Recently, American retailer Abercrombie & Fitch (ANF - Free Report) shocked investors and the market by posting better than expected earnings and beating on the top and bottom line. Although the company faced trouble and concern with its former CEO, it has proved to turn its business around and take the right steps moving forward. Let’s take a closer look at how A&F has performed throughout the year and its outlook for the future.
Mike Jeffries as CEO
Before he was pulled from the board and his position, Mike Jeffries was the CEO of Abercrombie & Fitch until 2014. However, during his time with the company, he was considered one of the most controversial CEOs in the retail industry. He continued to shock customers, investors and fellow retailers with his bizarre business philosophies and the approach he took towards the brand. Throughout his 22 years as CEO, he made many remarks about sexualizing the brand image of A&F. This was shown through the shirtless models welcoming customers at the front of A&F stores, only allowing people “who looked the brand” to work there, and using provocative images of young people for marketing material.
Jeffries was never shy about posing the brand as something only the “cool” kids could wear. He stated his brand was exclusionary and should only be worn by those cool, popular kids in school. The company suffered a 13 quarter streak of negative or flat growth sales in 2015, due to faulty marketing and lack of consumer interest. When Jeffries suddenly “retired,” the company needed a serious reboot, of their brand and values.
Abercrombie’s Current Climate
Since the current CEO, Fran Horowitz, joined the company in 2017, A&F has started to see a turnaround. The problem of dim lit stores and the overpowering smell of cologne in every corner has slowly started to die down. From the time Horowitz joined the company, A&F’s stock has surged almost 70%.
Shares of the company increased 25% after Abercrombie & Fitch posted adjusted earnings of $0.35, on revenues of $821 million, compared to $0.15 in the year prior’s quarter. The company also posted 3% growth of comparable sales on top of 4% from last year. The company started off with a strong holiday season and expects to keep that momentum going. Since the company has shifted its focus to what the consumer wants, instead of what the brand wants, it has seen success in both A&F and Hollister stores.
According to GQ, the company has proven that change is working. The most important thing is the clothing, according to A&F designer Aaron Levine. At one point, A&F’s clothing was meant for petite individuals who looked the part of the brand. Hence, consumers stopped shopping there because there was only one target audience and one demographic that the company was selling to.
Horowitz has taken the company back to its roots, supporting the heritage and valuing the consumers more now. It is important to understand that change doesn’t occur all of a sudden, and if A&F wants to fully revive their brand, they must continue to find ways to do that and not stop now.
With the direction that Horowitz is leading the company in, it seems as though it could be viable in the long-run. The new generation of A&F customers will continue to keep the company profitable and successful, if they continue to stay on the right track in terms of branding, clothing and values.
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