Abercrombie & Fitch has announced it is closing its Ruehl business saying that the economic climate has hampered potential success of the upmarket brand.
The US fashion group will close its 29 stores and related direct shopping channels by the end of January next year.
Ruehl was launched in 2004 as a more high-end sister to its Abercrombie & Fitch fascia. In the year to January 31 it made a pre-tax loss of $58m.
Abercrombie & Fitch chief executive and chairman Mike Jeffries said: “It has been a difficult decision to close Ruehl, a brand we continue to believe could have been successful in different circumstances. However, given the current economic environment, we believe it is in the best interests of the company to focus its efforts and resources on the growth opportunities afforded by our other brands, particularly internationally.”
As a result of exiting the business the group said that is expects to make a pre-tax charge of around $65m.
In relation to the exit of the business Abercrombie & Fitch said it had agreed to reduce its amount of available credit by $100m to $350m, an increase in the facility fee and borrowing costs and a capital expenditure limit of $600m in its current financial year to January 31, 2010.
Jeffries added, “We are confident that the Company will continue to generate sufficient cash from operations to fund its liquidity needs. However, in light of the one-time costs associated with exiting Ruehl and the current uncertain economic conditions, we believe it is prudent to make these changes to give us significant cushion in our debt covenants.”