Tuesday, September 15, 2009

Shhh… Abercrombie is Cutting Prices

Last night at the mall, we saw what it looks like when retailers who don’t want to discount do the dirty deed in hushed tones. Just a few feet inside the lease line at an Abercrombie & Fitch store, we saw fleece tops at 50% off—a whacked price put onto a tasteful little sign no bigger than a postcard. We saw this throughout the store, motivating price points on merchandise clearly meant for the upcoming fall/winter season. This A&F store even had a sign at the entry announcing a back-to-school sale (odd, since prime back-to-school shopping season is behind us). Deep discounts? On current season merchandise? Is this really “we will not become promotional” A&F? Since the onset of the recession, shoppers have flocked to low-price retailers like T.J. Maxx and Ross. Nearly every clothing chain has aggressively discounted to try to win over penny-pinching shoppers. But in the face of all this discounting, A&F has stubbornly held onto its loftier price structure to protect its “aspirational” brand.

Last week, A&F announced that its sales dove a frightening 29 percent in August – the eleventh straight month of double digit sales declines for the retailer. Sure, times are tough and the teen (and parent) clothing budget has been squeezed, but rival Aeropostale, with its less expensive, but still fashionable, apparel managed to increase sales a very respectable 9%. A&F has finally, reluctantly, quietly capitulated to shoppers’ demand for a deal (while still clinging hopefully to the idea of an aspirational brand). “It (discounting) is not the primary vehicle nor will it be the primary vehicle for driving business, but it is part of the balance at this point… but it is not the driving force of this business. The driving force is fashion, quality, aspiration, and will continue to be so,” Chief Executive Officer Michael Jeffries said on an Aug. 14 conference call.

A&F may have done its job of creating a high-priced brand image a little too well. Despite a current move to more price cutting, the company’s success ultimately depends on the willingness of teens to drop $50 on “Perfect Butt” sweatpants once the economy rebounds. Still, now that teens have learned that for the same $50 they can get a pair of sweats and jeans at Aeropostale and still have money in their pocket for a couple of tickets to a movie, it may not be so simple to get them to return. Habituation is a tough monkey to overcome.
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