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Abercrombie & Fitch’s Rebranding Strategy Has Yet to Translate to Consistent Sales

The company finally has leadership in place. Next up: continuing to elevate marketing and upgrade stores.
Photo: Abercrombie & Fitch

Photo: Abercrombie & Fitch

Hello and welcome back to the ongoing Abercrombie & Fitch revival, where sales remained disappointing as the brand continues to reposition itself as an iconic American casual luxury brand for the 20+ consumer. On Tuesday, Abercrombie & Fitch, the company, reported that total comparable sales decreased by 4 percent in the three months ending July 30 to $783.2 million. Abercrombie & Fitch, the brand (including Abercrombie Kids), saw the steepest decline at 7 percent while Hollister fared better with a decline of 2 percent. The former clocked in net sales of $363.1 million while the latter reached $420.1 million. The company saw revenue growth in the last quarter of 2015 for the first time since 2012, but it hasn't held so far in 2016. 

A&F execs remained confident on Tuesday's webcast that the company's new strategy is laying a foundation for future success even though the results remain challenging on paper: the new design and marketing teams are in place, inventory is under control and the new product is strong in both quality and aesthetic. The goal is to not only change the product but also upgrade the in-store experience and communicate it all to the consumer through marketing efforts that align with the new branding. And that takes time. CFO Joanne Crevoiserat says the team expects comparable sales to be rough for the rest of the year, too, especially because of decreased traffic at flagship and tourist location stores. 

The good news is that, in the recent quarter, total direct-to-consumer net sales increased by 2 percent and sales on mobile devices increased by 60 percent. The new online shopping with in-store pickup service is proving popular. And the company's overall social media following increased by 30 percent. Meanwhile in Europe, Hollister's business perked up and the company has set a new wholesale partnership to reach more people: just last week, German e-tailer Zalando announced plans to sell all three brands in 15 European markets. A&F, the brand, is already sold online in the UK through ASOS. 

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But it wasn't all good news for Hollister, which is being differentiated from A&F as an iconic brand for the global teen consumer where "summer is not just a season but a state of mind," according to Fran Horowitz, President and CMO. Girls' tops were a problem this quarter as the brand relied too heavily on the "boho" trend before pivoting to spring's widely popular off-the-shoulder styles. Accessories and denim, especially the Epic Flex jeans, fared better. Women's tops were also a problem for A&F, the brand, where the women's business is stronger than men's and swim, dresses and accessories are the best-performing categories.

Redesigning stores is another major focus point for the company. So far this year, 32 stores have been remodeled and 20 more are due for an upgrade by the end of the year. Horowitz said a new A&F brand store prototype will be tested in early 2017. In the meantime, the company will continue to sharpen the brands' messaging through marketing like "The Blues" denim campaign released in July. 

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