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Abercrombie & Fitch’s Turnaround Efforts

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Brand image is getting a face-lift

After years of disastrous campaigns by past CEO (chief executive officer) Michael Jeffries, Abercrombie & Fitch (ANF) has now embarked on an ambitious turnaround. The company has adopted a more inclusive approach to repair its damaged brand image. It has been overhauling both its Hollister and Abercrombie brands, catering not just to teenagers but also to young adults 18-24 years old.

Amid tough competition from brands such as Forever 21 and H&M, the company has been revamping its apparel design, putting less emphasis on logo-based designs. It’s making marked changes to its assortments and loyalty programs.

All this has been reflected in the company’s comps (comparables) store sales growth of 4% in fiscal 3Q17 after six straight quarters of decline. US comps rose 6%, whereas international comps were at a break-even rate. Brand-wise, Hollister reported comps growth of 8%, whereas the company’s namesake brand, Abercrombie, reported negative comps of 2%.

Focus on e-commerce, omnichannel capacities

Abercrombie & Fitch is investing significantly in the D2C (direct-to-consumer) sales channel. The advent of online retail giant Amazon (AMZN) caught most brick-and-mortar retailers unaware. Abercrombie & Fitch was no exception. The company is now making sound investments to build its online presence, especially on its mobile platform. Most of its D2C traffic is generated by its mobile app (application).

The company is also focused on strengthening its omnichannel distribution capability and has in place services such as purchase online, pick up in store and order in store. Peers Gap (GPS) and American Eagle Outfitters (AEO) have also launched services such as buy online, pick up in store to attract more customers.

Optimizing its store base

To enhance the efficiency of its store base, the company is shutting down underperforming stores and downsizing and remodeling others. It’s also expanding its footprint in international markets such as Saudi Arabia.

In fiscal 2017, the company expects to close 60 stores (mostly due to natural lease expiration) and open nine new stores. As of October 28, 2017, the company operated 700 stores in the United States and another 189 stores in international markets. It has closed 14 stores and opened five stores (including two outlet stores) year-to-date.

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