Hollister cutting prices, accelerating European expansion

Surf industry competitor Hollister is cutting prices in a major reversal for parent company Abercrombie & Fitch, which saw total company same-store sales fall 30 percent in the first quarter.

Hollister competes head-to-head at the mall with large action sports industry customers, most notably PacSun and Zumiez.

CEO Mike Jeffries repeatedly insisted the company would not discount clothing at the beginning of the recession. But sales at the company's three major chains - Hollister, Abercrombie & Fitch, Abercrombie - have plunged as a result.

In a conference call Friday, Jeffries said the company will now lower prices mostly at the surf-oriented Hollister and at its kids' chain, Abercrombie. He said the reductions will be "meaningful" but that the company will keep its initial markup and the quality intact. Jeffries said the company can accomplish this with more cost-effective sourcing. There will also be more lower opening price points at both Hollister and Abercrombie.

The reduced prices will be in stores in time for the back-to-school shopping season.

European expansion: Also of note for the surf industry, Hollister is focusing on its international expansion and executives raved about the chain's performance there. Jeffries said the future of the company is in international territories.

A Hollister store recently opened in a mall in South Hampton, UK. Jeffries said with no advertising or PR, there were lines out the door. On its opening day, the store did five times the volume of an average opening day in the U.S.

In 2009, the company will open seven stores in the UK, one in Germany and one in Italy. All the stores will be in malls instead of tourist locations.

The company plans to accelerate Hollister store openings in Europe for 2010 and 2011.

Fashion misses: The company had "major" fashion misses in the first quarter, most notably with a lack of dresses. The company also missed by not having more clothes with prints and patterns for juniors, Jeffries said.