Abercrombie sale talks fall apart
ABERCROMBIE & Fitch, the global retailer of apparel and accessories for young consumers, announced that it has terminated talks about a potential sale. On the news, its stock price plummeted more than 20 percent, closing at $9.59 per share Monday.
Last month, the Ohio-based retailer once synonymous with teen cool and known for its logo splashed across many of its clothes, announced that it was ready to make the jump into a transaction and had several interested parties after almost a decade of steady decline in its share price, hinting at another blow to the ever-more sluggish mall-based retail sector that Amazon.com, Walmart, and the new QVC Group are looming over.
“There can be no assurance these discussions will lead to a definitive agreement or that a transaction will be consummated,” the company announced in a statement in May.
According to a report by Reuters, two main players have been interested in the acquisition: Sycamore Partners, a private-equity firm from New York, which came the closest to sealing the deal, and American Eagle in partnership with Cerberus Capital Management. Bloomberg reported that the retailer Express was also a po- tential buyer.
Yet none of them could close the deal. Analysts were speculating that Abercrombie was no longer attractive to its teen target market. At the same time, the company, which also owns surf-inspired Hollister and Abercrombie Kids, was criticised for having failed to offer differentiated products, according to Cowen Group, a financial services firm. What’s more, the company was said to have been affected by the long hunt for its new CEO after the previous one, Michael Jeffries, stepped down in 2014. Its President Fran Horowitz was promoted to CEO earlier this year.
Now, Abercrombie says it’s focused on its business plan, trying to leverage the investments in marketing and sales, its team potential, as well as its growing sales at Hollister reported in the first quarter.
“We believe in the prospects for our business and the opportunities for our brands,” said Arthur Martinez, executive chairman of the board of Abercrombie & Fitch. “Our strong management team and dedicated people, the investments we have made in marketing, omnichannel and other strategies to drive sales, together with our relentless focus on operational efficiencies, all contribute to our expectation for improved trends beginning in the second half of the year.”
The company decline further comment.
Analysts seem to agree that the online sector is growing stronger, and that Abercrombie would need to enhance its presence on the digital market to stay competitive.
“The long-term key to their success or otherwise will be whether they manage to use the brand online and to sell to those online web-based customers,” James McCaughan, chief executive officer at Principal Global Investors, an asset-management firm, told Bloomberg on Monday. “Abercrombie is not that big of a store group, but it has enough of an image among its customers.”
Yet others say Abercrombie’s biggest challenge is to regain customers and redirect its efforts toward creating a stronger brand that will transcend platforms.
“There are plenty of companies that are opening stores and plenty of people that are doing well online,” said Brendan Witcher, principal analyst focusing on retail strategy at Forrester, a market research company. “What’s important to remember is that, with all the talk about online sales, this is still only 14 percent of the total retail sales. It’s only about $500 billion out of $3.5 trillion. If your brand is irrelevant offline, it’s irrelevant online as well.”