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Abercrombie's (ANF) New Concept Store Goes to Hong Kong

Abercrombie & Fitch Co ANF continues to focus on improving its business. One of the company’s core initiatives is to expand international operations to revive growth. The company’s aim on international expansion came to limelight with the announcement of launching a new store concept in Hong Kong by the end of 2017. To facilitate this, Abercrombie has signed a deal with Wharf Holdings.

Abercrombie plans to open this new concept store at Harbour City, one of Wharf’s flagship properties that provide avenues for shopping, dining, entertainment, sightseeing and features many leading brands. A footfall of over 80 million per year makes Harbour City an ideal location for the new A&F store. Further, the mall is one of the largest in Hong Kong.

The new A&F store is the company’s second concept store opening this year. The company opened its first prototype outlet in Columbus, Ohio, in Feb 2017. The idea behind these new concept stores is to facilitate better customer engagement and productivity on a smaller footprint. Aptly, the new Hong Kong store will be spread across nearly 6,800 square feet when compared with Abercrombie’s traditional large size stores.

Further, the Hong Kong store is among the seven latest concept outlets planned for 2017. The company expects to open five other prototype stores this year at Somerset North (Michigan), Lenox Square (Georgia), Tysons Corner (Virginia), Fashion Square (Arizona) and Century City (California). Among these, four stores will open after the downsizing of an existing outlet. Opening of these stores will be scheduled for July-August. 

These new concept stores provide modern amenities which are aimed to provide the best customer experience while highlighting A&F’s new collections and brand positioning. These stores feature omni-channel capabilities and innovative fitting rooms, designed to include separate controls for light and music, along with phone charging points.

Additionally, there are special fitting rooms with two individual capsules within a large private suite, which will enable customers to share new looks with friends or family, while maintaining privacy. The concept store will also enable quicker checkouts with cash wraps placed throughout the floor space. Further, assistance from store personnel comes handy while placing orders and in-store takeaways to enhance experience.

This store concept looks promising, especially as the company continues to face soft footfall. Abercrombie remains focused on reviving brands, enhancing performance and returning to profitable growth. Consequently, the company has been implementing several steps to spur its business forward. These initiatives include improving team leadership and organizational structure.

Optimizing store fleet by introducing outlets in high-performing markets while closing the underperforming ones and remodeling and improving assortments to meet changing trends and demands are some of the company’s objectives as well. Further, it is developing omni-channel capacities and focusing on key merchandise and design processes.

These initiatives have helped the company’s shares outperform the Zacks categorized Retail – Apparel/Shoe industry in the past six months. The stock has witnessed 4% growth while the industry fell 20.1%. The company currently carries a Zacks Rank #3 (Hold) and depicts a long-term growth rate of 14%, indicating its inherent strength.

Other Key Picks

Investors can also consider better-ranked stocks in the Retail space including Big 5 Sporting Goods Corporation BGFV and The Children's Place, Inc. PLCE, each sporting a Zacks Rank #1( Strong Buy). Also, Best Buy Co., Inc. BBY, which carries a Zacks Rank #2 (Buy), can be a lucrative investment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Big 5 Sporting delivered an average positive earnings surprise of 94.5% for the trailing four quarters and has a long-term earnings growth rate of 9%.

The Children's Place delivered an average positive earnings surprise of 36.6% for the trailing four quarters and has a long-term earnings growth rate of 8%.

Best Buy delivered an average positive earnings surprise of 33.8% in the trailing four quarters and has a long-term earnings growth rate of 11.8%.

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