The polished and sexy world of Abercrombie & Fitch hit a rather unsightly bump in its growth plans last week as it announced it was closing its high-end Ruehl brand.
The more expensive version of Abercrombie & Fitch’s eponymous stores, Ruehl – which targeted an older customer – failed to inspire shoppers as much as its sister brands.
The Abercrombie & Fitch group has been hit by major double-digit declines in comparable store sales at its US stores for over a year now, and its refusal to lower prices in line with its competitors has been driving customers away.
This, combined with the news last week that fashion chain Eddie Bauer filed for Chapter 11 bankruptcy protection, is indicative of the sorry state of the cut-throat US fashion market.
Brian Sozzi, equity research analyst at stock market research company Wall Street Strategies, said: “The shake-out in retail proves that you can’t chase every demographic, which is what Abercrombie & Fitch did by trying to target an older customer.”
He also said prices were too high at the retailer. “Ruehl was 30 to 40 per cent more expensive and only slightly better quality – customers see through that,” he said, adding: “Our tours of Ruehl confirmed two things: foot traffic is non-existent and the stores smell nice.”
Just as Ruehl failed to find a niche or reason for customers to shop there, Eddie Bauer fell into the same trap, according to Sozzi. “If you don’t stand for anything you will go – like Eddie Bauer did; like Circuit City did,” he said.
Now it is the lower-priced, fast-fashion stores that are attracting the most sales from young shoppers in US malls. AT Kearney partner Hana Ben-Shabat said: “The value sector is doing very well with the consumer.”
She cites young-casualwear retailer Aéropostale as an example of one that is benefiting. It has been performing very strongly with sales in May up 19 per cent on a like-for-like basis and total net sales so far this year up 23 per cent.
Sozzi agrees that Aéropostale’s price and product strength has kept traffic at its stores and sales strong. “H&M and Forever 21 also really stand out,” he said.
Despite continuing challenges, Abercrombie & Fitch is still performing well in Europe – now its big focus for expansion – and even in the US new openings of its Hollister fascia attract lengthy queues. It has yet to lose its kudos and should be well placed to hold up through the US recession.