Can Abercrombie And Fitch Make A Comeback?

Abercrombie & Fitch you might remember the clothing brand from the pounding techno music and the smell of Cologne that would hit you as you entered its stores after walking by the half-naked models who sometimes guarded its doors it's where teens in the early 2000s would shop to get the trendiest flannels T's and jeans all while feeling like they went clubbing with their parents Abercrombie and its sister brand Hollister consistently ranked as one of the most popular stores for teens in the early 2000s and the bare-chested models featured in Abercrombie's advertisements defined the brand but that hyper sexualization is also what led to its fall from grace I think we're all tired of the scantily clad teen ads you know what well I'm tired of it I don't know about you you know the RIP David and I are struggling I'm back I don't want to buy a rip - you know this is if I want a six-pack sip it the heck with it I'm buying a Coors Light for a period of time the company's PR troubles piled up it was hit with employee discrimination lawsuits and it's former CEO made headlines after fat-shaming comments made in 2006 resurfaced years later suggesting the company only targeted cool attractive people after its controversial CEO retired in 2014 the Abercrombie brand began repositioning itself hoping to wipe the slate clean of its past Hollister which has been the company's cash cow for a decade is focused on teens while Abercrombie targets shoppers over 18 as of October 2019 and F's stock has shot up 26 percent since CEO Fran Horowitz took over in February 2017 but it has also fallen around 28 percent since January 2019 as investors worried that sales at its faster-growing Hollister brand are slowing down Fran Horowitz laid out a four pillar vision for the company in a 20-18 her plan includes redesigned stores that are more open a more responsive supply chain and a seamless shopping experience online and off if you haven't been paying attention the company might be unrecognizable but that prompts the question our investors ready to buy in to the transformation Abercrombie & Fitch didn't always make its money from selling trendy clothes to teens the company actually got its start in 1892 as an outdoor specialty goods store it sold camping fishing and hunting gear and its clothes were sported by the likes of presidents Theodore Roosevelt and John F Kennedy as well as Amelia Earhart in a prior incarnation Abercrombie was the opposite of a teen retailer they actually did things like outfitted people going on safari and then they expanded and you could do things goodbye like crow cases and really expensive backyard grills so it was the opposite of teens it was mostly sort of pretty well-off people doing luxury kind of stuff things changed in 1988 the limited which also owned Victoria's Secret at the time took an interest in the Outdoor Retailer the company saw huge potential for growth so it took over Abercrombie's brand and 27 stores for 47 million dollars and started selling more fashion oriented and casual apparel instead of sporting goods but the rebrand didn't take in 1992 Mike Jeffries was hired as CEO with a vision for the company that completely turned it around analysts say he aimed the brand at high school and college aged students with a sharp eye for designing exactly the types of pricey skirts jeans and dresses that became must-haves for kids who wanted to be cool he was outrageous and he did outrageous things I mean he turned Abercrombie from being sort of an old stuffy really boring company into a brand that got a lot of his ability a lot of publicity by being outrageous and basically he sold sex to teenagers and that's an easy sell Geoffrey's plan worked the company's revenue jumped year after year hitting 166 million in 1994 235 million in 95 and 335 million in 96 the turnaround was so successful that the limited spun Abercrombie off as a public company in 1996 the retailer sold 7 million shares in its opening day for 112 million dollars or $16 per share anf became a fully independent company in 1998 after the limited distributed all of its stake in the company by 2000 Abercrombie and Fitch owned multiple brands Abercrombie kids Hollister and its namesake brand Abercrombie & Fitch which by fall 2001 had become the most popular brand among upper income teens a claim it would hold until spring 2005 when it was lapped by sister brand Hollister which held the top spot until 2008 its annual earnings increased for 12 consecutive years between 1995 and 2007 in its heyday it was really funny and its heyday it was almost boring to see so many of them wearing the same stuff the company's growth seemed unstoppable but behind the numbers the Abercrombie brand reputation was already beginning to erode Jeffries lofty goal of getting Abercrombie to be synonymous with cool had led to some pitfalls in 2002 the company came under fire for selling a t-shirt featuring two Asian caricatures with the words two Wong's can make it white it also found itself in hot water after selling thong underwear in children's with the words eye candy and wink wink in 2003 the company was hit with a class-action lawsuit from employees who said that black Asian and Latino people were rejected or forced to work in backrooms where they wouldn't be seen by customers that same year Abercrombie also stopped regular publication of its catalog called ANF quarterly which included racy photos of nude models and articles about sex controversies actually for a while helped them because that makes them a little bit counterculture so you know when you're