Abercrombie & Fitch Co. Case
Abercrombie & Fitch Co. in November 2013
In November 2013, Abercrombie & Fitch Co. had just entered into the fourth quarter of the fiscal year. Historically, the company has relied heavily on fourth quarter sales to boost year-end gross profit. But after the holidays, the company could potentially see significant changes. Declining popularity in the US has lead A&F to close over 180 US stores in 2012. 2 While the company continues to grow internationally, decisions need to be made regarding an action plan to win back American consumers and to maintain relevance in this competitive industry.
Shareholders and executives were pleased that gross profit increased from 2.550 billion in 2011 to $2.817 billion in 2012. However, this improvement was primarily attributed to a reduction of average unit cost. This coupled with aggressive international expansion, closing of unproductive US stores, and growing direct-to-consumer sales causes concern that the current business model is unsustainable going forward.
Regardless of sales results from this upcoming holiday season, A&F Co. should be concerned regarding its position in the retail industry. Intense competition and fleeting consumer loyalty consistently present new challenges for the company.
The US Clothing Industry
Personal income and fashion trends drive demand for the $165 billion US clothing industry, which consists of 100,000 retail stores. Of this $165 billion, 50% is from stores specializing in women's clothing, 20% specializing in men's clothing, and 10% specializing in children's clothing. The US clothing industry is fairly concentrated; with 50% of retailers earning approximately 65% of industry revenue.6 Within the larger US clothing industry are family clothing retailers at $97.8 billion in 2013 revenues. Rather than specializing in a particular gender or age group, family clothing retailers stock a general line of clothing for men, women, and children. Abercrombie & Fitch Co. is a key player in
In November 2013, Abercrombie & Fitch Co. had just entered into the fourth quarter of the fiscal year. Historically, the company has relied heavily on fourth quarter sales to boost year-end gross profit. But after the holidays, the company could potentially see significant changes. Declining popularity in the US has lead A&F to close over 180 US stores in 2012. 2 While the company continues to grow internationally, decisions need to be made regarding an action plan to win back American consumers and to maintain relevance in this competitive industry.
Shareholders and executives were pleased that gross profit increased from 2.550 billion in 2011 to $2.817 billion in 2012. However, this improvement was primarily attributed to a reduction of average unit cost. This coupled with aggressive international expansion, closing of unproductive US stores, and growing direct-to-consumer sales causes concern that the current business model is unsustainable going forward.
Regardless of sales results from this upcoming holiday season, A&F Co. should be concerned regarding its position in the retail industry. Intense competition and fleeting consumer loyalty consistently present new challenges for the company.
The US Clothing Industry
Personal income and fashion trends drive demand for the $165 billion US clothing industry, which consists of 100,000 retail stores. Of this $165 billion, 50% is from stores specializing in women's clothing, 20% specializing in men's clothing, and 10% specializing in children's clothing. The US clothing industry is fairly concentrated; with 50% of retailers earning approximately 65% of industry revenue.6 Within the larger US clothing industry are family clothing retailers at $97.8 billion in 2013 revenues. Rather than specializing in a particular gender or age group, family clothing retailers stock a general line of clothing for men, women, and children. Abercrombie & Fitch Co. is a key player in