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Abercrombie looks to Alibaba for boost in China
[NEW YORK] Abercrombie & Fitch Co is looking to shoppers in China, where its brand still has prestige, to help with its comeback plan.
The company will offer its flagship brand and its Abercrombie kids line on Alibaba Group's Tmall website starting on July 26, according to a statement on Thursday. Tmall, China's largest consumer platform, has carried the retailer's Hollister brand, geared toward teens, since 2014. Tmall will help Abercrombie expand its reach to consumers who can't shop at the brand's 10 namesake stores and one kids' store in China. The access will be critical for the retailer that's working to counteract an industrywide slowdown in the US Abercrombie abandoned talks with potential acquirers earlier this month in favor of its own turnaround plan that the company says will generate better returns for shareholders.
"Abercrombie is an iconic global brand that consumers, both on our platform and in China, have sought for some time," Jessica Liu, president of Tmall Fashion, said in the statement. "We look forward to connecting our customer base to the brand and working with Abercrombie & Fitch to further its international growth." The chain's shares rose as much as 1.3 perc ent to US$9.66 shortly after the open of trading in New York.
International sales, once a bright spot for Abercrombie, have started to cool. Last quarter, sales outside the US accounted for US$252 million, or 38 per cent of the company's revenue, a decline of 3 per cent from a year earlier. Capturing the Chinese market could help reverse this trend. Abercrombie said 75 per cent of Alibaba Group's users are under the age of 35 and about 80 per cent of its gross merchandise value takes place on mobile. That fits with the profile of the consumer that the "updated" Abercrombie brand is targeting, the retailer said.
So far, shareholders are skeptical of Abercrombie's turnaround plans, which include revamping its image in the US. Abercrombie shares lost more than 20 per cent of their value this year through the close of trading Wednesday.
SLS Management, which holds shares of the company, sent a letter to Abercrombie's board urging it to start "aggressively buying back stock and reducing the share count at these levels." The retailer has pointed to solid same-store sales at its Hollister brand and said it's following through on measures "to position the Abercrombie brand for revitalized performance." To reach new customers, Abercrombie is taking a cue from its teen rival, American Eagle Outfitters Inc, by reviving its intimates brand. It's also adding products to storefront windows while dialing back music volume and aroma use. Its namesake Abercrombie chain is going after older customers and playing up its heritage with a throwback logo.
So far, success has been hard to achieve. The chain has posted falling revenue for four straight years and Hollister's rebound hasn't yet been enough to offset the overall decline, making Abercrombie's incursion into China a vital play. "We are excited to bring our A&F brand experience to the broader Chinese market, beyond the reach of our physical stores, through Tmall," Abercrombie Chief Executive Officer Fran Horowitz said.