"The big news ... is that the company is finally addressing a premium pricing strategy that has exacerbated challenging underlying demand conditions," Credit Suisse analyst Christian Buss wrote. "We ultimately expect Abercrombie to be able to recapture share given our view that core consumers do still have a [modest] preference for the Abercrombie & Fitch and Hollister brands when those prices are appropriate."
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The change in pricing is just one of the initiatives Abercrombie has revealed as of late, as it struggles to compete with low-cost teen retailers such as Forever 21 and H&M. Earlier this year, the company separated the roles of CEO and chairman, and added three retail veterans to its board. Analysts reacted positively to the move, saying it showed Abercrombie's willingness to accept change.
In its earnings call last week, the retailer said that it is considering selling third-party brands as well as selling its merchandise through third-party channels. It currently sells Keds products on its Hollister website, an initiative that started in August 2013 and which CEO Mike Jeffries called "very successful."
In addition to new products coming from Keds, Jeffries said the retailer is working on a long list of collaborations across footwear, apparel and accessories. Michael Scheiner, the company's director of marketing and PR, said it is exploring these opportunities at both Hollister and Abercrombie. Expected to launch in coming months, this would mark a significant shift in the retailer's strategy.
"We know our target customer values these sorts of relationships, and we believe they can improve our brand positioning, while driving incremental sales and margin," Jeffries said on the company's earnings call.
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Despite these moves, many analysts remain on the sidelines about Abercrombie. Wells Fargo analyst Paul Lejuez, who has a "hold" rating on the retailer, pointed to troubles overseas, where he said Abercrombie's profit per square foot was down more than 40 percent in the recent quarter.
Stifel Nicolaus analyst Richard Jaffe also has a "hold" rating on the retailer. He cited a 23 percent increase in inventory per square foot as troublesome, as it will require significant markdowns in the first quarter.