Teen, young adult retailer Abercrombie and Fitch had been one of America's most successful apparel companies. Despite premium prices, its targets...young men and women (who wanted to aspire to the brand's young, good looking and sexy image) bought its clothing in large numbers. Even older men who kept fit were avid buyers of A and F.
Then the recession hit and it hit A and F big time. The publicly traded company refused to discount its products or have big periodic sales to drive business. Instead, the brand (under its CEO Michael Jeffries) insisted in could withstand the weak economy (and a major drop in sales and profits) by staying the course with its premium pricing and lifestyle positioning.
I generally have been a proponent of consistent branding and NOT falling into the hole of going the discount pricing route to generate traffic and business---it is hard to recover from that move. However, this recession is unlike any we have seen before and with any significant paradigm shift, long held beliefs and business strategies get tested. Evolution of one's brand strategy is the appropriate course these days.
It does appear in today's new economy ( and it will continue I believe even with a recovery) consumers are demanding value and a strategically sound pricing plan (whether its Prada or Levi's or A and F) has to become a part of any brand strategy.
A and F's refusal to alter their business model seems to be causing the brand some major harm. It is no longer the darling of its prime target...on a recent shopping trip across the US, I found A an F stores consistently empty while other competitors for the young market were busy like H and M and Forever 21.
What is amazing is that CEO Michael Jeffries was paid in excess of $71 Million in total compensation last year despite the company's terrible financial performance...he was paid higher than virtually all of his industry peers again despite the brand's significantly declining sales and profits. Why? I'm not sure, but The Corporate Library, a research entity that tracks CEO compensation, has identified Mr. Jeffries as the one of the MOST overpaid CEOs.
Mind you this is NOT a privately held company but a publicly traded one...and one would think and hope that stockholders and Board members would significantly adjust Mr. Jeffries compensation given the company's very poor performance. If I was a stockholder in this company I would be screaming at the board...to take some of his compensation and plow it back into the company's marketing effort. I also find it hard to believe that ethically and morally Mr. Jeffries can justify his compensation. Where are the CEO's who do the right thing and voluntarily reduce their compensation when their companies are doing poorly? I wonder how may employees have lost their jobs and A and F because of the weak economy while Mr. Jeffries still gets paid top dollar?
Watching out for you everyday.
Eli
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