Abercrombie and Fitch - External Analysis and Internal Analysis

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Alternative Assessment for 2BSO601 BUSINESS STRATEGY

Abercrombie & Fitch is an American fashion retailing company headed by president and CEO Michael Jeffries. Abercrombie & Fitch brand focuses on offering apparel that reflected the youthful lifestyle for a target audience, which was college students, designed to encourage teamwork and creativity On February 2007, A&F retailer operated 944 stores in 49 States, District of Columbia and Canada. Furthermore, A&F currently operates four other brands, which are: A&F, Abercrombie Kids, Hollister Company, and RUEHL. With the running of those four brands, the company is collectively targeting consumers of 7 through 35. David T. Abercrombie founded the company in 1892, A&T managers promoted it as: ”The Finest Sporting Goods Store in the world”. At its early beginnings, A&F had been an outfitter of sporting goods and rugged apparel, but also a place where individuals could learn skills and get involved in the community. Since 1960, the company encountered continued financial losses until The Limited purchased it in 1988, when Michael Jeffries became president and chief executive of A&T launching the trademark slogan “casual luxury”, new style of Abercrombie. This case highlights the strategy of Abercrombie and Fitch, an upscale sporting good retailer who has turn into a leader in trendy apparel. In order to find the key issues, both internal and external analyses will be drawn and the company business strategy will be described.


• External analysis and Internal analysis
• Strengths:
The A&F company strengths stand, firstly, in its strong brand portfolio. The retailer managed four brands: A&F, Abercrombie, Hollister Company and Ruehl, which make them able to target a population from 7 to 35 years old. The company has also gained a strong brand image, because of its uniqueness as a “casual luxury” brand and thanks to its stores design, which are implemented through an exciting store format, in order to communicate a consistent message in each stores. Abercrombie & Fitch achieved revenues of $2.785 billion and its net income rose to $334 million. During the same year, the company opened 63 stores and hired 20,600 employees. From 2001 to 2005, the company Financial Performances has done nothing but increasing, in each sectors (see Exhibit 4). That it to say, A&F achieved a strong financial performance. When looking at Exhibit 1, we can see that A&F also has a strong balanced sheet. The company has no debt/capital ratio, no debt as % of net working capital since 2002 and its Annual high-low stock price is much better than it’s competitors’.

• Weaknesses:
The company is faced with a low inventory turnover ratio, because they choose not to distribute its apparel and accessories through wholesale, license or franchise, unlike other businesses. A&T is the only responsible for creating and managing its brands. The company is implemented only in London, Milan, Canada and Tokyo abroad; thus they needs to focus on their expansion because it represents a limited geographic reach.

• Opportunities:
The fact the company is only implemented in London, Milan, Canada and Tokyo represents an opportunity to expand in new markets, by targeting other kinds of population. Making investment in infrastructures would also be an opportunity for Abercrombie to improve customer services as its staff in the stores, its merchandising and store design, in order to merger from the competitors. The company can work on developing new concepts, in order to anticipate competitor’s moves, now that their own concept of being a “casual luxury” brand is a success. A&F are not really presented online and should it would be an opportunity for the company to increase online sales.

• Threats:
The main threats the company is faced with stands in the fact that US rental rates are increasing while the US economy is slowing down. Furthermore, the...
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