American Eagle, Aeropostale Abandon Logos as They Look for Edge
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By staying on top of trends, quickly turning around inventories and offering new styles, prints and new bohemian looks - all with little visible branding - American Eagle and Aeropostale may have found the path to recovery, analysts say.
The decisions early on by American Eagle Outfitters Inc and Aeropostale Inc to abandon the logo-covered clothing that made them popular in the 1990s and 2000s could also give them an edge over bigger rival Abercrombie & Fitch Co.
"American Eagle used to be an embarrassing, uncool place to shop but ... more trendy pieces and awesome price point have brought me back," 25-year-old operations consultant Pam Forster said in an email.
American Eagle's sales rose 3 percent in the holiday quarter, the first increase in seven quarters, while Aeropostale said in January that it might make a profit after two years of losses.
American Eagle's inventory turn, which measures the number of times inventory is sold and replaced, rose to 7.63 in 2014 from 6.93 in 2013, according to Stifel, Nicolaus & Co.
For Aeropostale, Stifel estimates turns were down to 9.7 from 10.3 last year, but were quicker than Abercrombie's 2.89 times, which was down from 3.22 in 2013.
Abercrombie's results show little evidence the company has been able to deal with the challenges in the sector, analysts said.
Apparel prices have plummeted in part because of intense competition from online stores and fast-fashion retailers such as Hennes & Mauritz AB's H&M and Inditex's Zara, which bring the latest fashions from the runway to stores within two to three weeks, rather than months.
A&F's sales dropped 14 percent in the fourth quarter, its seventh straight quarterly decline, as a delayed decision to move away from logo-centric clothes and public relations debacles hurt demand.
The company has struggled to shed its inventory of logo-heavy clothes and its plans to expand in new countries are expected to run into trouble as the dollar gains strength.
"Abercrombie still has too much branding, (is) overpriced ... and (has) a bad reputation," Forster said.
Abercrombie said in an email that the company was making changes to its products and leadership, but still had issues to address.
"The company is entering a new chapter," Abercrombie spokesman Michael Scheiner added.
(Additional reporting by Siddharth Cavale in Bengaluru. Editing by Andre Grenon)