Abercrombie & Fitch Shares Plunge After Termination Of Takeover Talks

Abercrombie & Fitch (NYSE:ANF) has announced that it has terminated talks over a potential sale of the business. In a press release, Abercrombie chairman Arthur Martinez said that the retailer “determined that the best path to enhance value for stockholders is the rigorous execution of our business plan.” Investors seem to disagree.

Shares of the U.S. teen apparel maker plunged 21 percent after the announcement, reaching their lowest levels since mid-2000. Year to date, the stock is down 19 percent, but is now down almost 90 percent from the all-time highs it hit in 2007. Abercrombie currently has a market value of $650 million.

It was only two months ago that the company had put itself on the shopping block. In May, the company reported that it was in talks with several bidders regarding a potential sale. A day before that announcement, Reuters reported that Abercrombie was working with an investment bank to field takeover interest from other retailers.

People familiar with the matter said that private equity firm Sycamore Partners came closest to acquiring Abercrombie. Unfortunately, Sycamore could not meet the company’s valuation expectations. Sycamore agreed to the biggest deal in the firm’s history two weeks ago, acquiring U.S. office supplies chain Staples for $6.9 billion. American Eagle had also reportedly sought to make a deal for Abercrombie through a partnership with private equity firm Cerberus Capital Management LP.

New Albany, Ohio-based Abercrombie has been hit hard as shoppers avoid heavy branding in favor of a more independent and unique style. Teen retailers have seen their primary customers abandon malls in favor of fast-fashion chains like Zara, H&M and Uniqlo. Another source of competition is Walmart, which has recently acquired several trendy online fashion retailers. Teen-focused companies Aeropostale, Wet Seal, and BCBG Max Azria Group have all filed for bankruptcy over the past two years.

Abercrombie has attempted to reinvent itself, but its surf-wear brand Hollister has remained the one bright spot of growth for the company. Its Hollister brand had a 3 percent same-store sales increase in its recent first quarter, compared with a 10 percent plunge the retailer’s name-sake brand in the same period. The retailer saw its total same-store sales drop 3 percent during the period and its eponymous brand has reported falling quarterly sales since 2014. Martinez said that there are strategies in place to revitalize the core brand.

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