For some time now, Abercrombie & Fitch (NYSE:ANF) has been struggling to attract customers who have lost interest due to its weak inventory management, premium prices, slack response to changing fashion trends and fierce competition from fashion-forward brands. While its brand image has taken a beating, due to lack of trendy and season relevant inventory, controversial comments from its CEO Mike Jefferies have made things worse. In response, Abercrombie’s management made some changes to its corporate governance structure earlier this year, as it added three new members to the board and relieved Jefferies of his responsibilities as the chairman of the board. One of the new board members, Arthur C. Martinez, took over Jefferies’ role as the chairman of the company. Also, Abercrombie promoted its CFO, Jonathan E. Ramsden, to the position of COO.
Last month, the company hired Christos Angelides as the president for its Abercrombie & Fitch and abercrombie kids brands.  Angelides, who had previously worked with Next Plc, will take over his role in October and report directly to CEO, Mike Jefferies. The new president will have complete responsibilities of product and customer-facing activities for both the brands and he will also be accountable for their performances. Angelides has immense experience in retailing and his inclusion in the management is expected to bring about some fresh changes to Abercrombie’s struggling brands.
Our price estimate for Abercrombie & Fitch stands at $39.72, which is more than 5% below the market price.
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New President Comes With A Strong Background
Christos Angelides has more than 28 years of experience in retailing. He spent his entire career at Next Plc, a six billion dollar U.K. based fashion retail chain, where he held a number of senior management positions. Some of his key roles include general manager of Next’s sourcing office in Hong Kong, menswear product director and womenswear product director. Angelides’s most recent position at Next was group product director, where he had been since 2000, overseeing buying, designing and quality of merchandise.
Next Plc operates close to 700 stores in 40 countries and an Internet & catalog business in 60 countries. The company has posted solid sales and profit growth, as well as strong shareholder returns, during Angelides’s tenure as the group product director. Angelides also holds the positions of chairman of Next Sourcing Limited and non-executive director of Lipsy, a young women’s fashion brand owned by Next. Abercrombie’s CEO Mike Jefferies stated that Angelides’s strong expertise in apparel retail made him the prime contender for the president’s position. He believes that Angelides will play a crucial role in rejuvenating Abercrombie’s brand image.
Some Areas Where Angelides Should Focus On
As soon as he starts his tenure at Abercrombie, Mr. Angelides should work on developing some new strategies to elevate the retailer’s brand image and regain customer confidence. To start with, Abercrombie’s inventory management has to improve substantially. There have been a number of occasions in the past several quarters when the retailer faced either inventory shortage or surplus issues. The executive management needs to strengthen Abercrombie’s supply chain, shorten lead times and increase its speed to market. Only then it will be able to compete with fast fashion brands such as Zara, Forever 21 and H&M.
Lately, U.S. buyers have shown some affinity towards eccentric products as they want to add uniqueness to their lifestyle. Urban Outfitters‘ (NASDAQ:URBN) Free People brand has seen tremendous success over the past several quarters due to strong customer response to its attractive products. On the other hand, Abercrombie’s merchandise are perceived as boring. A new line of edgy and preppy apparel might change this perception, or at least add some variety to the retailer’s product portfolio.
Another area where Angelides should focus on is Abercrombie & Fitch’s product prices. In the current environment, U.S. shoppers have scaled back their spending on apparel, and premium brands such as Abercrombie & Fitch have been worst hit by this trend. Angelides needs to find some ways to reduce the brand’s prices without putting much pressure on its margins. It shouldn’t be too difficult given that the company has already identified some areas where it can lessen its expenses, and pass on the savings to customers.Notes:
- Abercrombie & Fitch Names Christos Angelides Brand President Of Abercrombie & Fitch and Abercrombie Kids, Abercrombie & Fitch, Jun 10 2014 [↩]