Abercrombie and Fitch held their Q2 2010 results conference call today. Although they announced an increase in sales and comps, they also touched on closing 110 stores over the next year, higher inventory levels and lower gross margins. Not a good quarter for the teen retailer.
However, I did like this quick bite from the question and answer portion of the call.
Christine Chen – Needham & Company
I’m wondering, your e-Com business is doing so well. Have you been able to use that to test product, and is that something that you can react quickly enough of certain things that you have on the internet only, like the Epic product you’re selling, and maybe getting it into different locations?
Mike Jeffries
The direct-to-consumer business, we have been experimenting with that; we have been testing categories of direct-to-consumer. And the direct-to-consumer results are proving to be pretty predictive of what happens in store. We’re fascinated with the potential of direct-to-consumer; are in fact, expanding our assortments. We have a major goal for that business and what you’re describing is very definitely a part of where we’re taking it.
Leveraging the e-commerce division to test new ideas, categories, and merchandise assortments is a fantastic way to drive in-store sales with less risk and overhead. A mass market retailer can roll out pilot programs to brick and mortar locations around the country, but not in the time (or without the cost) that they can do it online. With a targeted buying, marketing, and social media strategy, a retailer can measure the success of new categories faster than ever. Measure sales and social media feedback and learn what your customers like, or don’t like, about new categories.
I imagine that Abercrombie, with a rough few quarters behind them, is going to lean heavily on the e-comm business to drive growth and look for more predictions on in-store over the next 18 months.