a teen you're feeling rebellious and you know authority nobody tells me what time to go to bed nobody tells me anything so I think they actively courted controversy it was credibility with teens that they couldn't buy but consumers were changing in 2013 comments from a 2006 Salon interview with CEO Mike Jeffries resurfaced in it he said the company only goes after cool attractive and all-american kids he openly admitted that the company was exclusionary and that other companies that were in trouble were the ones who were trying to target everybody young old fat skinny resulting in an image that is totally vanilla he also said Abercrombie hires good-looking people in their stores since they attract other good-looking people at the time Jeffries issued an apology in a Facebook post on the company's page he said quote while I believe this seven-year-old resurrected quote has been taken out of context I sincerely regret that my choice of words was interpreted in a manner that has caused offense the post can no longer be found on its Facebook page that perception came back to haunt ANF in 2015 after the Supreme Court ruled against the company for denying a Muslim woman a job because she wore a headscarf this slew of controversies coincided with a loss of interest in the brand Abercrombie & Fitch fell to the fourth most popular brand among upper income teens in the spring of 2006 sixth in 2009 and floated around 10th between 2010 and 2014 falling off the charts soon after by the end of 2013 the company had closed at least 220 stores since 2010 and announced that another 120 to 130 would shudder within two years as part of its strategy to make the stores more profitable after Jeffrey's comments recirculated in May 2013 same store sales dropped by double-digit percentages for the next few quarters with the exception of one quarter in 2015 they continued to stay negative until the third quarter of 2017 meanwhile the Hollister brand only became more popular in the fourth quarter of 2007 Hollister eclipsed the Abercrombie brand for the first time in terms of sales the pervasive sexual marketing which lasted until 2015 and the company's history of targeting skinny and attractive people did not play well with consumers who were beginning to prefer brands that promoted inclusivity today's young customer is used to diversity inclusion in terms of gender in terms of race ethnicity religion size sexuality they're used to that and it's something that baby boomers who run these companies need to quickly understand Abercrombie eased back on the large logos from its clothing in North America stores in 2014 it's a move the company says was motivated by the fact that logos fell out of fashion in the US at the time but analysts tell CNBC it might have had more to do with the fact that a and F logos turned off consumers who didn't want to be associated with the brand after years of controversy when the logo gets to be that big it's like oh the brand is trying too hard to be cool and I'm trying too hard to be cool hey everybody look at me I now have bought an A&M shirt well at that point it's pretty much the beginning of the end it also didn't help that malls seeing falling foot traffic amid the rise of e-commerce between 2010 and 2013 foot traffic in malls plunged by 50% in 2017 analysts estimated that between 20 to 25 percent of American malls will close by 2022 the retail landscape was changing of course fashion trends come and go and retailers need to adapt between 2013 and 2017 experts say the company was also struggling to compete with an emerging fast fashion industry which offered clothes that were just as trendy for half the price it's a lot tougher because you have companies like H&M and Zara and forever21 who focus on fast fashion and that's really where jimsy and millenials shop in terms of their preferences of where they use their share of wallet but fast fashion has faced its own struggles in recent years customers have grown concerned with the environmental impact of producing clothes so cheaply and quickly forever21 filed for bankruptcy in September 2019 around 2013 as ANF sales declined competitors like American Eagle were rolling out campaigns that seemed the antithesis to what Abercrombie stood for in early 2014 American Eagles intimates line airy launched a campaign featuring models of all sizes in unretouched photos American is smart to run a campaign that celebrates this that keeps the customer very loyal because what you're saying to the customer is I value you and I value your relationship with our brand and that's smart messaging American Eagle was among the retailers early to the trend but others later embraced inclusivity as well including a and F in a 2015 ad campaign featuring diverse models and later in its 2018 gender neutral Abercrombie kids line called the everybody collection in late 2013 a group of activist investors wrote a letter to Abercrombies board asking them to replace Jefferies as the CEO once his contract expired in 20 tene the same man who once pioneered and transformed the company was now seen by some as driving it to the ground by December 2014 Jefferies retired from the company just a few months after he left in April 2015 the company announced that Abercrombie would move away from its usual sexualized marketing tactics signage and shopping bags were redesigned and it brought in Neelam Gill a British supermodel of Indian descent to become the face of the brand in November 2015 then it literally wiped the slate by removing every picture from its Instagram account in 2016 shirtless men were notably missing repositioning