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Abercrombie & Fitch slips into something more comfortable

Posted Feb 27th 2008 1:48PM by Jonathan BerrJonathan Berr RSS Feed
Filed under: Products and services, Abercrombie and Fitch (ANF), Limited Brands (LTD)

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Abercrombie & Fitch Co. (NYSE: ANF) recently opened Gilly Hicks, a provider of women's undergarments like no other.

"The shop, which contains upper-end lingerie, loungewear and intimate accessories, is modeled after a British manor, with columns at its doorways, dark wood paneling and close to a dozen rooms, such as a `bra library' featuring more than 40 styles," according to the Wall Street Journal (subscription required). The company plans to open as many as 15 other Gilly Hicks outlets this year, the paper said.

Abercrombie & Fitch continues to walk the fine line between sexy and soft core porn with Gilly Hicks. The promotional video for the chain on its Web features half-naked and at times totally naked models of both sexes cavorting on a beach in what appears to be Australia. Gilly Hicks, according to the company's marketing department, emigrated from England to Australia in 1932 and opened an underwear store in her family's British colonial-style manor house in Sydney.

This 40-year-old married guy from New Jersey isn't sure if the message of the commercial is that our underwear is so comfortable that you will run around in it in front of total strangers in the beach. Apparently, the models didn't get the message that prolonged exposure to the sun can damage your skin.

Gilly Hicks, which is the company's fifth chain, seems like a good fit with the rest of the company's businesses which are aimed at young people. Plus, the timing seems right as well. Shares of Limited Brands Inc. (NYSE: LTD), parent of Victoria's Secret, have been clobbered over the past year, tumbling more than 33%. December same store sales fell 8%, twice as much as expected. American Eagle Outfitters Inc. (NYSE: AEO) is counting on its Aerie brand of bras, underwear and robes to keep its sales from eroding further.

Shares of the New Albany, Ohio-based casual retailer have risen about 5% over the past year, a solid performance given the worries among investors about consumer spending. Earlier this month, Abercrombie & Fitch posted a decent 9.4% increase in fourth quarter profit on the performance of its Hollister Co. chain and its children's apparel business. Wall Street investors were disappointed with the company's guidance though one analyst is predicting that the stock could jump nearly $30 to $100. That means they will pay extra attention to the performance of the Gilly Hicks, something which they probably would have done anyway for reasons having nothing to do with finance.

Tags: AEO, Aerie, ANF, featured, Gilly Hicks, GillyHicks, Lingere, LTD, Victoria's Secret, Victoria'sSecret

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