Abercrombie And Fitch Industry Analysis

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Industry Analysis
Abercrombie and Fitch is a members of the retail (special lines) industry. This means that they are focused on one certain demographic area. That being the high-end middle to upper class men and women in high school or college. Other members of this group include The Limited, Polo Ralph Lauren, American Eagle, and the GAP.
The short- term outlook looks great for specialty stores due to several things. They have continued to gain market share from the bigger department stores. Predictions for 2001 have disposable personal income climbing 4.9% and consumer consumption increasing by 4.0 %. Apparel prices should remain level with last year’s, but margins will get a boost from lower sourcing cost in Asia, lower inventories, and more emphasis on cost containment.
The longer- term outlook is sort of cloudy. This is to be expected with an industry that is buoyed by a strong economy. The main factor looks to be the concerns of demographics with all the baby boomers getting older. An older population will be less interested in the latest fashion trends and more focused on the priorities such as retirement, health care, and their kids’ tuition. These expectations will definitely use up a greater share of disposable income. There is also an excess of retail square footage in America, some twenty square feet for every man, woman, and child in the U.S. As a result, chains are cutting back on their expansion plans, closing under performing units, and investing in cost-cutting technology. The next big undetermined factor is the future of the traditional bricks and mortar format and will it be necessary with online shopping coming on strong.
Abercrombie looks to be establishing a strong leadership role in this evolving industry. Perhaps the most important to their future success will be their Internet strategy. Abercrombie has arguably the best e-commerce division in the industry with the initial high cost o...