Abercrombie and Hollister lead A&F path to recover
In this article (5)
Following on from a robust fourth quarter, Abercrombie & Fitch has continued its run of success with another solid set of sales numbers. Although growth has come off the back of soft prior year comparatives, the positive comparable sales numbers are an indication of momentum at both the Abercrombie and Hollister brands.
Under the leadership of Fran Horowitz and her team, the business now has a much clearer sense of direction and a strategy that is producing results.
Last quarter the Abercrombie brand delivered its first positive comparable sales number in five years, an advancement that has continued into this period with the division reporting a 3 per cent uplift. While this represents something of a bottoming out of sales declines, we also believe that Abercrombie is benefitting from the many improvements that have been made over the past year.
One of the biggest shifts at Abercrombie has been the change in tone of the business. It has moved from a brash brand to a somewhat confused brand to a brand with a much clearer and more focused identity.
While we would argue that this reinvention is still a work in progress, we think that the more authentic tone and the coalescing around an effortless American casual theme has paid dividends.
A key part of the reinvention has been a focus on the product. There are two things we particularly like here. The first is the more disciplined approach to merchandising, which has involved having fewer items in the assortment but making sure that the pieces stocked are a mix of staples and on-trend garments.
This has made the range much easier to shop. Alongside this, there have been significant improvements to quality and styling. Most of this is subtle and seen in small details like stitching, discrete monograms, or the design of buttons and zippers. The net effect is a range that is more mature and sophisticated, with many more ‘must have’ elements.
Although it has traditionally been a stronger business, Hollister has also benefited from a more focused approach. Its carefree casual position resonates with the target audience and this is helping to differentiate it and drive sales in a crowded marketplace.
“Across both brands, there are some impressive changes which are supporting sales growth.”
Across both brands, there are some impressive changes which are supporting sales growth. Marketing efforts are much more comprehensive, with social channels and influencers being used to gain attention.
Importantly, the company is now marketing where its customers are rather than just through traditional channels, using platforms like Snapchat and app-based games to create brand awareness and affinity.
Stores have also been an area of focus and we applaud the continued efforts to rightsize the chain.
Moreover, we remain impressed with the new store formats of both Abercrombie and Hollister. These represent an enormous shift in thinking and allow customers to see and experience the new face of the brands. Digital has not been neglected and we equally welcome changes made to the websites and the development of more omnichannel services.
Admittedly, all of this has added to costs, which contributed to this quarter’s loss. That said, the company is a lot less in the red than it was this time last year, which represents progress.
Abercrombie & Fitch’s work is not yet complete. The past couple of years were about stabilising and transforming the business, something we think has been achieved.
In the year ahead, the focus must be on accelerating growth.
Questions & Answers
Q.What specifically has changed in the Abercrombie brand's identity to help its recovery?
What specifically has changed in the Abercrombie brand's identity to help its recovery?
Abercrombie has shifted from a brash or confused brand to one with a clearer, more focused identity. This reinvention involves a more authentic tone and a coalescing around an effortless American casual theme.
Q.How have product strategies contributed to the improved sales at Abercrombie?
How have product strategies contributed to the improved sales at Abercrombie?
Abercrombie has adopted a more disciplined merchandising approach, stocking fewer items but ensuring a mix of staples and on-trend garments. Significant improvements to quality and styling, seen in small details, have also been made.
Q.In what ways has the company updated its marketing efforts to reach customers?
In what ways has the company updated its marketing efforts to reach customers?
Marketing is now more comprehensive, using social channels and influencers to gain attention. The company also uses platforms like Snapchat and app-based games, marketing where its customers are rather than through traditional channels.
Q.Did the company's efforts to improve its business impact its financial performance this quarter?
Did the company's efforts to improve its business impact its financial performance this quarter?
Yes, the improvements added to costs, which contributed to this quarter's loss. However, the company is significantly less in the red compared to the same period last year, indicating progress.