Abercrombie & Fitch just scored its highest operating margin in over a decade with 2022 expected to show greater annual net store openings than closures for the first time since 2008.
On its fourth quarter call, Fran Horowitz, who replaced Mike Jeffries as CEO in 2017, said the improvement reflects “substantial foundational changes” outlined on its 2018 Investor Day, including:
Ms. Horowitz said Abercrombie shuttered 23 percent of its store base, including most large locations, since 2018 to reduce annual occupancy costs by 31 percent. Newer stores are 30-to-50 percent smaller than heritage locations “and better reflect the modern Abercrombie & Fitch to clean and open sight lines and improve functionality that supports the digital nature of our customer.”
Hollister’s updates likewise “open up and brighten the store front and interior.”
Stores have been designed to embrace localized preferences. Ms. Horowitz said, “We no longer take a one-size-fits-all approach.”
Abercrombie has worked to significantly upgrade the quality of the product with better fabrics, zippers and buttons. The mix now features more down-to-earth looks and refined basics, replacing the oversize logos and low-rise jeans of the past. Extended sizes have been added for a more inclusive approach.
Ms. Horowitz said, “We refined our design calendar, re-balanced our vendors and expanded countries of origin. This has enabled us to move quicker and further improve the quality of our product.”
From an engagement standpoint, “the most critical steps thus far have been clearly defining the purpose and competitive positioning of each brand,” said Ms. Horowitz.
Abercrombie, now repositioned around younger Millennials, has ditched its shirtless male model greeters, dimly-lit stores and sexualized marketing. Hollister is centered around Gen-Z.
Newer examples of engagement include Abercrombie’s rollout of a Best Dressed Guest franchise to take advantage of an expected record number of weddings this year, Hollister’s gaming partnership with Fortnite’s Bugha and the work both brands are doing with social influencers. Ms. Horowitz said, “With the DNA in positioning solidified for each of our brands, our marketing teams are authentically engaging with their respective customers on a channels that are most relevant to them.”
