Abercrombie & Fitch, Lab Report Example

After 96 years in the sporting goods and outdoor clothing business, Abercrombie & Fitch (A&F) was purchased by Limited Brands and transformed into a purveyor of trendy clothing lines targeting trendy young people.  For the past ten years, A&F has “pushed the envelope” by leveraging highly sexualized advertizing and the resulting string of protests, boycotts and lawsuits.  Rising above the industry mean, A&F prices increased brand-appeal among “yupsters” during that time.

What are the greatest environmental threats that have immediate implications for A&F?

The American recession and worldwide economic downturn are without question A&F’s greatest challenges.  From the beginning of FY08 to the end of FY09, A&F’s stock fell 56%.  While stock prices have been rising in 2010, A&F’s most recent report on fourth quarter and FY09 year-end earnings reflect an overall 5% decrease in sales (WSJ Report, 2010).

Another potential challenge could be A&F’s apparent insensitivity to shareholder and public opinion regarding executive compensation.  In this day of massive unemployment and government bailouts, corporations have found themselves under the magnifying glass of a cynically vigilant public.

In a recent Time article, Gregory (2010) lambasts the company for cutting its CEO’s annual travel allowance to $200,000 then offsetting the reduction with a $4 million lump-sum.  Notwithstanding Jeffries’ remarkable success in turning a failing company into an icon of success in the clothing industry, no one in a publically-traded company is exempt from the scrutiny of today’s public.  A&F’s tradition of “snubbing its nose” at conservatism may have served them well insofar as advertizing is concerned, but could come back to bite them in the area of corporate responsibility.

What are the greatest opportunities available in the marketplace for A&F to pursue?

A&F’s year-end report reflected a, 86% increase in international sales (AF Report, 2010).  This figure reflects tremendous growth in that division of the business and should be leveraged while the market demand is still growing.  The report also indicates FY10 plans to open additional flagship stores in Fukuoka, Japan, and Copenhagen, Denmark along with its new 5^th Avenue store in New York.  The company is also pushing its subsidiary brands (Abercrombie and Hollister Co.) harder than ever in international markets.

What are A&F’s greatest organizational strengths?

Jeffries is responsible for transforming A&F from a stodgy, old-fashioned company into the corporate personification of hip, cool, rebellious youth.  In doing so, he has created a brand equity that is paramount to the future success of the company.  Jeffries has managed to turn the entire organization into a high-impact, chic, cultural phenomenon not unlike Starbucks.

There are several areas of significant organizational strength that drive A&F.  The company exudes a certain style that is evident in its marketing as well as with the walls of its retail outlets.  A&F employs often-controversial, cutting-edge advertizing strategies that have kept the company’s name alive in the news, at the water cooler, and occasionally in the courtroom.  A&F thrives on this controversy and probably smiles with the rest of the country when some of their more outrageous offerings have been parodied on late-night television shows.

Despite a recent downturn in net sales, A&F continues to command a strong market position.  The company still has many loyal followers and has been able to maintain a strong financial position.  On April 30, 2010, InvestorGuide.com (2010) rated ANF stock at 2.41 on a scale of 1-5, but strongly recommends holding rather than selling due to the company’s overall financial strength.

Define the company’s greatest weakness.

A&F identifies their products as “aspirational” and “casual luxury” lines of apparel.  Jeffries has remarked on numerous occasions that lowering prices would dilute the value of the brand.  After a poor showing in overall earnings of late, he has reconsidered this position and has decided to launch a line of lower priced products in an effort to “improve the domestic sales trend” (Anderson, 2009).

Aside from high prices, some have criticized the company for not keeping pace with current clothing trends.  A&F is still selling “torn” jeans, seen by some as a fashion “fopa” in 2010.  Today’s world moves at an unprecedented pace and the fashion of today can become outdated in a matter of months.  Jeffries rules the company with his own strong sense of style and direction.  This approach has worked well in the past but as the social pendulum begins to swing toward conservatism, it may become an issue.

How can A&F’s strengths be used to deflect environmental threats and take advantage of opportunities to further the company’s success in the industry?

Since 1988, A&F has been on the cutting edge of the youthful garment industry in the United States.  Overseas operations have propelled the company into becoming a worldwide brand.  A&F has developed a brand equity that it must continue to support and leverage.  The company has been doing very well in international markets and should continue to position itself accordingly.

To maintain its reputation among young people, A&F should also take full advantage of emerging technology by strengthening its reach through social media.  A&F has made a significant “splash” in terms of its advertizing approach in magazines, billboards, and other traditional media but has yet to garner a comparable measure of presence on face book, twitter or other “hip” electronic media venues.  These mediums are the new “billboards” for A&F’s target market and should be leveraged accordingly.

References

(AF Report 2010216 Abercrombie & Fitch reports fourth quarter and fiscal year-end results)WSJW

(Anderson M 20091113 Abercrombe & Fitch 3rd quarter profit falls)Anderson, M. (2009, November 13). Abercrombe & Fitch 3rd quarter profit falls. Retrieved from http://abcnews.go.com/Business/wireStory?id=9073091

(Gregory S 2010416 Abercrombie & Fitch pays CEO millions to stop flying)Gregory, S. (2010, April 16). Abercrombie & Fitch pays CEO millions to stop flying. Time, . Retrieved from http://news.yahoo.com/s/time/20100416/us_time/08599198224700

(InvestorguideCom 2010430 Abercrombe & Fitch)Investorguide.Com. (2010, April 30). Abercrombe & Fitch. Retrieved from http://www.investorguide.com/stock-analysis.php?ticker=ANF#ratings

WSJ Report. (2010, February 16). Abercrombie & Fitch reports fourth quarter and fiscal year-end results. Retrieved from the Wall Street Journal website, http://www.marketwatch.com/story/abercrombie-fitch-reports-fourth-quarter-and-fiscal-year-end-results-2010-02-16