In the past few years, Abercrombie & Fitch has been just one of a handful of once-premier teen retailers looking to reestablish itself for the Generation Z age. The former stalwart began its transformation campaign in earnest in 2015, installing a new CEO and creative team, removing its shirtless in-store models and, eventually, debuting actually-very-chic clothing.
But now, following quarter-after-quarter of reported sales losses (and with dips some as steep as a 13 percent), A&F is finally on the up and up. On Friday, Abercrombie & Fitch Co. (A&F's parent company which includes Hollister) reported that its overall net sales were up 5 percent to $859.1 million in its third quarter, or the three months ending Oct. 28. Meanwhile, Hollister itself saw a 10-percent boost, which, as we've seen, is admittedly quite impressive for any mall-based retailer in 2017.
What's interesting about A&F's recent development, though, is from where a sizable chunk of that sales boost came. Direct-to-consumer sales grew to roughly 24 percent of total company net sales for the period, by nature aligning the company with those buzzier direct-to-consumer brands — Everlane, The Arrivals, Reformation — we report on all the time. (Since at least 2015, A&F has pursued wholesale partnerships with retailers like ASOS; meanwhile, its infamous Fierce fragrance has been carried at Sephora and other beauty stores via a relationship with Inter Parfums.) Could treating the brand like it's much smaller and operating from scratch soon become A&F's not-so-secret, often-proven-effective-for-many-fledgling-retailers weapon?
"We continue to execute on our strategic plan, and we are positioned to compete in what we expect to be a challenging and promotional fourth quarter," said CEO Fran Horowitz in a statement. "We maintain our focus on driving operating expense leverage, while also making strategic investments in marketing and omnichannel to meet our customers' needs whenever, wherever and however they choose to engage with our brands."
It wasn't all a walk in the park, however: Stores and distribution expenses came in at $375.9 million, down from $386.6 million last year, which the company attributes to "volume-related expenses" from higher sales and changes in foreign currency exchange rates. Its marketing spend went up for the third quarter, too, going from $105.3 million to $124.5 million in the same period year-over-year. But, that nearly $20-million increase falls into the whole spend-money-to-make-money practice — which seems to be working out for them, doesn't it?
We knew it was going to be a slow hike for A&F to climb out of the hole into which it had landed over all these years, but it looks like they're nearing the top now. Will its fourth quarter be what puts it over the edge? Watch this space.