Abercrombie Refuses to Discount, Stock Plunges


Eight years ago, Abercrombie & Fitch was the bee's knees of discreetly sexy casualwear. Overpriced sandblasted jeans and button-up plaid shirts were boxed up and put under the tree (or menorah) of any 16-year-old with a Suburban in the driveway. Those were the good, pre-recession, naked-models-riding-horses-in-catalogues days. But now Abercrombie is suffering much worse than its competitors, like American Eagle, in the economic downturn. Though the competition is discounting prices to get consumers to shop, Abercrombie has kept its prices the same because they don't want to look cheap. The Wall Street Journal reports:

Wall Street has begun to question the soundness of Abercrombie's no-discount pledge. The stock has tumbled nearly 80% from its January high of around $80, in part because of the pricing strategy. Some analysts now rate the stock a "sell."

"We hear your concerns," said Chairman and Chief Executive Michael Jeffries in an earnings call with analysts last month, but "promotions are a short-term solution with dreadful long-term effects." Marking down clothes now could lead to the brand being seen as something cheap, he explained.

Some analysts applaud Abercrombie's stamina, but others note that they might have to relent and lower prices if the recession continues for another six months. Abercrombie's customer base tells the Journal that Abercrombie doesn't fit into their new thrifty lifestyles. Even the topless models on the walls, "nightclub lighting," and (horrible) thumping club music can't override the economic climate:

[T]he store's image isn't enough to lure Megan Tysoe, 20, who says she and her friends skip Abercrombie for cheaper chains like Forever 21 and H&M. "Some of my roommates' parents have decreased their allowances," causing less spending, she says.

Horrors. Maybe they'd swing by if Abercrombie started handing out the catalogues for free again. We would at least think about going down to the Seaport to get one.

Abercrombie Fights Discount Tide [WSJ]