Updated Nov. 6, 2013 5:47 p.m. ET
Abercrombie & Fitch Co. ANF -13.52% Abercrombie & Fitch Co. U.S.: NYSE $33.13 -5.18 -13.52% Nov. 6, 2013 4:00 pm Volume (Delayed 15m) : 17.82M AFTER HOURS $33.11 -0.02 -0.06% Nov. 6, 2013 7:18 pm Volume (Delayed 15m): 68,775 P/E Ratio 12.12 Market Cap $2.93 Billion Dividend Yield 2.41% Rev. per Employee $45,129 11/06/13 Abercrombie Pledges to React t... 11/06/13 Stocks to Watch: Tesla, Humana... 11/05/13 Abercrombie & Fitch Sees Tough... More quote details and news » , a day after warning about a disappointing holiday season, acknowledged it needs to move faster in adopting the latest fashion trends—although not as quickly as others in the teen-apparel retail sector.
The company on Wednesday painted a dismal picture of the coming critical holiday season in its first meeting with analysts in more than 2 ½ years, but pledged to get the struggling retailer back on track by reacting to changing fashions more quickly.
The teen apparel retailer, which used to dominate the sector, said it has lost share to more on-trend fast-fashion competitors, particularly in its women's tops segment. Bargain-hunting consumers, deep discounts, and the rise of fast-fashion peers like Swedish retailer Hennes & Mauritz HM-B.SK +0.04% H&M Hennes & Mauritz AB Series B Sweden: Stockholm kr272.70 +0.10 +0.04% Nov. 6, 2013 5:29 pm Volume : 1.72M P/E Ratio 26.81 Market Cap kr451.17 Billion Dividend Yield 3.48% Rev. per Employee kr1,723,520 10/23/13 Wal-Mart, Gap Press for Safety... 10/03/13 Retailers' Group Publishes Lis... 09/26/13 Italian Stocks Fall 1.2% More quote details and news » AB and Forever 21 Inc. have stoked competition for business at the mall.
But Chief Financial Officer Jonathan Ramsden said Abercrombie isn't going to "become a fast-fashion company" in an interview with The Wall Street Journal.
"We're sticking to our current brand aesthetic, but to compete though, we need to get into fashion quicker," he said.
Abercrombie warned late Tuesday ahead of the meeting that third-quarter same-store sales had fallen 14% and projected a low double-digit drop for the fourth quarter, which includes the holiday season. It also noted bloated inventory levels have further pressured margins.
The company has also been closing stores and focused on trying to sell more full-price items by trying to limit the items in store to the most popular products. It also outlined plans Wednesday to push new, more-open store formats for its Hollister brand and source more efficiently.
Still, the company's unwavering support for its preppy polo shirt and denim aesthetic is worrying analysts and investors.
"I heard a lot of sensible ways to manage the business better, but nothing from a merchandising or branding standpoint," Stifel Nicolaus retail analyst Richard Jaffe said. "The world is changing, but Abercrombie has chosen not to change its merchandise assortment."
Meanwhile, Glenn Welling of Engaged Capital LLC, an activist hedge fund, told The Journal he has taken a stake in Abercrombie and left a recent meeting with management believing it has lost touch with investors and believes a succession plan for executives will be required for the company.
Mr. Welling, who founded Engaged after leaving larger activist fund Relational Investors, called the meeting frustrating, specifically criticizing Chief Executive Mike Jeffries ' question-and-answer session and noting that when asked about what's changed from two years ago when the company had said it needed to be more fashion-forward, Mr. Jeffries was unable to answer.
Abercrombie declined to specifically address Mr. Welling's criticisms.
The company has said it expects inventory levels to be up about 20% in the third quarter and margins in the fourth quarter to be pressured as discounts and promotions are used to clear through excess inventory.
"For reasons nobody has fully explained, some time around back-to-school the younger customer was just out much less than they were expected to be, particularly in our segment," Mr. Ramsden said. "Coming into the holidays, people don't know what caused that decline in traffic or when it will abate, and we assume it will continue through Christmas."
Oppenheimer retail analyst Anna Andreeva noted the company typically struggles to keep inventory levels in line with sales.
Indeed, Abercrombie was forced to discount because of excess inventory last year, and then earlier this year said its top-line was plagued by not having enough inventory.
"Over the years, it's always too low or two high," Ms. Andreeva said.
—David Benoit contributed to this article
Write to Anna Prior at anna.prior@wsj.com
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