Abercrombie Mulls Third-Party Sales

Abercrombie & Fitch is considering selling its teen-friendly clothes and merchandise through third-party channels, perhaps as a way to combat flagging sales and declining foot traffic. Net sales for the quarter dropped to $1.299 billion, a 12 percent decrease year over year.

CEO Mike Jeffries, discussing fourth quarter results with analysts, said the "volume potential" of sales though third parties is significant. "From a strategic standpoint, it is clear that we need to be thinking outside of the confines of our existing vertical specialty retail model," he explained. The mall-based retailer is planning several collaborations in the coming months across apparel, footwear and accessories.

This month, A&F plans to transition to a vertical organization structure by brand, for most categories in design, merchandising and planning. "We believe these actions will support a number of key objectives, including increased brand differentiation, and increased accountability," Jeffries added.

The retailer is also hiring brand presidents to oversee each label, searching for experienced executives with a general management background in addition to being "product oriented."

"The branding initiative will enable us to have more distinguished products — product that's different from one brand to the next — and also will enable us through new insight with these new people to look at the business a little differently," said Jeffries.

For 2014 A&F capital expenditures are heavily geared toward investments in direct-to-consumer and IT, with an eye toward growth, according to CFO and COO Jonathan Ramsden. For example, the retailer is reconfiguring its New Albany distribution center so that it serves DTC fulfillment only. "This will provide the additional infrastructure necessary to support unit volume growth from our expanding web exclusive assortment, and also improve processing speed," Ramsden noted.

A&F's direct-to-consumer business performed well in Q4 2013 and represented nearly 25 percent of total sales, up in all regions, with particularly strong growth in Asia, according to Jeffries. A flagship A&F store in Shanghai is scheduled to open in April.

Another of A&F's top priorities for the coming months is nudging its average unit cost lower. "As we move forward, we believe the next big area of opportunity lies in lowering our merchandise average unit cost," said Jeffries.

"Clearly, it's an old axiomatic statement that good fashion doesn't have a price attached to it, but today it does."
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