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Abercrombie and Fitch Co. lost $26.7 million in the second quarter. This being the third straight quarter of double-digit sales declines, changes are afoot! Executives have finally realized the dissonance between the brands cost and its value. At last theyve decided to lower prices, try to sell clothes that people see a point in purchasing, and focus on their greatest strength: sexy 20-year-olds who enjoy riding horses naked through the woods. CEO Michael Jeffries says he learned something after Ruehl shuttered in June: We are young. We are sexy. We are controversial at times. Thats what we know how to do and thats the business that we own here and are comfortable that we can around the world.

The most dramatic price reductions will take effect next quarter and be most noticeable at Hollister and Abercrombie Kids. More than 270 leases are up for renewal in 2011, and the chain is likely to shut some Abercrombie & Fitch stores. Jeffries said the label wont open any more flagships in the U.S., but plans to accelerate the opening of international Hollister stores in 2010 and 2011. The Germans ought to have a greater appetite for scary dark techno caves during daylight hours than Americans do.