Shop Talk

Retailers, consumers and prices

Check Out Line: No discounts? no customers

February 13, 2009

Check out Abercrombie & Fitch’s falling profits.

 

The company played a remix of “Cold as Ice” as hold music for its conference call with analysts. It’s hard to tell if it is supposed to be ironic, or if the company is just tone deaf. 
 
The latter could be possible, as Abercrombie has decided to tune out consumer’s expectations that retailers will offer discounts to try to get them in the door.
 
In November, CEO Mike Jeffries said the short-term relief provided by promotions would have the affect of damaging the brand in the long term.  He defended the strategy again on Friday, though the company has cut some prices at its Hollister and abercrombie chains.
 
But if people stop going to your store, do they eventually forget about your brand?
 
Abercrombie’s same-store sales fell 25 percent in the key fourth quarter. Of course, refusing to discount (other than on clearance items) protects profits. Or maybe not. Net income fell 68 percent, though some of the decline was related to a new employment agreement for the CEO.
 
Also in the basket:
 
PepsiCo Q4 profit falls, but matches Wall St view
 
Sears launching online service to connect clients, contractors (Chicago Tribune)
 
Starbucks to sell instant coffee
 
Microsoft to open own stores, take on Apple

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