a brand and moving a brand forward is not always easy so candidly we've had a few starts and stops on our journey with the Abercrombie adult brand we knew where we wanted to go but we had some things to learn along the way the purpose of that campaign was to say we are no longer the company that we used to be that we could wipe clean our social channels wiped clean the history and really think about forward meanwhile around the time that Jeffries tenure was coming to a close at a and F Fran horowitz's was just beginning she joined the company in October 2014 as president of the Hollister brand then moved on to be a and F's president and a head of the company merchandising before being named CEO in February 2017 by 2017 the company was at an inflection point sales were turning around q3 2017 was the first time since the fourth quarter of 2012 that the company's sales grew year-over-year it reported 859 point 1 million dollars in revenue on more than 4% boost from the year ago quarter Hollister its largest brand by sales grew 10 percent in April 2018 para wits met with investors to lay out her vision to improve the company first since so many customers shop online it prioritized efforts to make shopping seamless whether customers chose to shop in its stores or browse the website since 2010 it is invested about half a billion dollars in its digital infrastructure by 2018 it reached 1 billion dollars in digital sales representing more than 30 percent of its total sales for the year the company said experiences such as its purchase online pick up in store function drove 1.5 million store visits in 2017 and it added Ben Moe as a payment option for shoppers it's also investing in prototype stores that are smaller with an open floor plan which the company says is a better fit for customer needs to do that it's closing underperforming stores shuttering more than 400 in the past several years our stores were very dark they were unapproachable today our stores have lights on we've opened up the aisle way people talk about the retail apocalypse from our perspective stores matter half of all Hollister stores and 10% of Abercrombie stores have been remodeled in its new format by opening new stores and closing others Abercrombie says it expects to end fiscal 2019 with more stores than in 2018 but less square footage overall another goal is to respond more quickly to fast changing fashion trends by making its supply chain more nimble in April 2018 Hollister's president said for example that when designers noticed an emerging trend in rose themed graphics it was able to rapidly put those products into stores which customers loved the company says loyalty programs are also key to its future in September 2019 the company had 30 million loyalty members up from 14 million in April the year prior these customers tend to shop more and spend more another big goal reinforcing the differences between its brands although the company bears the name Abercrombie & Fitch Hollister has been the biggest growth engine for the company so an opportunity to really separate the target demographic for Hollister as being that Gen Z 17-year old and then moving abacrombie into what we references the young Millennials in their early to mid-20s it's also building up Gilly Hicks which sells intimates and loungewear in 2019 it opened for pop-up shops to join to existing stores in Hawaii and New York the brand is also sold within Hollister stores and online there are signs that consumers are responding well to the changes I think today the consumer sentiment is increasing when I first got here actually both brands had negative consumer sentiment we have watched the negative go positive and then we've watched it increase from that point of view we are not necessarily at power level yet today with our competition but we believe that we are on track and we are improving and we're heading in the right direction in surveys Hollister's popularity among teens has been steadily rising and it was ranked fourth among all clothing brands as a fall 2019 in the first quarter of 2019 Hollister reported same store sales growth of 2% marking its tenth consecutive positive quarter but that still missed analysts expectations of 3.3 percent growth sparking a sell-off of ANF shares on fears that momentum at its crown jewel was slowing in the second quarter of 2019 same store sales at both brands were flat we are a very different company than we used to be we are a much more inclusive company we are closer to the customer responding to what the customer wants and not what we want them to want our Hollister marketing has changed 180 degrees when I first got here you would see an individual photo in jeans and a white t-shirt today our marketing is bright it's colorful it's happy it's kids together it's friendship it's optimism the 2019 holiday season may prove to be a pivotal point for the company if sales at Hollister continue to fall below expectations investors might double down on the belief that the brand is losing steam if sales accelerate however that may indicate Horowitz's initiatives are winning over shoppers who decided to give the retailer another chance

Channel: CNBC

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Rating: 4.8225427 out of 5

Keywords: CNBC, business, news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, Stock market news, stocks, abercrombie and fitch, what happened to abercrombie and fitch, the rise and fall of abercrombie and fitch, 8 Secrets Abercrombie & Fitch Employees Won’t Tell You

Id: q-EMD0C8hYQ

Length: 19min 24sec (1164 seconds)

Published: Tue Oct 15 2019