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Saturday, February 5, 2011

The Land of Down Undies Gets a Makeover!

Future Gilly stores to be reduced in floor space. Where will it all fit?!? (image source)
The Company has always been riské when it comes to expidentures. The overvalue of the RUEHL concept and lack of profit (as the recession developed) ultimately lead to the closure of the iconic Greenwich Village-inspired brand. Not wanting history to be repeated, Abercrombie & Fitch will reduce gross square feet sales space on the Gilly Hicks brand to accomodate its present financial stand. A new prototype has been developed to accomodate the decision. The future stores will come out at around 5,000 square feet, and this does not affect plans up the road for further openings of Gilly Hicks locations in the United States.

The reduction on sales space is a 50% decrease from the 10,000 square feet of the original prototype developed for the brand when it opened in January 2008. Eric Cerny, who's manager of the Company's investor relations, commented to the Columbus Dispatch that "we're treating those [10,000sqft] stores as if they are 5,000 square feet, [but] unfortunately, we invested in them as if they were 10,000 square feet." Smaller, the new 5,000sqft store will allow for more expansion opportunities into lower tier malls and their opening will signify the ever-growing appeal of the GH brand to a greater consumer base in the US.

And while the Company and its fans keep faith in the GH brand, analysts have another view: "[Gilly Hicks] is possibly the absolute worst chain rollout from a profitability perspective in specialty-apparel history." (anonymous); and "despite modest improvement this year, calculations suggest the chain is still producing sub-$200 sales per square foot. Not good in Class A real estate." And they have a point. The brand was launched at one of the most inopportune moments in financial history. It is hard to still get the consumer to shop, and Gilly has been offering an awful lot of sales in an attempt to lure gals into its romanticized shops. Part of the reason why GH opened in London (November 2010) was to take advantage of the strong international consumer demand for A&F (a wave Gilly hopes to hang ten on)...

Guess we will have to wait and see how the new stores will look like, and, like always, The Sitch will keep you in the know!