Like just about every retail chain that launched more than five years ago, Abercrombie & Fitch has been in turnaround mode for the past few years, working tirelessly to reconfigure its retail and product strategies to compete with fast-fashion brands and capture the limited attention spans of young consumers who live on their phones.
Fiscal 2018 was apparently the first full year of what CEO Fran Horowitz called "our transforming while growing phase" during a conference call Wednesday morning to present the results of the company's full-year and fourth-quarter earnings. A big part of that phase has been getting its whole retail situation (including Abercrombie & Fitch and Hollister brands) into better shape through efforts like improving omnichannel capabilities and "optimizing the store network" which basically means revamping the stores it thinks could perform better, and evaluating which stores should simply close. In 2018, the company closed 29 stores and in 2019 it will close up to 40 more.
In today's retail climate, it's not exactly surprising. Gap closing 230 stores and Victoria's Secret closing more than 50 are among the many retail-apocalyptic headlines we've read or written in just the past month. Over the past eight years, Abercrombie & Fitch has actually closed 475 locations. Still, Horowitz emphasized that the company has not lost faith in brick-and-mortar. "We are one of the specialty retailers still committed to investing in physical space," she said. In fiscal 2019, the company plans on delivering approximately 85 new experiences (including remodels), including 40 new stores; so while overall store count may remain the same, square footage will be reduced.
While brick-and-mortar may need some revamping, the retailer hit a milestone for its online business, reaching $1 billion in annual digital sales across its brands with the majority coming from mobile. Thanks largely to that e-commerce strength, overall comparable sales were up 3 percent for both the fourth quarter and the year, marking the company's sixth consecutive quarter and second consecutive full year of positive comparable sales. By brand, Hollister did a bit better, with 6-percent growth in comparable sales, whereas A&F saw a 2-percent decline. Horowitz blamed this on weakness in women's dresses and tops.
In addition to designing cuter dresses and tops, the company's plans for this year include lots of store remodels and further expansion into Europe. But it still only expects comparable sales to be up in the low-single digits for fiscal 2019. Turnarounds take time and, in this landscape, any growth is a good sign.