Abercrombie & Fitch is to exit its London flagship store by the end of January 2021 as part of a wider restructuring and a shift away from tourist destinations that will lead to seven flagship stores around the world closing.
The London store on Burlington Gardens, at the edge of London’s historic Savile Row, was opened to much fanfare (and some controversy given the nearby bespoke tailors not feeling it was an appropriate neighbour) in March 2007 and famous generated £140,000 of sales within six hours of opening.
It has now been named as one of seven stores that will close ahead of their lease expiry dates. The others are in Dusseldorf (already closed) Munich, Paris, Brussels, Madrid and Fukuoka.
Abercrombie & Fitch said the seven flagship locations that will close in fiscal year 2020 represent a combined 200,000 gross square feet, or about 3% of total company gross square footage and 10% of the Abercrombie & Fitch brand square footage as of fiscal year-end 2019.
In fiscal 2019, these stores had a combined adverse impact of approximately 20 basis points to comparable sales and approximately 10 basis points to operating margin. They contributed approximately 1% to revenues and approximately $30m to annualized payroll and occupancy in fiscal year 2019.
By closing them the business will remove $85m of lease liabilities from its balance sheet.
CEO Fran Horowitz said: “With these seven closures, we should end the year with eight operating flagships down from fifteen at the beginning of the year. These actions align with our multi-year strategy of reducing dependence on tourist-driven locations to reposition within key markets and deliver a better omnichannel experience to our local customer.”
Tourist footfall in global city centres has plummeted in light of the COVID-19 pandemic leaving once prime retail locations deserted. Domestic customers have also shifted to working from home and shopping more locally or online.
Abercrombie & Fitch has two further UK stores, one in Westfield London and one at the Trafford Centre in Manchester.
The flagship store closures were announced as the US fashion giant announced net sales of $820m, down 5%, in the third quarter ending 2 November 2019. Digital net sales increased 43% to $382m reflecting robust growth in every month of the quarter. Operating income improved to $59m and $65m on a reported and adjusted non-GAAP (Generally Accepted Accounting Principles) basis, respectively, compared to $14 million and $25 million last year.
Horowitz said: “[…] we delivered our best third quarter operating income in eight years. Results were fueled by 43% year-over-year digital sales growth and sequential sales improvements in our global store base. Updated product and marketing resonated with existing and new customers across brands and regions. Combined with a focused inventory management strategy, we expanded gross profit rate significantly while continuing to tightly manage expenses, leading to operating margin improvements over last year.”