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Abercrombie & Fitch To Debut In Mexico Next Year

Abercrombie & Fitch To Debut In Mexico Next Year

Posted by Shanelle Weir on December 01, 2014

Specialty apparel retailer Abercrombie & Fitch, recently announced its entry into Mexico. In a press release earlier this month, the company stated that it has signed a franchise agreement with Grupo AXO to establish a retail network for Abercrombie & Fitch and Hollisterbrands in the country.  Founded in 1994, Grupo AXO has built a great reputation for developing brands in the Mexican apparel market. The first Hollister store is scheduled to open in late spring next year andAbercrombie & Fitch will make its debut in the summer. The company’s entry into Mexico will mark its debut in the Latin American region, which houses a couple of lucrative apparel markets. Abercrombie already has presence in North America, Europe, Asia, the Middle East and Australia. We believe that the company’s expansion in Mexico will position it better to compete against its domestic counterparts, Aeropostale and American Eagle Outfitters, and fast-fashion retailers such as Zara, Forever 21 and H&M.

Although Aeropostale and American Eagle Outfitters had entered Mexico even before Abercrombie announced its expansion, the retailer might not have to face significant competition, given that it already has a customer base in the country. Moreover, in addition to the country’s growing middle class and rising disposable incomes, it has young buyers that have become extremely conscious of international fashion trends, which bodes well for retailers such as Abercrombie. Even though the overall market size still remains small, it has grown steadily over the past and is likely to continue this way in the future. However, the current economic slump in the country can have a negative impact on the overall market growth. Nevertheless, given that Abercrombie will be starting from scratch, it shouldn’t have much trouble in gaining market share for the initial few years.

Our price estimate for Abercrombie & Fitch stands at $39, which is about 35% above the current market price.

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