Abercrombie & Fitch Takes Its Togs Abroad

After getting its first taste of Europe with a new store in London, Abercrombie & Fitch(ANF Quote) is looking to expand on the continent in a big way.

The Ohio-based teen retailer said Friday it has hired a New York commercial real estate company to scout sites in Italy, France, Germany, Spain, Denmark and Sweden for new stores. The expansion follows the March opening of the first Abercrombie & Fitch store in Europe, at Burlington Gardens in London.

"We have been evaluating the European markets for some time and it is clear that the demand for the Abercrombie & Fitch brand is very strong," said Mike Jeffries, Abercrombie's chief executive, in a statement. "We believe that now is the ideal time for us to execute our international growth strategy with expansion throughout Europe."

Christine Chen, an analyst for Needham & Co., says the time is right for the retailer to move overseas, since the Abercrombie & Fitch brand is reaching a point at which it may need to look elsewhere for growth. For the fiscal year to date, the company's same-store sales have slid 3%, brought down primarily by declines at the flagship brand in the U.S.

As of the end of June, the company operated 355 Abercrombie & Fitch stores, 182 abercrombie kids-clothing stores, 409 Hollisters and 17 Ruehl accessories stores. Besides the London store, the company operates six others outside of the U.S.: three Abercrombie & Fitch stores and three Hollisters in Canada.

Chen says the brand seems to have resonance in London and likely will translate well in other parts of Europe.

"Maybe Europeans hate our politics, but they still like our products," says Chen, who points to Nike (NKE Quote) as an example of an American brand that has flourished overseas.

Abercrombie also has plans to open a store in Tokyo by 2009.

Other retailers have tried their hand internationally, but with mixed results. Chen says Urban Outfitters(URBN Quote) may even be more popular in Europe than it is here. But Gap(GPS Quote) has had some difficulty. Its international same-store sales, or sales at stores open at least a year, fell by 3% in its most recent quarter.

Like many retailers, Gap now establishes stores overseas through franchise agreements with licensees in countries including Indonesia, Malaysia, Saudi Arabia and Turkey.

Franchise agreements are considered less risky than retailers' going out on their own to establish their name abroad because the agreements allow retailers to designate licensees that are more familiar with the turf, as well as with the competition.

The flip side is that a retailer may have to cede control over how its brand image is being presented. Chen says Abercrombie is intent on controlling its image, one reason why it may have decided to take on Europe by itself.