Abercrombie & Fitch to shut London and Paris flagships
Abercrombie & Fitch is to close a selection of major flagship stores, including London, Paris and Munich, it announced with its latest set of results on Tuesday.
It will also shut its Brussels, Madrid and Fukuoka flagships although these come with natural lease expirations. The London, Paris and Munich locations are, however, all "well ahead of" the natural end of their leases, which range from 2022 to 2031.
All of the shops will shut by the end of January and the total number of flagship closures add up to seven given that it also recently shut its Dusseldorf store. That leaves it with eight global flagships, down from 15 at the start of this year.
The London store is a stone’s throw from Savile Row and opened earlier last decade. There was some unhappiness at the time with a number of Savile Row tenants complaining that it wasn’t the right type of brand for the neighbourhood.
Regardless of how right or wrong it was for the area, it’s yet another sign of how tough individual companies are finding it to run expensive flagship stores in what were destination cities pre-pandemic, buzzing with tourists and office workers.
And it’s also a sign of how shopping in those cities has been devastated this year. Footfall to Central London, for instance has swung from down 50% to down as much as 80% at various points in 2020. By contrast, it's not that long ago that footfall had been expected to surge this year as planned new transport links were meant to open.
On a conference call, A&F CEO Fran Horowitz said the company is still excited about the global growth opportunity across all four of its brands and sees “meaningful runway domestically and in EMEA and APAC, where our local teams are continuing to gain traction by delivering more targeted regional products and messaging”.
But Horowitz also talked up the importance of digital, rather than those global flagships in shopping cities that were once seen as so crucial to the brand.
Horowitz added that while the closures are only seven stores out its total of 849, “these flagships, which combined roughly 200,000 gross square feet or 10% of the Abercrombie & Fitch brand global square footage, have taken an outsized portion of our time and resources for years and are not an accurate representation of [the] Abercrombie & Fitch brand today”.
In fact, in fiscal 2019, they contributed a combined 1% to revenues “or a 20 basis point drag to comps and were a 10 basis point drag to operating margin,” she added. The closures will remove roughly $85 million of lease liabilities from the balance sheet and that’s clearly important as for the “fiscal year-to-date, performance has been meaningfully worse at these locations, which are heavily dependent on tourism, due to Covid-19 and associated traffic constraints”.
But Horowitz also stressed that the company remains “committed to the markets” the stores are in.
Meanwhile, looking at its results in the three months to October, the firm beat Wall Street expectations for quarterly profit and sales as it cuts costs and benefited from digital growth.
The firm’s net sales fell 5% to $819.7 million and it reported a profit of 76 cents per share, better than analyst expectations of it breaking even.
Its digital sales jumped 43%, boosted by demand for its Gilly Hicks activewear and loungewear as stuck-at-home consumers shopped for comfort clothing.
But Fran Horowitz was still cautious. “We are encouraged by quarter-to-date results... However, this is tempered by uncertainty regarding the potential for increased Covid-related store restrictions and our expectation for elevated shipping, handling and freight costs,” she said.
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