American Eagle, Abercrombie and Aeropostale Hurt By Fast-Fashion Retailers

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.