Gap and Abercrombie & Fitch slump on unhappy holidays


A Gap store in New YorkImage copyright
Reuters

Shares in two of America’s largest clothing retailers plunged on Friday following disappointing third quarter sales and a downbeat forecast for the crucial holiday shopping season.

Gap shares sank by 13.1% after a seventh consecutive quarter of falling revenue and warned that fewer people were visiting stores.

Abercrombie & Fitch’s stock fell 13.9% on a poor sales and a weak outlook.

Both have been attempting to revitalise their brands, with limited success.

Neil Saunders, chief executive of Conlumino, the retail research company, pinned the blame for Abercrombie & Fitch’s poor figures on a failure to communicate with customers about the changes it has made to its fashion lines.

Once known for its picture-perfect models and sales assistants, as well as Abercrombie & Fitch monogrammed garments, the retailer has shifted “towards a more inclusive and gentler approach with an emphasis on stylish, quality clothing”, said Mr Saunders.

However, a “confusing” marketing campaign, poor foot traffic at both its flagship and mall-situated shops and warmer weather resulted a 6% fall in third quarter sales to $821.7m and an 80% slump in profit to $7.9m.

Abercrombie & Fitch said it expects business to remain challenging for the rest of the year, which includes Black Friday, the post-Thanksgiving Day shopping jamboree, as well as Christmas and the New Year.

‘Challenging’

Gap also said that footfall was down in the current quarter covering the holiday period and said that it would shut 65 stores this year compared to a previous forecast of 50 closures.

The retailer announced in October that it was closing all its Banana Republic outlets in the UK to focus on its North American business.

For the third quarter, sales fell by 2% and profit dipped to $204m. While its Old Navy brand thrived with revenue up 3%, sales at Gap Global and Banana Republic both fell by 8%.

The management at Gap, under chief executive Art Peck, has been struggling to stop a continuing slide in turnover.

Mr Peck said: “The retail environment and the apparel environment continues to be challenging. Traffic remains challenging and, as a planning assumption, we believe that will carry forward as well.”



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