A&F Ends The Lease Of Flagship Stores In Hongkong And Korea Ahead Of Schedule.

After releasing the disappointing three quarter report, the United States

Brand Abercrombie & Fitch (NYSE:ANF) decided to end its lease in Hongkong and Korea flagship store ahead of schedule.

A&F flagship store in Hongkong is located in the city of Beth street, four stories high, with an area of 2844 square meters.

Flagship store opened in 2012. It is the first store in A&F in China, and the lease is until 2019.

It plans to withdraw from central in advance in the second quarter of fiscal year 2017, and will compensate the owners 16 million dollars (about 110 million yuan) in the fourth quarter of this year.

The flagship store in central is now the last A&F store in Hongkong. Closing the flagship store means the fashionable fashion that has attracted many consumers' eyes with sexy muscle men.

Will temporarily bid farewell to the Hongkong market.

At the same time, the brand is also planning to withdraw from the Korean market in January.

The abdominal muscles and waistline were once A&F's marketing tools.

When the flagship store opened in Hongkong in 2012, A&F routinely invited half naked muscles from all over the world to shop to attract publicity.

The A&F flagship store has a monthly rent of HK $7 million (about 6 million 225 thousand yuan), two times that of the former tenant fashion brand "Shanghai".

Grand occasion of central shop opening

However, with the rapid competition in the fast fashion market, consumers' interest in the A&F market is gradually fading away.

In 2014, A&F decided to remodel its brand image and relocate its target consumers to young, relatively old and more powerful young workers. It also concealed the large size deer Logo, launched loose size T-shirts, brighten shop lights, and reduced the smell of spray in stores, trying to make the brand look mature.

But in the next few years, A&F's brand reform plan has been running around.

Mature consumers still feel that A&F is wearing clothes for college students and high school students, while the new generation of young consumers think that the elk is not cool at all. In the autumn of 2014, the Piper Jaffray in the investigation of consumer goods in the fall of A&F, A&F dropped the list of "favorite teenagers' favorite brands".

Even when the sale of goods was too long after the sale was discounted, the great crowds of people in business were never seen again.

In the 3 months ending October 29th this year, the parent company's sales volume of US $822 million (about 5 billion 670 million yuan) dropped 6.5%, compared with 15 consecutive quarters of sales decline.

The group said that the decline in its performance was mainly due to the poor management of its flagship brand A&F, and the net sales in the A&F period fell 13% to 358 million 300 thousand US dollars (about 2 billion 472 million yuan).

A&F did not publish the sales data of Hongkong market. The company said the closure was the result of a sustained strategic adjustment, with a view to maintaining sustained growth in the future.

This is not the first time the fashion brand flagship store has been evacuated from Hongkong.

Earlier this month, the US fast fashion brand Forever21 also announced that it would close the flagship store of 6 floors in Tongluowan JINGWAH center after the expiration of the tenancy agreement next year, and take the Victoria's Secret of the American underwear brand.

According to sources, the store rent will be reduced to HK $7 million per month (about 6 million 225 thousand yuan), which is more than 1/3 more than that of HK $11 million (about 9 million 783 thousand yuan) in the first month of 2011 Forever21.

Retail sales in Hongkong have been in the doldrums in recent years as the number of mainland tourists visiting Hong Kong continues to decline.

The statistics released by the Hongkong SAR Government on November 3rd showed that the estimated value of total retail sales in September this year was 33 billion 800 million yuan, down 4.1% from the same period last year, and the retail industry has been down 19 months.

In the first half of the year, total expenditure related to inbound tourism decreased by 14% from HK $166 billion 150 million per year to HK $143 billion 620 million.

In addition, the recent depreciation of the RMB exchange rate has further dampened the enthusiasm of mainland consumers to go shopping in Hong Kong.

On the other hand, the high rental of Hongkong's downtown also makes the brand owners complain incessantly.

A report by Cushman & Wakefield pointed out that Tongluowan, Hongkong, is the second most expensive commercial street in the world, with an average annual rent of $2878 per square foot (213 thousand and 680 yuan / square meter), second only to Fifth Avenue in New York, more than Champs Elysees's big street in Paris and New Bond Street in London.

In the past ten years, with the development of China's economy and the liberalization of free trade, Chinese tourists have become an important force in promoting Hongkong's retail industry.

A number of international brands have set up large volume brand flagship stores in the downtown areas like central and Tongluowan. The speed of expansion is very radical.

However, as the enthusiasm of tourism and shopping has subsided, high rent has obviously become the unbearable burden of business.

Including "Zhuo Yue" and "Sasa international" and other mainland tourists' "holy places for shopping" recently, they have closed the stores in the center of the city and opened more new stores in remote but inexpensive residential areas, hoping that local consumption in Hongkong can save their declining performance.

Zhuang Chunjie, a partner in Greater China in OC&C, an enterprise management consultancy, said that brands such as Abercrombie & Fitch and Forever21 facing young consumers need to reconsider whether it is necessary to maintain expensive brand flagship stores.

As young consumers are very familiar with e-commerce, for a well-known brand, the development of a lighter asset Internet channel will be a way to cut costs.

Compared with Forever21, which has already opened flagship stores on Tmall and other platforms, A&F still chooses to build its own e-commerce website, which seems to be a bit stubborn and ungrounded.

Instead of borrowing from Hongkong, A&F now wants to set up stores more directly in the mainland of China.

In April 2014, its first mainland store opened in Nanjing West Road, Shanghai.

The official website shows that there are 10 stores in mainland China, including 3 in Shanghai, Beijing, Tianjin, Chengdu, Nanjing, Qingdao, Kunming and Ningbo, each of which has a total of 3 stores in Abercrombie.

A&F said that 7 new stores will be opened in the fourth quarter, of which 2 are in the US and 5 in the mainland of China.