Abercrombie may be lowering prices

Gone are the days of only marketing to 'cool' kids. In an earnings call last month, Abercrombie & Fitch said it may be cutting prices and selling through third party channels.

Kiichiro Sato/AP/File
Pedestrians walk pass a giant display of an Abercrombie & Fitch ad in May 2005, in New York City. The retailer may be slashing prices to compete with discount fashion giants such as Forever 21 and H&M.

The preppy clothing giant Abercrombie & Fitch is looking to slash prices on its expensive clothing lines. The announcement, which came during its earnings call late last month, indicates that the brand is looking to price its clothes more competitively in an attempt to revitalize a tired brand with a less than stellar reputation. In particular, competitive pricing will target women's clothing lines, especially those at Abercrombie's Hollister stores, which are already a cheaper alternative to the high-priced Abercrombie & Fitch line.

Lower Prices and More Sales Are on the Horizon

The new pricing scheme of "fast fashion" looks like a way to attract teens back to Abercrombie stores; it will capitalize on the trend of inexpensive and disposable products and clothing that American youth have flocked towards. This trend can be seen at stores like Forever 21 and H&M and other companies that offer inexpensive clothing, which teens can afford — and afford to throw away each season. Fast fashion keeps people coming back to stores.

According to analysts from the Switzerland-based financial services company, Credit Suisse Group, Abercrombie & Fitch's move is a positive one that indicates the company is willing to change. However, other analysts weren't sold on the idea, and drew attention to under-performing sales overseas.

The earnings call also involved talk about Abercrombie shedding some of its exclusive branding. The company announced it may sell its clothing through third-market parties and offer third-party merchandise. In fact, Keds footwear is already being sold at Hollister, a move that seems to have garnered a positive response from consumers. As a result, the company announced that it will be "working on a long list of collaborations across footwear, apparel, and accessories." Such collaborations likely helped Abercrombie & Fitch earn $2.1 billion in 2013, though Hollister sales fell 14% last year, according to the Wall Street Journal.

The A&F Brand Has Lost Some Appeal

The Wall Street Journal also notes that teens aren't as interested in buying clothing layered with brand logos such as Hollister's or A&F's. This could be a result of the excessively negative press the company received after CEO Mike Jeffries' comments that the Abercrombie brand only wants "cool kids" and "good-looking people" to don its duds.

Jeffries was stripped of his role as chairman in late January 2014. Subsequently, Abercrombie & Fitch's stock rose 5% after the announcement, though overall the brand saw a 10% dip in sales last year. Perhaps more inexpensive apparel will make the brand accessible to a wider consumer market, who will in turn drive up sales, though it's more likely that 60 to 70 Hollister stores will close its doors this year instead.

Angela Colley is a features writer for Deal News, where this article first appeared: http://dealnews.com/features/Abercrombie-and-Hollisters-New-Retail-Tactic-Lower-Prices-Across-the-Board/1004079.html

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