Abercrombie & Fitch has terminated discussions about selling itself. "After a comprehensive review of all relevant factors, with the assistance of our financial advisor, the A&F Board of Directors determined that the best path to enhance value for stockholders is the rigorous execution of our business plan,” the company said Monday in a press release.
In May, the struggling apparel retailer said it was “in preliminary discussions with several parties regarding a potential transaction,” reportedly including rivals American Eagle Outfitters and Express.
In February, the company promoted Fran Horowitz to CEO; as president and chief merchandising officer, she led the turnaround of the teen apparel retailer’s better-performing Hollister brand. At the start of the year, after a rough holiday season, the retailer laid off 150 of its 2,200 workers at its New Albany, OH headquarters.
The faltering teen retailer, which retains a valuable brand, was apparently piquing the interest of rival apparel retailers just a few months ago. But, while both Express and American Eagle may have had an opportunity in Abercrombie to broaden their customer bases, both are also feeling the effects of a culling in the junior apparel sector, sparked by falling foot traffic at malls and changing consumer behavior toward online purchasing.
In May, Express announced it would shutter all of its Canadian operations amid a “challenging Canadian retail environment;” and the company isn’t faring much better in the U.S. Fourth quarter net sales fell 11% from the year-ago quarter to $678.8 million. Meanwhile, American Eagle is forecasting flat fiscal 2017 same-store sales, although it is being buoyed somewhat by its popular Aerie lingerie brand, which garnered a 17% rise in same-store sales in the fourth quarter, compared to a 1% same-store decline in the rest of the retailer’s brands.
Abercrombie is in the midst of a rebranding effort that seeks to leverage its 125-year history as a preppy American retailer, Horowitz has previously said. But while A&F's Hollister brand sports a California surf vibe with some traction, the flagship’s changes haven’t resonated with the fickle teen demographic. Some observers question its pivot to appeal to older consumers, presumably with more money to spend.
In any case, the retailer has decided to go it alone in its turnaround. "We believe in the prospects for our business and the opportunities for our brands," Chairman of the Board Arthur Martinez said in a statement. "[O]ur 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, compared to the prior year period. We are committed to taking sound, aggressive action to deliver enhanced performance and long-term stockholder value."
Abercrombie & Fitch — which has enjoyed ardor overseas that never cooled quite as much as it did in the U.S. — has also been working to solidify its presence in Asia. Last month the retailer announced it will bring its new A&F store concept to Hong Kong’s largest mall, Harbour City, by December — one of six new stores of its kind to open by the end of the year. Earlier this year, the retailer entered into a wholesale agreement with Zalora, a major fashion e-commerce company based in Singapore and operating in six markets, including Singapore, Hong Kong, Taiwan, Malaysia, Indonesia and the Philippines.
Back home, however, its investments continue to fall flat. The recovery that seemed nascent in 2015 and continued in 2016 has devolved into a significant slump. The struggling teen apparel retailer in March announced plans to shutter 60 U.S. stores as leases expire. Last year, the company closed 54 stores, mostly in the U.S. Earlier this year Moody's Investors Service downgraded Abercrombie due to significant earnings declines and expects the retailer to show modestly lower results over the next year, Moody's Vice President and Senior Analyst Raya Sokolyanska said in a statement emailed to Retail Dive.