The prolonged soft economy has caused growing mistrust of big business among many and that seems to now be spreading even to teens. The decades-long fad of kids acting as a human billboard is falling out of favor faster than Justin Bieber's acting career.
Abercrombie & Fitch (NYSE:ANF) feels their pain where it hurts the company most -- in the bank account -- and is shedding the logo-wear for good in North America. Is Abercrombie coming to grips with the harsh reality that its brand isn't what it used to be?
Sales results that are out of style
Whatever the case, the store known for its chokingly strong cologne smell and super-model employees doesn't seem to have its finger on the customer pulse lately.
Maybe it's just that today's teen wants to feel more independent, and trying to use a clothes label to brand himself as the cool kid is no longer cool. Maybe humble is the new cool, and Abercrombie & Fitch sure had a humbling report for the fiscal second quarter.
U.S. same-store sales were down 5%. International same-store sales were down 9%. Total same-store sales including direct-to-consumer were down 7%. CEO Mike Jeffries blamed a "continued challenging environment" and a headwind of "adverse likes in our logo business as we work to strategically reduce that element in our assortment."
Guess what I'm wearing
During the latest quarter's conference call, Jeffries said Abercrombie is looking to decrease the logo business aggressively, including cutting the North American logo business to "practically nothing." He expects North America will be essentially out of the logo business by next spring.
It was kind of a strange call. There was a lot of talk about logo versus non-logo business as if the two types of apparel were unrelated products that have no effect on each other. It seems it would be as silly as a restaurant asking you to only pay attention to its growing burger sales while ignoring its decline in guests coming in the door and the decline in total sales. American teens are buying less of the company's stuff. Period.
Fashion's a tough game
When it comes to fashion, it's a company's responsibility to anticipate products that are in style and that customers actually want, or for the company to have marketing that's savvy enough to persuade people to start a trend. During the conference call Q&A, Jeffries even said to apparel research analyst Jennifer Black, "Jennifer, I have to congratulate you because you have been on the push for less logo for a while. So, you are a forecaster there. Thank you."
Crazy. Back in November of last year, Jeffries stated during a conference call:
I think that it's very smart that there is a logo business that is ongoing. Our mission in logo is to make that category cooler, and by doing so, I don't think we have to relegate that to a promotional business only.
This statement was in response to a question about whether logo clothes would be part of promotional discounts as the company was doing with other apparel and accessories. Apparently things changed.
Mission failed. Now what?
If kids really don't want to be seen admitting that they shop at Abercrombie or its Hollister brand, am I the only one who sees a possible major problem? I don't know if things have changed since I was younger, but it seems that once a brand starts to become tainted in the minds of teens, it quickly ends up in a death spiral that's hard to stop. For Abercrombie to be this behind the curve instead of ahead of it leaves almost as bad of a taste in my mouth as its cologne-saturated air.
Nickey Friedman has no position in any stocks mentioned. 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 may not 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.
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