Abercrombie & Fitch Co. plans to keep trimming its “B-mall” fat in America while toning its international assets — and Wall Street likes what it sees, even though the company turned in a weak fourth-quarter performance.
The New Albany, Ohio-based retailer, which opened 47 international stores and shuttered 71 U.S. doors last year, plans to close roughly 180 additional U.S. stores by 2015.
That means the company, which already shuttered 135 stores over the past two years, is on track to cut its U.S. store count by 315, or 29.1 percent, over the five-year period leading up to 2015. The firm currently has 946 domestic stores.
For Abercrombie, it’s more of a real estate churn than outright decline, with stores in weaker U.S. malls getting cut and replaced with higher-margin stores overseas. The firm’s door count has been declining only slightly, dropping to 1,045 stores at the end of the fiscal year on Jan. 28 from 1,096 stores two years earlier.
“A smaller [U.S.] base in better malls play to the quality level of the A&F business around the world,” said Mike Jeffries, chief executive officer and chairman, on a conference call with analysts.
Although Abercrombie’s net profits fell sharply in the most recent quarter thanks to aggressive price promotions, results were in line with its warning earlier this month. Net income slumped 78.9 percent to $20 million on a 15.6 percent rise in sales to $1.33 billion. Excluding charges to write down the value of assets, close stores and account for other special items, adjusted earnings tallied $1.12 a share — in line with what Wall Street expected. U.S. sales inched up 4 percent during the quarter, while international sales shot up 62 percent and direct-to-consumer revenues gained 41 percent. The firm projected 2012 earnings per share of $3.50 to $3.75 — opening up some upside to the $3.47 analysts had penciled in.
Heartened by the outlook and the emphasis on top U.S. locations and international expansion, investors pushed the stock up 8.3 percent to $48.30.
And even as Europe teeters on the edge of recession, Jeffries expressed confidence, telling investors, “The overall economics of our business in Europe remain very strong. Our top line in Europe grew 85 percent for the quarter. Hollister Europe, which now represents approximately two-thirds of our store business in Europe, continued to [see comparable-store sales growth] despite a very difficult environment.”
By taking its brand cachet and moody flagships overseas, Abercrombie has answered, at least for itself, one of the most vexing questions for U.S. retailers: Where to find growth?
A host of other retailers — including Coldwater Creek Inc., Christopher & Banks Corp., The Talbots Inc. and Pacific Sunwear of California Inc. — have also shuttered U.S. doors, but have less certain prospects in markets outside the U.S.
“Not every brand can go international,” said Christine Chen, analyst at Needham & Co. “Abercrombie stands for something. What they’re doing from a store environment is something that’s unique for the international markets. There’s nothing like them over there. The areas that they’re going into — Europe and Asia — those regions have a big club culture and their stores are quasi-clubs. For the young customer, it can be viewed as a cool place to hang out.”
In the U.S., Chen noted that some of the malls that used to be considered “B-plus” are now “B-minus,” given the changes in the U.S. economy over the past few years.
Erika Maschmeyer, analyst at Robert W. Baird & Co. Inc., said closing stores in the U.S. was a “smart move.”
“They have 250 stores that are operating at levels that are closer to their high-margin international flagships,” she said. “It’s good for the brand, it’s good for margins to get rid of the underperformers.”
Competition from the Internet is also forcing stores to go dark.
“The bigger trend isn’t so much going overseas, but it’s realizing that with e-commerce you don’t have to have as large a real estate footprint,” Maschmeyer said.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast