in at $0.19 per share, compared with its previous view of just $0.14 to $0.16 per share.
Likewise, Gap (NYSE:GPS) saw better results this quarter, too, but its sales were actually up year over year, rising 3%, with comps 1% higher. It's also marching higher into the fourth quarter, as October same-store sales jumped 4%, with four-week sales almost 6% higher.
Clothing retailers are still in a difficult position, and teen retailers more so, underscoring why Abercrombie's previous restrictive policies were ludicrous. Aside from being offensive and hurting the brand's reputation, it immediately limits the size of its potential market, which in difficult times such as we're facing (teen unemployment remains around 16%) is going to make it that much more difficult to see any expansion. There are ways to make your brand exclusive without alienating everyone else.
But let's also put it into perspective. While A&F was vocal about its abhorrence of fat people, plenty of other retailers didn't cater to the plus-size crowd, either. The Huffington Post reported earlier this summer that a survey conducted by online retailer ModCloth found that while Abercrombie didn't go above a size 10 in its stores, most retailers rarely went beyond a size 12, even if they carried larger sizes online.
Urban Outfitters, Express, J. Crew, and American Apparel all stopped at that size, even though the average woman is apparently a size 16. Perhaps retailers would all do well to stop being so exclusionary and carry clothes that the majority of people are wearing. Gap is one of the very few that carries up to a size 16 in its stores, which perhaps in part explains its recent success.
Abercrombie & Fitch has belatedly realized the folly of its ways and is now proclaiming its love for ugly people everywhere. I don't think that will help the retailer reverse the trend as the sting of its prior bigotry still smarts, and having super-fit models parading in front of your store, regardless of the clothing line you offer inside, won't entice many people to venture past those Spartan sentinels.
Fool contributor Rich Duprey owns shares of Abercrombie & Fitch. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.