This has been one tough year for Abercrombie & Fitch.
A megaviral "Abercrombie-Hates-Fat-People" meme started in May when a Business Insider piece analyzed Abercrombie's marketing practices and included a 7-year-old quotation from CEO Mike Jeffries.
The piece then piled on with comments from a retail consultant with no connection to the company who explained that A&F didn't sell plus-sizes because Jeffries didn't want overweight people wearing his clothes. Social media outrage ensued, and a YouTube video urging consumers to donate their Abercrombie clothes to homeless people for a "brand readjustment" garnered more than 8 million views.
That might have been enough to make it a tough year. But the retailer's operating results and stock market performance have also fallen off a cliff. In a November presentation, the company reported its seventh consecutive quarter of declining same store sales, cut its earnings forecast by more than half, and announced that it would close its Gilly Hicks-branded lingerie stores.
But it also countered its earlier negative press by announcing it would be offering larger sizes, particularly for women. It is all part of an effort by the retailer to reinvent itself.
The November presentation, however, drew even more skepticism. Analyst Dorothy Lakner of Topeka Capital Markets, who has the stock rated a hold, called it "very scary."
"My impression was that these were all admirable goals but that they were a day late and a dollar short," she said. "There were many initiatives that they discussed that other companies have been working on for years. It was Retailing 101; it was that basic."
(Read more: Should Abercrombie's CEO be year's worst?)
What's more, Abercrombie's financials have helped its case. Net sales for the third quarter were down 12 percent; comparable store sales were down 14 percent in the U.S. and 15 percent internationally, offset by an 11 percent gain in catalog and online sales.The stock is down almost 30 percent year to date, versus a gain of more than 41 percent for Standard & Poor's retail index. To be fair, shares of Aeropostale and American Eagle Outfitters, the company's two most direct competitors, are both down more than 21 percent.
Robin Lewis, the industry consultant whose analysis of Jeffries' aesthetic led to the spring brouhaha, said that isn't much of a consolation. It suggests that Abercrombie isn't losing market share to similarly situated but lower-priced competitors because of temporary price-consciousness—as happened during the recession. Rather, the company's target demographic is shifting to something entirely different, and the perception of the brand as intolerant is symptomatic of that. As the company noted in November, the conformity of Gen-X has given way to a different aesthetic that Abercrombie is still trying to understand.
"They're in more trouble than perhaps people realize," Lewis said. "Young, sexy, and cool has to be defined by those who are young, sexy, and cool. The 18-24-year-olds are the people who are defining this. They are looking for something a little dressier, a little more fashionista—and they don't want to wear the same outfits their friends are wearing. That's why H&M and Zara, with new lines every two weeks, are doing so well." Still, Jeffries was granted a new contract recently, giving him more time to turn around the retailer.