The Chief Executive Officer of Abercrombie and Fitch, Mike Jeffries, made some comments concerning the company’s business model which have our friends on the left very, very upset:
By Sean Levinson \ May 3, 2013
Abercrombie & Fitch print ad
Anyone who’s been to Abercrombie & Fitch in the last few years has probably noticed that they don’t carry XL or XXL sizes of women’s clothing because they don’t want overweight women wearing their brand.
According to this popular teen clothing retailer, fat chicks will just never be a part of the “in” crowd.
They take a big risk with this tactic because two of Abercrombie’s biggest competitors, H&M and American Eagle, both offer XXL sizes for men and women.
The largest women’s pants available at Abercrombie are a size 10, while H&M goes up to 16 and American Eagle goes even farther to 18.
Abercrombie’s attitude towards plus-sized women derives from CEO Mike Jeffries. Robin Lewis, author of The New Rules of Retail, spoke to Business Insider about the kind of people Jeffries wants advertising his brand.
More at the link, and I will let you read Mr Jeffries’ comments there. But I will cite the last line in Mr Levinson’s article:
Is Mike Jeffries the worst CEO in the world? Here are the 13 most ridiculous things that Abercrombie’s CEO has ever said.
The reader will notice that Mr Levinson’s article is sourced from an interview given by Mr Jeffries in 2006, so it’s clear that Mr Jeffries’ business model for ANF should have had plenty of time to succeed or fail in the intervening years. Mr Jeffries felt the need to apologize for his 2006 remarks, because they were causing such controversy.
But is Mr Jeffries the worst CEO in the world? If you look at ANF’s profit margins
, he’s clearly one of the best! Their gross profit margin was a whopping 62.26% in the first quarter of 2013, which placed them in the 88th percentile overall, the 87th percentile in the consumer cyclical sector, and in the 95th percentile in apparel stores.
Mr Levinson wrote that ANF was taking “a big risk” with Mr Jeffries’ strategy, because two of their major competitors offer larger sizes. However, ANF is significantly outperforming AEO in profit margin; Mr Levinson’s statement, had it been accurate, should have been proven out by the two companies’ relative performance. That ANF has consistently outperformed AEO demonstrates that Mr Levinson’s statement was not realistic.
Mr Jeffries’ statements may have been impolitic, but the reaction to them by our friends on the left demonstrate a cold, hard fact: liberals simply don’t understand economics. The primary goal of any corporation is to make money for its shareholders, period. Their purpose is not to be nice guys, their purpose is not to please everybody, but simply to make money, and Abercrombie & Fitch makes money.
Nor do they understand very much about psychology. Mr Jeffries might have apologized, because he had to, for telling the truth about his business model, but, in calling for a boycott of Abercrombie & Fitch’s clothing, because they market only to the cool and the good-looking, they have placed a premium on ANF’s clothing: if you wear it, you have been defined, by a major American corporation, as cool and good looking. Does anyone (reasonably) think that won’t appeal directly to ANF’s target customers?
The Abercrombie story demonstrates what is wrong with liberal thinking when it comes to economics and to the real world: they feel that such things should just be wrong, but don’t really think things through. It did not take your Editor much time to look up ANF’s economic results, and Mr Levinson, and the other liberals who have been so utterly aghast at Mr Jeffries’ remarks, ought to have done so themselves. If they had, they’d have realized that whatever Mr Jeffries is doing with ANF, it has been a success. He might apologize for an impolitic statement, but there’s absolutely no reason for him to change a business plan which has been working and profitable for his shareholders.