How low can Abercrombie go? After a spate of bad publicity, the chain decides to drop prices

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On the heels of an embarrassing lawsuit over how the company mistreated an employee with a prosthetic arm, Abercrombie & Fitch announced same-store sales dropped 30 percent compared to the same period last year. And now the company is going to do what it once was too full of itself to do -- discount its prices.

Abercrombie has become a popular target from its provocative advertising to issues over the quality of its previously not discounted clothing (read about one woman's fight over problems with their Hollister line) to how it treats employees.

The company crowed in victory in the aftermath of the lawsuit filed in London by Riam Dean -- even though the company was ordered to pay her $15,000 for injury to her feelings -- because the court found Abercrombie didn't discriminate against her. And then Abercrombie announced that some of its best friends are disabled.

"We were happy to employ Ms. Dean, and we have always been, and will continue to be, supportive of the rights of disabled individuals."Abercrombie said in a statement.

Dean, 22, who was born without a left forearm, briefly worked in Abercrombie's flagship London store and wore a cardigan to cover where her prosthetic arm connected to her body. She was told by a manager her clothing violated the store's "look policy" and was shifted to the stock room.

The law school student quit after five shifts and filed a discrimination claim. Abercrombie, which has a handbook thick full of rules about employee appearance, is seen by many as trying to sell its clothing through a not-very-disguised use of sexual overtones. And Dean's prosthetic arm was viewed as a turn-off. An employment panel that heard her case determined she was harassed, insulted and unlawfully dismissed, but did not find she was discriminated against.

Meanwhile, the company hasn't exactly been having its best run.

"We continued to be confronted with very challenging conditions during the second quarter," CEO Mike Jeffries said. in a written statement. "We believe we are doing the right things to address those challenges and improve our domestic business. In the meantime, we remain very encouraged by our prospects for international growth."

In those words and in the company's earnings report is a clear message: It's time to try to grow our business in other countries. Perhaps their reputation is better in certain parts of Europe. It would seems as though they might have some issues in London.

The CEO also told analysts during a conference call on earnings that it is going to offer discounts and will continue to examine its pricing. Seems like they might be a little late, having already lost a lot of customer loyalty in the U.S. Buying folks back with cheaper prices is worth a shot, though.

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