Topline
Abercrombie & Fitch, the iconic fashion brand that dominated the Y2K era, reported record-breaking first-quarter earnings Wednesday, signaling a successful turnaround as young millennials turned back to the nostalgic brand’s inclusive revamp—with shares growing over fivefold, outpacing Nvidia over the past year.
Abercrombie & Fitch continues its winning streak as young millennials turn back to the nostalgic … [+]
Key Facts
Abercrombie & Fitch reported a 22% annual increase in first-quarter sales topping $1 billion—the “highest first-quarter net sales in company history”—following last year’s 16% revenue growth.
Shares surged more than 20% Wednesday after the earnings announcement, extending to a 459% gain over the past year as of Friday afternoon—outperforming Nvidia’s 187% stock growth in the same period.
The company increased its full-year outlook on net sales growth to around 10%, up from the previous forecast of 4-6%.
The company’s two brands both delivered solid sales growth: Abercrombie brands—targeting millennials aged 23 to 40-plus—posted a 31% increase, while Hollister brands—catering to 13- to 21-year-old Gen Zs—saw a 12% rise.
Once an iconic mall staple in the 1990s and early 2000s, the Ohio-based retailer faced severe criticism and declining popularity in the 2010s due to its controversial and exclusive marketing tactics, including sexualized advertising and refusing to make XL or XXL sizes.
Under the leadership of CEO Fran Horowitz since 2017, the company has reinvented itself by focusing on inclusivity, broadening its product range and revamping the brand image targeting young professionals who grew up wearing the nostalgic brand.
The company’s inclusive strategy includes offering denim in a range of styles and sizes—such as 90s low-rise baggy jeans, ultra high-rise straight jeans and the Curve Love line which went viral on TikTok—shifting away from its previous image of fitting only slim customers.
In March, Abercrombie launched the A&F Wedding Shop Collection—tailored to brides and wedding guests—to diversify its product lines beyond casual wear, which Horowitz said “clearly exceeded expectations from the beginning,” during the earnings call on Wednesday.
Key Background
Abercrombie & Fitch has undergone a significant transformation over the past decade. In 2015, the company announced it would end its “sexualized marketing” practices using shirtless models and tone down the provocative in-store atmosphere—characterized by dim lighting, strong cologne scents and loud music. After being labeled America’s most-hated retailer in 2016, Horowitz, then-chief merchandising officer, committed to fostering “a more diverse and inclusive culture.” Upon becoming CEO in 2017, Horowitz spearheaded a comprehensive rebranding, featuring models of various body shapes and skin tones, and expanding product lines. In 2019, the company introduced Curve Love, tailored to curvier customers with sizes up to XXXL, which now accounts for nearly half of the women’s denim segment, according to Horowitz’s recent interview with Vogue Business. The company also launched Your Personal Best (YPB), an activewear line in 2022, and unveiled a bridal shop in March, catering to the diverse lifestyles of young millennials. On the back of these strategic shifts, the retailer’s stock soared 285% in 2023, with an additional 91% surge so far this year.
Crucial Quote
“The key factor behind Abercrombie’s success is a relentless focus on the customer,” Neil Saunders, managing director and retail analyst at GlobalData, told Forbes. “The brand has also been transformed from its 1990s vibe into a modern label that is appealing to younger and middle-aged shoppers. On the assortment side, a focus on quality and moving into areas of growth like athleisure and wedding outfits have served Abercrombie very well.”
News Peg
The 131-year-old apparel company had a controversial history under its former CEO Mike Jeffries. In a 2006 interview with Salon, he said that the company targeted an “attractive all-American kid with a great attitude and a lot of friends.” He also said the company would “hire good-looking people in our stores,” as “we want to market to cool, good-looking people. We don’t market to anyone other than that.” This approach led to a series of controversies, including a $50 million settlement in 2004 over discriminatory hiring practices. Amid increasing criticism and 11 straight quarters of declining same-store sales, Jeffries left the company in 2014. The brand hit a 17-year low stock price below the $10 mark in 2017, five months after Horowitz took over as CEO.
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Tangent
While Abercrombie & Fitch is making headlines with its stunning revival, Gap is another nostalgic 90s brand signaling a comeback under new leadership. Following the appointment of Richard Dickson—former president of toymaker Mattel who helped revive Barbie—as CEO last August, the company has undergone a turnaround, which seems to be paying off so far: shares rose by 256% over the past year as of Friday afternoon, with the company’s promising earnings announcement Thursday pushing up shares over 20% after market close. The company posted an annual sales growth of 3% for the first quarter, with all four brands—Gap, Old Navy, Athleta and Banana Republic—seeing quarterly sales growth “for the first time in what we can’t necessarily find in our history,” according to Dickson in an earnings call. The company also raised its full-year guidance to “up slightly year-over-year” from the prior outlook of “roughly flat,” with its market share gaining for the fifth consecutive quarter. Gap appointed fashion designer Zac Posen, also known as the former Project Runway judge, as the company’s creative director in March—which would enhance “the brand’s reinvigoration” and has already started to “show up on the scoreboards,” according to Dickson. Posen has recently elevated Gap’s media exposure by dressing Da’Vine Joy Randolph in a custom denim gown on the Met Gala red carpet, and Anne Hathaway in a white shirt dress for a Bulgari event in Rome—the dress was launched online on Tuesday and sold out within several hours.
Further Reading
Beyond the ‘young millennial’: Can Abercrombie maintain momentum? (Vogue Business)
Gap Snaps Slump With Sales Gain (The Wall Street Journal)