Talks of teen brand sale fails

MERGERS and acquisitions for fashion retailers are like a crop top T-shirt: a risk best braved by a select few and avoided after a certain age.

Abercrombie & Fitch Co (ANF.N), the teen brand with a 125-year heritage, became the latest to demonstrate that on Monday, ending talks about a potential sale after failing to agree terms with potential suitors.

Successful deals in the mercurial world of US fashion are rare, and now look even less likely to succeed as sales dip across the board. Cost savings can be counterproductive if it means squeezing money out of marketing and design, and buyers are taking a risk on a style that can easily go out of favour.

As a result, established brands such as Abercrombie are having problems finding a saviour.

“Often, as well as spending the money to buy the brand or business, you then have to spend more to do something strategic that will propel growth, and that means paying out twice before getting a return,” said Neil Saunders, managing director of market research firm GlobalData Retail.

Five of the 20 companies involved in the biggest private equity apparel deals of the last decade have been restructured or gone bankrupt. All struggled under the debt load of a leveraged buyout.

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