Abercombie and Fitch

Abercombie and Fitch are known for their high-end, preppy style clothes. They're like The Gap, with a bit of Billy Zabka-style 1980s teen trustfund kid thrown in. As such, they're a popular retailer for the suburban mall crowd.

When the economic slowdown occurred in summer 2008, Abercombie and Fitch decided to keep their prices high believing their customer base was sufficiently funded to keep moving product. Turned out they were wrong. Fourth quarter profits were down significantly, as were first quarter 2009 profits and revenues. The company's business model did not hold up as even upper-middle class white families from the suburbs saw their solvency effected by the worst fiscal crisis since the Great Depression.

Does this mean Abercombie and Fitch are going out of business? No, not likely. But they've had to adjust their business model accordingly. Gone are the artificially high prices of the past 15 years, bringing them more into line with the likes of The Gap and Old Navy, rather than the higher-end lines like Banana Republic and J. Crew with whom they used to compete.

This means, of course, that if you're the type who looks for labels when you shop, that it's a good time to head to Abercombie and Fitch to try to find some bargains. Depending on whether or not you're willing to wear last year's fashions (and really, is there any difference between last year's fashions and this year's when it comes to a label like Abercombie and Fitch? I mean, isn't the whole idea to look like everyone else all the time forever? It's all khakis, bermuda shorts and three-button shirst as far as I can tell. But I digress...), you can probably come up with an entire outfit for a fraction of the price you would have paid at the same store twelve short months ago.

More interesting are the longterm ramifications for the brand. Once a brand loses value, most business insiders say that it's gone permanently. Abercombie and Fitch didn't want to be thought of as an alternative to The Gap, which is why the board fought the price slashing move tooth and nail. Now that that it's there, however, can the brand's reputation ever recover enough in the public eye to have it become the choice clothier of the in crowd?

Only time will tell. For now, trust funds are low enough and taxes high enough to sap the bank accounts of all but the most stable of household incomes. Gone are the days of $90 shorts and $45 t-shirts, and they're probably not going to be long lamented. Maybe it'll usher in a new era of fiscal solvency that points to a more stable future for the country.

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