One analyst following the announcement that Abercrombie & Fitch ended its talks over a possible sale wrote he was not surprised a deal was not completed.
The retailer announced during May that it was discussing a possible sale with several different bidders, which at the time were rumored to include Express and American Eagle.
However, news that the conversations had ended sent shares for the apparel company Abercrombie plunging over 21% during Monday trading, while at the same time dragging down other retail stocks.
The overall state of the apparel retail industry is challenging and has an uncertain future, which likely helped to contribute to the few financial backers dealing with the process with interest.
On Monday, shares of American Eagle, Express and Gap all were down over 4% at one time during trading. Other apparel retailers such as Cato, Buckle, Children’s Place, Guess and Francesca’s were down on Monday. The S&P 500 Retail ETF was down over 2%.
The valuation process was likely difficult for traditional Abercrombie a brick and mortar retailer given that traffic in malls is declining, said one analyst in Chicago.
Another analyst said that the industry that is focusing on selling to teens is going to continue to one of the most difficult spaces given the vast amount of competition.
Aeropostale, BCBG Max Azria and Wet Seal are only a few of the names in that space that have had to file for bankruptcy protection the last two years.
More players, such as Amazon and Target, want part of the apparel market for young adults. However, they have gone after it in a much different manner than has Abercrombie, American Eagle and Aeropostale, who all found much success using distinct brand labels, but those are now a thing of the past.
Amazon, H&M and Inditex, the owner of Zara, have all done better than others in providing teens with the apparel and experience they are looking for, said a consultant in New York.
She added that Abercrombie & Fitch did not adjust to the trend of fast fashion like others did and their brands both look and feel dated.
Aesthetics and products aside, there is an important factor for retailers to consider – what the stores they have can offer today’s shoppers.
