Abercrombie & Fitch Desperately Needs To Fix 3 Problems

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A decade ago, Abercrombie & Fitch was the must-have brand for teens everywhere. 

But the retailer has fallen on hard times, and today executives reported that sales are down 10%. 

A myriad of bad decisions led to Abercrombie's status as a struggling retailer today, Brian Sozzi, chief equities strategist at Belus Capital, told us. 

Sozzi shared a few reasons why Abercrombie is struggling. 

1. Competition from H&M and Forever 21. These retailers' offerings are cheaper and trendier than the designs found at Abercrombie & Fitch, Sozzi told us. "Abercrombie is no longer the only place in the mall for teens to get stuff to wear to school," he said. 

2. Teen values have shifted. "In 1999, we all wanted to fit in, but in 2013 it's about showing your identity by wearing unique accessories or clothes no one else has," Sozzi said. Other retailers like Urban Outfitters' Free People have gotten teens to spend full-price by offering more unique items, he said. But Abercrombie is perceived as boring. 

3. Abercrombie's clothes are too expensive. Abercrombie and competitor American Eagle "are simply not perceived by parents as offering the best bang for their buck," Sozzi said. Online shopping and apps have made shoppers more price-conscious than ever, making this trend likely to continue even as the economy improves. 

So what can Abercrombie do to recover? 

Offer more promotions to get people in stores and convert new customers, Sozzi says. 

Abercrombie CEO Michael Jeffries outlined a similar strategy when he spoke with investors earlier today. 

He also said the company will start opening outlets. 



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