S E C T I O N S

Reuters

Abercrombie's Kiddie Thongs Provoke Anger
Reuters Company News
Wednesday May 22, 2002
By Jackie Sindrich

NEW YORK, May 22 (Reuters) - Abercrombie & Fitch Co. (NYSE:ANF - News) the youth-oriented clothing retailer accused of peddling a pornographic catalog and racist T-shirts in the past, is now stirring up controversy with another of its wares: thongs for kids.

The underwear -- a rearless style typically worn by adult women -- is decorated with pictures of cherries and sayings such as "wink wink" and "eye candy." The New Albany, Ohio-based chain said it has sold them since January at its 150-store "abercrombie" unit, which targets children ages 7 to 14.

Bill Johnson, president of the Christian nonprofit American Decency Association, called Abercrombie "financially desperate," with little regard for the "innocence of young girls, and I think it's really outrageous."

"It struck me as interesting that even though A&F is obviously very sensitive to racial discrimination, they have no problem backhanding decency," he told Reuters.

An Abercrombie spokesman disagreed.

"The underwear for young girls was created with the intention to be lighthearted and cute. Any misinterpretation of that is purely in the eye of the beholder," said Hampton Carney, an Abercrombie spokesman. He said the thongs are aimed at girls no younger than 10, since they come only in sizes medium to extra large.

Carney said the retailer has already sold out of most of the thongs, so it won't pull them from shelves, as it did with a line of Asian-caricatured shirts last month after protesters and boycotters called them racist. Carney said there are no plans to introduce more kids' thongs in stores.

But some said Abercrombie had gone too far and could possibly suffer further sales declines as a result.

"While the company does thrive on controversy, I think it's a poor strategic move to basically try to introduce some level of shock to the kid's segment," said Robin Murchison, an analyst for Hibernia Southcoast Capital.

Murchison said negative publicity over the retailer's racy quarterly catalog, which has attracted the ire of family advocacy and religious groups, may not have factored into its sagging sales at stores open at least a year and floundering stock price. But thongs for young girls could be the last straw for its upper-income customers, she said.

"Forget about drawing judgment from the Christian Coalition. It just doesn't make good business sense," Murchison said. "I think the target market parents are going to have a problem with it."

Founded in 1892, Abercrombie gained fame as a seller of camping, fishing and hunting gear, outfitting such clients as Ernest Hemingway and Teddy Roosevelt for safaris. The company went bankrupt in 1977, and was bought by Limited Brands Inc. (NYSE:LTD - News) before going public in 1996, selling college fraternity-inspired clothes.

On May 14, Abercrombie, which runs about 500 stores, posted a 13-percent rise in first-quarter profit and boosted its second-quarter forecast, bolstered by tight inventory and expense controls. But sales have largely stagnated over the past two years.

Its stock has also lost more than 35 percent over the past year. The shares slipped 2.9 percent, or 85 cents, to $28.36 in Wednesday on the New York Stock Exchange -- off from trading levels of $42 last May.

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