The Abercrombie & Fitch store prototype in Columbus, Ohio.
The summer doldrums could become a busy mergers and acquisition season in retail.Sources said Abercrombie & Fitch Co., Lululemon Athletica and Deckers Outdoor Group are at least three firms being put under the microscope by private equity and strategic buyers, and others could follow.It's already been a busy late spring, with deals such as Coach Inc. acquiring Kate Spade this week for $2.4 billion, Wolverine buying OnlineShoes.com and Adidas selling its golf brands to KPS Capital Partners.At Abercrombie, a Reuters report Tuesday night said the company has hired Perella Weinberg Partners as its investment banker to field takeover interest from strategic buyers. Financial sources told WWD Wednesday morning — much the same way Coach Inc. is consolidating the space by buying its handbag competitor Kate Spade & Co. — the interest is coming from teen competitor American Eagle Outfitters Inc.A spokesman for American Eagle said, “We do not comment on market rumors.” Abercrombie at first declined comment, but then late Wednesday confirmed that, “after receiving expressions of interest, it is in preliminary discussions with several parties regarding a potential transaction with the company.”Abercrombie cautioned, “There can be no assurance these discussions will lead to a definitive agreement or that a transaction will be consummated.”“This is about consolidation in the teen space,” said one analyst at a research firm in the Middle Atlantic region. “The stock is certainly cheap. The company is working on a turnaround, but is it working? I don’t see any traction yet whatsoever. The merchandise isn’t right, and the demographic doesn’t coincide with the image of the [Abercrombie] brand,” he said.Shares of Abercrombie have been trading at near their 52-week low of $10.50. The 52-week high is $25.49. That trading range, and the market capitalization of $861.5 million, based on Tuesday’s close of $12.67, easily makes the company a takeover target.Abercrombie has been working on a turning around its fortunes in the fickle teen space for three years. But one analyst in New York said, “If the real brand investment [in an acquisition] is Abercrombie, then one has to ask, what does it mean today?”Last year’s new advertising campaign — targeting a slightly older consumer at the tail end of the Millennial age range — didn’t resonate well with consumers, even though inclusiveness is in and sexualized marketing is out. And while analysts said the product has improved somewhat, they also note that there’s nothing really different about it that distinguishes the product as Abercrombie — meaning the product looks like what one could get from any other retail competitor in the mall.Abercrombie has started working on a new store prototype, but not enough are in place to see what’s really resonating with consumers. And with the label so entrenched in the minds of consumers as a teen brand, getting them to shift to a new brand identity could take time, even as the retailer is relying on consumer feedback to tell it what she or he wants from the brand.That’s not the case with Hollister, which is much farther along with its tuneup of its brand identity. Hollister even brought back the Gilly Hicks line. And that’s likely where the interest in Abercrombie is centered on, said another analyst at a firm based in the Northeast. She said, “There’s still a place for Hollister and its Southern California vibe.”Hollister and Gilly Hicks are considered complementary to American Eagle and its Aerie intimates line because they’re in the same space, but have different points of view. It couldn’t be determined at press time whether American Eagle’s interest might be for just the Hollister brand or for the entire company.A Wall Street Journal story Wednesday cited Express Inc. as another possible suitor in addition to American Eagle. A spokeswoman for Express said that the company doesn't comment on market rumors.The problem with American Eagle and Express is that they are struggling, too. Buying another firm at a time when one’s own business is pressured is a risk, and could cause more balance-sheet problems down the road if teen trends and traffic patterns don’t improve — and signs are that the teen space isn’t about to improve anytime soon.Earlier this month, Wolfe analyst Adrienne Yih Tennant downgraded shares of American Eagle to “Underperform” from “Market Weight,” noting the weaker-than-expected mall traffic trends, still-aggressive promotions across the sector and uncertain timing of potential acceleration of consumer demand.Susan Anderson at FBR Capital Markets & Co. had a “market perform” rating on Express Inc.: “We remain on the sidelines until we see a rebound in [same-store sales/traffic], consistent execution and earnings growth.”At Lululemon, the company has resurfaced as a possible target of financial players. Private equity firm Advent International in December 2005, with partner Highland Capital partners, acquired a minority interest in the Vancouver-based company for $95 million, but exited its investment in 2009. Advent then made another investment in the yoga firm when it bought half the stake owned by company founder Chip Wilson for $845 million in August 2014 to give it a 13.9 percent holding in the company. Wilson sold half his interest to end a board fight he had with the company. The deal also had Wilson agreeing not to pursue a buyout of the firm for at least a year, and put Advent partners David Mussafer and Steve Collins on the Lululemon board.It wasn’t immediately clear which private equity firms are said to be interested in Lululemon — although market chatter on Monday pegged possible offers starting at $70-plus a share — and sources speculated that Advent could be one of those looking to take on a bigger stake in the yoga retailer.A spokesman for Advent International declined comment.RBC Capital Markets’ Brian Tunick said last week that shares of Lululemon have been down 20 percent year-to-date due to the first quarter’s deceleration to negative low-single-digit comps from the 7 percent comps gain in 2016’s fourth quarter. And while he acknowledged concern about the athletic apparel cycle as it enters its sixth or seventh year, Tunick also said the slowdown was likely due more to execution missteps.Financial sources said VF Corp. has been keeping tabs on Lululemon, given its stated interest in the outdoor markets and in ath-leisurewear. It already owns Lucy Activewear and VF chief executive officer Steven Rendle earlier this year said the group would take the “Lucy women’s product engine [and merge] with that of The North Face brand.” But financial and market sources believe VF is more focused on Deckers Outdoor Group.One source said VF has looked at Deckers before, but didn’t make an offer and is eyeing the company again. That’s a pattern that replicated what it did with Timberland before VF actually acquired the brand, and is a reflection of the group's financial discipline to not buy a company unless certain parameters are met. A spokesman for VF said, “We don’t comment on rumors or speculation.”Deckers has retained Moelis & Co. as its financial adviser and is exploring its strategic options following a push in February by activist investor Marcato Capital Management to sell itself.Jefferies analyst Randal J. Konik said last month after Deckers said it was reviewing alternatives: “We believe the strategic review will generate ample interest given Uggs' brand strength, Hoka’s rapid growth, operating margin potential and international expansion.”There’s been some concern in the marketplace about the Uggs brand, given the extent of discounts and promotions over the holiday period. Analysts said Wednesday that the company has resolved the pricing issue, and the product line will garner more interest from consumers so long as there’s more innovation coming down the pike.