Investors should consider moving on as the group’s situation may deteriorate further.
The past year has seen Abercrombie shares decline by 24%, American Eagle by 40%, and Aeropostale by 63%, and that is not considering dividends.
The decline may be because of a decrease in mall traffic and market saturation, but the biggest culprit is called fast-fashion. Traditionally, retailers have maintained low costs with high margins. This was achieved by placing large orders for a small range of garments by season. This often resulted in excess stock which prompted clearance sales.
Fast-fashion works differently. Large amounts of fabric are ordered and factories contracted prior to designing. Garments are ordered on an as-needed basis, which allows for receipt of new items in short periods of time.
This shift in consumer buying may force traditional retailers to reduce their store numbers, as fast-retailers are looking to increase store numbers by 10% per annum over the next few years.