Europe Isn’t Buying Abercrombie & Fitch’s Overpriced Clothes

Comparable sales dropped at Abercrombie’s swanky flagship stores in London and Milan, while the company’s lower-priced Hollister stores posted a modest gain across Europe, the company said yesterday. Sales fell at stores in Canada and Japan. Quarterly sales for US stores were up 14 percent.

“Apparently, A&F materially raised prices in the (European) flagships around Labor Day and they may have gone too far,” said Stacy Pak, an analyst at Barclays Capital. {NY Post}

Looks like Abercrombie has bigger problems on its hands than a loud, flashy overly tan guy decking himself out head to toe in their clothes. Then there’s the whole Situation/Jersey Shore thing too.

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In spite of pulling our favorite self unaware publicity stunt in recent memory, it looks like A&F has a bigger situation on their hands than an undesirable customer representing their products overseas. In fact, it seems no one overseas is interest in becoming an Abercrombie customer in the first place – at least not at the price they’re charging.

In fairness, cotton and commodity prices have risen for almost every clothing manufacturer, so it’s not completely unreasonable to think that a slight price increase may have been necessary to increase rising production costs.

Combined with an overestimation of the brand’s appeal outside the US probably didn’t help much either. Even though we regularly see European tourists heading back with Abercrombie bags, we have to wonder if the company failed to take into account the relative discount of American pricing, which could add to the appeal.

Luxury brands in China often find stores with weak foot traffic and sales, since many of the people who purchase luxury items can do so in Hong Kong, Europe or the US at prices that don’t include such a high markup (for mainland China, the luxury tax can add as much as 50% to the price of items). Most European countries have a consumption tax that’s not present in the US, so Abercrombie could take a smaller margin and keep prices comparable to what they’d be in the US, or raise prices to keep margins the same.

With austerity plans in place that leave consumers with more expensive goods and less money, we know which way we’d go if trying to keep sales growing. Hint: not the way Abercrombie chose.