• Business Week, Tuesday, November 24, 2009 10:43 AM

Abercrombie & Fitch CEO Michael S. Jeffries swore he'd avoid the retail discount wars after spending 17 years building his brand into a paragon of high-end preppy coolness, Matthew Boyle reports. But when same store sales plunged for the eighth consecutive quarter -- this time by 39% -- this month, he decided it might be time to step into the fray. High prices, it seems, drive teens away.

While they were departing, A&F also lost some of its fashion mojo, some analysts feel. "Fashion changed in the teen space" to more detailed, dressy items, says Lisa M. Walters, a principal at Retail Eye Partners, "and [A&F] didn't change their fashions."

In any event, Jeffries is marking down items such as jeans and outerwear by 30% to 40% and plans to add lower-priced clothing, especially at its surfer-themed Hollister outlets. He has also added trendier dresses and tops.

It's not all retrenchment; the company is expanding aggressively overseas. But it has got a job ahead of it domestically. Says consultant Robin Lewis: "Once you lose your brand loyalists -- and you have to do a lot to piss them off -- you don't get them back."

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