Abercrombie & Fitch Co. laid out its strategy Wednesday to win back teen shoppers after reporting a steep drop in sales for the third quarter.
But investors are clearly wary of the plan, sending shares tumbling more than 12% since the company reported earnings. Investors’ low confidence can be partly explained by these four statements made by company executives on Wednesday:
1. Abercrombie isn’t willing to drop its logo-centric strategy, even though that’s a primary reason why young shoppers have been flocking to other brands, such as H&M and Forever 21.
“We cannot walk away from the logo business,” said Leslee Herro, executive vice president of planning and allocation for Abercrombie.
2. The company is reinvesting in storefronts, even as mall traffic continues to decline across the country.
“We believe that while digital is becoming a more important channel, stores will continue to to be the key channel by which our target customer will engage with our brands,” Senior Vice President of Marketing Craig Brommers said. New Hollister storefronts marked by giant video displays will be opening by fall 2014.
3. The company is sending a mixed message about its business model.
CEO Mike Jeffries said Wednesday that he wants the company to behave more like a fast-fashion retailer, such as Forever 21, by turning around new styles more quickly.
But Chief Financial Officer Jonathan Ramsden explicitly said Abercrombie is not going to “become a fast-fashion company.”
4. Company executives appear to have only just begun researching millennials, Abercrombie’s target demographic, and they admittedly know very little about kids in their early teens.
Senior Vice President of Marketing Craig Brommers said Abercrombie has brought in consultants to “better understand the markets we compete in” and to “better understand our target.”
Based on the research so far, the company has concluded that its former target, Generation X, was well-suited for Abercrombie because it “embraced exclusivity, standardization and brand loyalty.”
Then came Generation Y, or millennials.
“They embrace inclusivity and diversity, are budget conscious, have relatively low brand loyalty, seek customisation and assume the use of technology,” Brommers said. “We are working to maximise our relevancy to this new generation.”
But while the company works on targeting millennials, an even younger generation is taking their place, of which the company admittedly doesn’t know much about.
“It’s too early to make definitive statements on Generation Z, or kids in their early teens,” Brommers said.
Here’s Abercrombie’s visual representation of each generation from the slideshow presented at Wednesday’s meeting with analysts. The year ranges represent the dates that people in that generation were born:
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