Abercrombie & Fitch Plans Changes To Turn Their Business Around

After a number of periods of poor sales, Abercrombie & Fitch (NYSE:ANF) has been undertaking a bevy of changes to turn around its fortunes. Some of these efforts are highlighted below:

1. Removing Its Infamous Logo

While the logos do still exist to some extent, the retailer began phasing them out in 2014. This follows from millennial consumers’ increasing preferences of clothing and accessories without labels or logos, according to a report by Goldman Sachs. While their parents and grandparents derived status from brand names, millennial shoppers would rather spend on food, technology, and vacations. With limited discretionary incomes, these consumers are moving to fast-fashion retailers, such as H&M and Zara, preferring function and practicality over ‘cool’ brand names.

2. Focus On Direct-To-Consumer (DTC) Sales

During 2015, this channel, which includes online and omnichannel sales, accounted for almost a quarter of the company’s sales. This 24% was an increase of two percentage points from a year earlier. The company has undertaken significant investment for its online and omnichannel strategy, with a further $70 million expected in 2016, while at the same time undertaking an aggressive store closure program. The company has started a number of initiatives such as ‘Click and Collect,’ which is ordering online and collecting in the store, which was rolled out in all stores in the US in the first quarter of 2016. It further plans to start shipping from the stores internationally in Canada, and the UK, in the next quarter. A robust international DTC business is being developed, which includes localized websites, local language, and local currency. Furthermore, since mobile now accounts for over 60% of its online traffic, and nearly 40% of its DTC revenue, posting double-digit increases in conversion rates year on year, the company has also worked on improving its mobile website and app, to make the customer experience better. The company’s promotion of its Hollister brand president, Fran Horowitz, to a newly created company-wide position of president and chief merchandising officer, is also a step in this direction. Her role would involve overseeing customer-facing activities which include e-commerce, marketing, and inventory management.

3. Rebranding Effort

The company has also undertaken a massive rebranding initiative after parting ways with its former CEO Michael Jeffries in late 2014, to move away from the reputation it had built in the last decade, because of which the company was also voted the most hated retail brand in February of this year. However, the company is taking efforts to reinvent itself, which was reflected in its men’s lineup, which fused its roots as a hunting and fishing store, with a more contemporary style. Aaron Levine, who joined the company last year as the head of men’s design, had a major role to play in this. Abercrombie released two new casual luxury lines with a refreshed design philosophy, which will be available for retail in July. The company’s women’s line also featured a more sophisticated and classic look. The advertising campaigns are also moving towards something more consumer friendly. The company also used Indian model and activist Neelam Gill, in its last Fall’s campaign.

However, these efforts may still not be enough to turn the company around, due to the general macroeconomic weakness and the current soft state of the retail industry. Though the sales are still down, they do seem to be improving, albeit slowly. During Q4 2014, the decline in comparable sales for the company was 10%, while that of the Abercrombie and Fitch brand was 9% and for Hollister was 11%. By the fourth quarter of 2015, Abercrombie brand’s comparable sales were down 2%, while that of Hollister was up 4%, and for the entire company, it had recovered to +1%.

Have more questions about Abercrombie & Fitch? See the links below:

• Who Relies On Debt More; Gap Inc or Abercrombie & Fitch?
• What Is Abercrombie & Fitch’s Revenue & Earnings Breakdown In Terms of Different Operating Segments?
• What Is Abercrombie & Fitch’s Fundamental Value Based On Expected 2015 Results?
• How Has Abercrombie & Fitch’s Revenue Composition Changed In The Last Five Years?
• By How Much have Abercrombie & Fitch’s Revenues & Earnings Grown In The Last Five Years?

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