Abercrombie & Fitch is planning to roll out a new chain store division in 2005 (dubbed internally as "Concept Four"), adding to its current chains for the popular A&F and Hollister product lines. The apparel company has nearly reached its maximum 400 stores planned for the A&F brand, while the Hollister chain launched in 2000 is only at 192 units out of a potential 800 stores.

Several reasons have been cited for A&F's strategically positioned new division. The core A&F brand has been hampered by products that are high-priced, imagery that became overtly sexual and offensive to prospective customers, and increased competition offering an overabundance of casual sportswear.

While the company's Hollister brand has overshadowed A&F as of late, and is said to be cannibalizing sales from its sister A&F division, analysts are not deeply troubled by the company's performance or future. The Hollister brand--which caters to 14- to 17-year-olds rather than the 18- to 22-year-old set that A&F division targets--is seen to be the engine of growth for the near term. The company's new chain store division is currently being test marketed and is expected to drive revenue growth beyond 2005.

(September, 2004)