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Why Abercrombie & Fitch is 110% entitled to close its massive flagship stores



Abercrombie & Fitch's latest decision to bid goodbye to the lining box for clothing is 110% right.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – small Mt Abercrombie & Fitch shares ( ANF ) fell about 20% on Wednesday when it first revealed Quarter the same sales on its name brand and Hollister, which was slightly below many Wall Street forecasts. Gross profit margins of 60.5% also came in a shadow that was less than 60.6% analyst consensus. "> Although Mr. Market might need something convincing about it. Abercrombie & Fitch shares (ANF) fell by 20% on Wednesday when it revealed the first quarter of the same store sales on its name brand and Hollister, which was slightly below many Wall Street forecasts. Gross profit margins of 60.5% also came in a shadow that was less than the 60.6% analytical consensus.

The company delivered a net loss of 29 cents a year. Stock, better than the 43 cents a stock analyst feared.

But it was Abercrombie's announcement that it will close three new flagship stores, which are also likely to balance the investor's feelings.

"Large flagship stores are not the brand of the future," says Managing Director Fran Horowitz, CEO of Abercrombie & Fitch.

<h2 class Abercrombie & Fitch leaves flagships "" Abercrombie & Fitch leaves flagships

Abercrombie & Fitch said it will soon close three flagship locations: a Hollister in New York City; and Abercrombie & Fitch in Fukuoka, Japan; and an Abercrombie & Fitch in Milan, Italy. All these stores were opened (2009-2010) under the leadership of former controversial Abercrombie CEO Mike Jeffries, bordering on obsessed with showing the flag through massive flagship stores … even to the detriment of profits.

The three stores account for 140,000 total square feet and, according to Abercrombie & Fitch, have been below the company's average productivity.

Clothing traders closed former flagship stores in Hong Kong (first quarter 2017 closure) and Denmark (first quarter 2019 closure).

Investors are likely to read the news, as the Abercrombie & Fitch brand will be less on the global market. Less visibility, less sales potentially. Or that the brand itself no longer has a cache to keep flagships open, which could possibly damage the shops in shopping malls.

But the cohort probably misses the point – what careful light snapchat user teenager will go up into five floors looking for clothes? Today, it's about mobile ordering and getting in and out of the shops as soon as possible wearing something cold to take a picture for an Instagram post.

(AP Photo / Mary Altaffer)

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) em) – sm" type = "text" content = "So if you are Abercrombie & Fitch, & nbsp; why not shut down some waning flagships & nbsp; and redistribute capital for more productive applications. Stacey Widlitz reminded me of Twitter flagship often is "big money pits." Abercrombie & Fitch Chief Financial Officer Scott Lipesky tells Yahoo Finance that the latest flagship closures should help the bottom line over time. "data-response time =" 37 "> So if you are Abercrombie & Fitch why Don't close some lagging flagships and redistribute capital for more productive applications. SW Retail Advisors Stacey Widlitz reminded me of Twitter that flagships are often "big money pits." Abercrombie & Fitch Chief Financial Officer Scott Lipesky tells Yahoo Finance the latest flagship closures should help the bottom line over time.

Horowitz, who has led to an aggressive shrinkage of the company's fleet since we joined 2015 in an effort to maintain margins, says her team continues to focus on smaller stores that better engage consumers. Horowitz says she is still "great believer" in the stores.

The company plans to open more stores than it closes in 2019, mostly smaller places.

<p class = "canvas-atom canvas-text Mb 1.0mm) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Brian Sozzi is an editor-at -large and co-host for & # 39; The First Trade at Yahoo Finance. Follow Brian Sozzi on Twitter @BrianSozzi "data-response time =" 40 "> Brian Sozzi is an editor-at-large and co-host of & # 39; [19659017] The First Trade & # 39; at Yahoo Finance. Follow Brian Sozzi on Twitter @BrianSozzi

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8 em) – sm "type =" text "content =" Read the latest financial and business news from Yahoo Finance "data-reactid =" 41 "> Read the latest financial and business news from Yahoo Finance

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