Loss of $26 Million in 2009: Is Abercrombie Shutting Down Business?
Abercrombie is struggling from last 4-5 years, they have closed down many of their outlets, are they shutting down completely?
It seems that over the past several years the struggling economy has made the headlines – and it is not without its fallout. Not only have many consumers suffered from the bad economy, but the businesses have as well. In an economy where the consumer cannot spend as much as they used to, many businesses – especially retailers – find ways to cut the prices on their items to make them easier for the consumer to purchase. These businesses are often willing to offer consumers special deals, coupons, savings vouchers, or whatever incentive they have to, to get the consumers in the door to purchase things.
However there are some retailers that are not willing to budge on price. They are not willing to make it easier for the consumer to afford their products. Unfortunately, because of their inflexibility, they often pay the price via lost sales and customers. Abercrombie & Fitch is one such retailer.
Abercrombie & Fitch is one of a handful of upscale clothing retailers that caters mostly to teenagers and young adults. In the best of times, their products are high end with a price tag to match. Surprisingly though, when the bad economy hit, they were not willing to lower their prices or offer their customers any deals, suggesting that it would “cheapen the cachet” of the brand. Consumers responded to this with resounding silence – lack of patronage. Abercrombie & Fitch tanked for 10 months straight with a 30% decline in sales, which came out to a loss of over 26 million dollars in the second quarter of 2009.
In addition to their unwillingness to lower prices, another reason for the decline in sales is due to the fact that their clothes have since gone out of style. They were not diligent in keeping up with the latest popular fashions, and instead carried their same design – a design that consumers simply were not interested in.
As a result of their declining numbers, Abercrombie has decided to close a number of its under-performing stores. As of March, 2012, they have already closed 71 stores in the United States. They are projecting to close 180 more by the year 2015; however the retailer did not indicate where the closures might take place. And while these U.S. stores are closing, Abercrombie has been taking its business elsewhere. Since 2007, they have been actively launching stores all over Europe and Asia, seeking out consumers in other countries who will be willing to purchase their product and increase their profit margin. Time will tell if this strategy will work.