Abercrombie & Fitch

Group 2 Project – Abercrombie & Fitch

    Submitted to Professor Alexander Brown by

Suhas Kaushik, Trang Nguyen, and Vinesh Reddy

In partial fulfillment of course requirement for MGT 6100

Operations Management

Concordia University Chicago

08/09/2016

Abercrombie & Fitch is known for its casual clothing and accessories including cologne and perfume for men and women targeting a large population, the company has 300 stores and counting for both children and teenagers and also communicates it through its magazines and publications.

It was established in the year 1982 by David Abercrombie and it became popular as the supplier of rugged, outdoor gear for common population. David convinced Ezra Fitch to become his partner in the year 1904 but since both were different in nature they divided/ dissolved their partnership in the year 1907. It was Fitch’s innovative thought making process which made it a big brand. Even after the retirement of Fitch in the year 1928, Abercrombie & Fitch continued to grow but by late 60’s it was hit with bankruptcy and was bought by Limited Inc. in the year 1988.

Today it is being run as a publicly held company with hundred of stores worldwide.

1. Problems of Abercrombie & Fitch

Abercrombie & Fitch is facing problems in managing its inventory, which led to accumulation of merchandise at its stores. Abercrombie & Fitch Co's days inventory increased from Apr. 2015 (138.13) to Apr. 2016 (153.22). It might indicate that Abercrombie & Fitch Co's sales slowed down. Inventory can be measured by Days Sales of Inventory (DSI). Abercrombie & Fitch Co's days sales of inventory (DSI) for the three months ended in Apr. 2016 was 58.06.

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They have used the massive promotions in order to reduce the inventory turnover ratio; hence, the massive promotions might cause a decline in the average price per unit and weight on the company’s margins.

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Fashion tends to change rapidly. Thus, it is risky for the company when they keep extra inventory and anticipate inaccurate the upcoming fashion trends. On the other hand, with inventory shortage, it can drive the customers to other brands.

According to the mythreecents.com, a site to share the consumer reviews, Abercrombie & Fitch’s only receives 1.9 per 5 due to many complaints about the customer service which due to the available of discount and clearance items as well as the uncertainty about their prices and package tracking. Therefore, the inventory management can impact directly to the customer service and the firm’s brand image.