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Abercrombie Decides Not to Sell Itself, Shares Plunge 20%

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Abercrombie & Fitch

Abercrombie & Fitch won’t be selling itself after all, and the market isn’t happy about it.

On Monday, Abercrombie said in a statement that it has ended talks about a potential sale of its business, and the news sent shares sliding as much as 21 percent in early morning trading.

The troubled teen retailer had been weighing takeover bids, including one from Cerberus Capital Management and American Eagle Outfitters, and analysts had seen the move as potentially a wise one.

However, after “expressions of interest,” Abercrombie went to far as to start preliminary discussions about a possible transaction, but still decided to press on on its own.

“After a comprehensive review of all relevant factors, with the assistance of our financial advisor, the A&F board of directors determined that the best path to enhance value for our stockholders is the rigorous execution of our business plan,” Abercrombie board executive chairman Arthur Martinez said. “We believe in the prospects for our business and the opportunities for our brands.”

The company, Martinez continued, has generated “solid” comp store sales momentum at Hollister and are continuing to position Abercrombie for “revitalized performance.”

In first quarter results announced in May, Abercrombie & Fitch reported a net loss of $61.7 million, nearly double the $39.6 million loss in last year’s first quarter. Net sales decreased 11 percent at Abercrombie to $286.4 million, while sales at Hollister inched up 3 percent to $347.7 million. The company’s direct-to-consumer sales reached 27 percent of total sales, compared to 24 percent of total company net sales last year.

Teen retail hasn’t fared well in the face of fast fashion’s rise in recent years, and several stores have already fallen victim to the bankruptcy bug: Papaya, Rue 21, Wet Seal, Aeropostale—and the list is likely to go on.

[Read more about apparel store closures in teen retail and other categories: Infographic: Apparel Store Closures by Category]

But despite the bleak backdrop, Martinez seems to believe Hollister, and a turnaround, can get Abercrombie to where it needs to be. As part of those efforts to get back on track, the company said in May that it will open seven full-price stores this year, two new outlet stores and close 60 stores this fiscal year as leases expire.

“We are committed to taking sound, aggressive action to deliver enhanced performance and long-term stockholder value,” Martinez said.

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