A label that fell out of fashion in the 2000s has become one of the strongest performers in the stock market in the USA.
Sarah Freedman, who started shopping at Abercrombie & Fitch in 2007 at the age of 12, turned away from the brand during her high school years. But now, at 30 years old and size 16, she has found her way back to Abercrombie thanks to social media and influencers. "I tell everyone to shop at Abercrombie," says Freedman.
Freedman's enthusiasm explains how Abercrombie, once a star of the early 2000s, managed a rare comeback in retail. Last year, the company became one of the strongest performers on the US stock market, with stock prices surpassing even those of Nvidia.
This is a completely new business," said Corey Tarlowe, an analyst at Jefferies. "What we are seeing now are the fruits of years of work to reinvent this brand.
The retailer that was once proud to be an exclusive brand for "cool and popular kids" has completely changed its strategy under the leadership of CEO Fran Horowitz since 2014. Today, Abercrombie targets Millennial and Gen-Z customers of various sizes, offering stylish clothing for work, home, and even weddings. Hollister, the second brand, is aimed at today's teenagers.
We have inspected every piece of this business," CFO Scott Lipesky told the Financial Times. "We have completely transformed every aspect of the company.
Abercrombie expects an annual net sales growth of 10 percent this year, making it an outlier among its competitors. Last year, sales grew by 16 percent, while other clothing retailers reported a slowdown in spending.
Analysts expect Abercrombie to maintain its momentum this year, even if consumers cut back on spending. This is due not only to trendy and well-fitting products but also to a smart inventory strategy that has maximized the company's regained popularity.
Abercrombie and their retailers have anticipated and responded to consumer trends," said Greg Portell, a partner at the consulting firm Kearney. "Many retailers gather consumer insights, but implementing these insights on a large scale remains the biggest challenge.
Jessica Ramirez, analyst at JHA, emphasized that Abercrombie now offers more tailored and "core" items, making the company less dependent on seasonal products.
Abercrombie has managed its inventory more strictly since the pandemic-related closures in 2020. The company quickly realized that it could operate more productively with less inventory by working with suppliers to quickly respond to well-selling styles.
The customer is moving faster than ever before, the industry is moving faster than ever before, and therefore the inventory process must also be more agile and flexible than ever before," said Lipesky.
Abercrombie recorded fewer discounts in the first quarter, increasing the gross profit margin from 61 percent in the previous year to 66.4 percent. In comparison, competitors Aritzia and American Eagle Outfitters reported gross profit margins of 38.3 percent and 40.6 percent, respectively, for the quarter.
Better-Fitting Items Have Attracted More Than Just Plus-Size Customers. Sabrina Ramkhelawan, 30, said that despite being a size 0 in the US, she had difficulty finding well-fitting clothing, but Abercrombie has been her preferred clothing retailer since 2021.
Joey Yu, 24, started shopping at Abercrombie again last year after noticing that the brand was selling fashionable styles at reasonable prices. "Abercrombie strikes a good balance between trend and style, as well as quality and comfort," he said.
Despite ongoing inflation, Abercrombie was able to introduce higher-priced products that were well received by consumers. "We are selling clothes at prices we haven't seen in the past, but we have earned the right to sell them to our customers," said Lipesky.
After reestablishing itself in the domestic market, Abercrombie now plans to expand abroad. Business in Europe and Asia accounted for less than 20 percent of net sales in the first quarter, but grew faster than the US business. Teams in Shanghai and London are expected to 'localize' the assortments, Lipesky said.
The company is in a very good position to grow globally," he said. "That's our next step.
