Abercrombie & Fitch Showing Signs Of A Comeback As Shares Surge

Abercrombie & Fitch shares surged 9% on Wednesday after the company reported better-than-expected holiday fourth-quarter profit and sales. The next logical question: Is the once-iconic American brand back? 

Abecrombie & Fitch’s namesake label, about two-fifths of the company’s business, posted an 8% increase in comparable-store sales in the quarter that ended February 1, the best performance since at least 2015. The retailer’s Hollister brand, targeting younger teen shoppers and about three-fifths of the total, posted a 2% drop in same-store sales, hurt by faltering sales overseas.

Abercrombie & Fitch, joining a chorus of other retailers like Crocs, expects the coronavirus outbreak to hurt first-half results, thanks to store closings in markets including China and Italy. International sales represent 30% of the company total. U.S. sales, on a positive note, have seen comparable sales rise for a 10th straight quarter.

In a move that was already underway in the wake of the U.S.-China trade war, Abercrombie & Fitch, like other merchants including Cole Haan, expects to further reduce the percentage of goods it sources from China to a “low teens” percentage this year, down from 22% last year and 42% in 2017. The percentage bought from China that was imported to the U.S. will decline even more, to just 10% from 15% last year, the New Albany, Ohio-based retailer said. 

However, beyond the coronavirus outbreak and other macroeconomic concerns, there are some signs that the retailer’s turnaround is gaining some ground. 

Under CEO Fran Horowitz, the company has been shutting costly flagship stores, from a Hollister location in New York’s Soho to an A&F in Milan, as it shrinks store footprint and size. It’s also remodeled stores, including removing dark shutters to make shops brighter, and has shortened the time it designs products. The company also has increased online sales.

Just as importantly, it’s been seeking to strike a chord with today’s millennials and Gen Z consumers by embracing inclusive, body-positivity and other more on-point messages. Gone are the topless male models who were once prominent at the front of its stores and its sexualized marketing campaigns, now out of style—a change that had also hurt other retailers like Victoria’s Secret. 

For instance, Abercrombie’s #FaceYourFierce campaign this year features a cast of 24, including professional women’s soccer player Megan Rapinoe, to promote messages of self-empowerment. Many of its campaigns have also featured plus-size models. 

“I have been an A&F fan for literally decades,” said a customer named Jenni Roe in a February 5 Facebook post in response to the company post of a model promoting its new “Curve Love” jeans. “This new healthy body approach to your sizing and models make me love it even more!!”

In a promising sign, while the label still is ranked among brands upper-income American female teens said they no longer wear, the percentage of teens saying that has declined to 4% in fall 2019 from 8% in spring 2018, according to Piper Jaffray’s semi-annual Taking Stock With Teens survey. 

Hollister, meanwhile, is ranked among American teens’ top 10 favorite apparel brands, improving its ranking to No. 4 for both males and females on average in fall 2019 from No. 8 in spring 2018. 

“Abercrombie is widening its appeal as a result of its marketing efforts and brand reinvention,” Neil Saunders, managing director of researcher GlobalData, said in a note Wednesday, adding Abercrombie’s “Do 96 Hours In” pop-up shops during the holiday season also showcased a brand moving from one that was “obsessed with looks and external image” to one that’s about self care. “A&F remains on the right trajectory. The brands….now have an ethos that’s aligned with the needs of modern consumers.” 

A turnaround in the right direction indeed, but Abercrombie and Hollister returning to their once-vaunted perch in the 2000s may still be a long shot. 

After all, not only is there more competition from both within the industry and outside from gadget and experience peddlers vying for teens’ attention, the empowering messages the company has adopted also are used by its rivals. 

Related on Forbes: Crocs and Steve Madden show how China’s coronavirus outbreak is hurting retailers

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Related on Forbes: Walmart is still falling short in its bid to be a “fashion destination”

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