Abercrombie & Fitch Building Up Its Store Fleet Again, Differently
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After experiencing a strong 2021, Abercrombie & Fitch Co. is back to building up its brick-and-mortar store fleet.
For the first time since 2008, A&F in 2022 will open more stores than it closes, with 50 openings planned versus 30 closings planned.
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“This company is transformed. It’s at a much healthier place than it used to be. It’s a different company,” Fran Horowitz, chief executive officer of Abercrombie & Fitch, told WWD on Wednesday, just after the company reported solid results for 2021 despite a fourth-quarter net income decline.
On Wednesday, the youth specialty retailer, impacted by higher costs of freight, Omicron and inventory delays, reported a drop in fourth-quarter net income to $65.5 million, compared to $82.4 million in the year-ago period. A&F had $80 million in incremental costs due to freight inflation.
For the year, however, A&F returned to profitability, generating net income of $263 million, compared to a loss of $114 million in 2020, which was heavily impacted by the pandemic and tax charges. For the quarter ended Jan. 29, sales rose 4 percent to $1.2 billion compared to the same period a year ago, and were down 2 percent compared to the 2019 quarter. For all of 2021, sales rose 19 percent to $3.71 billion, from $3.13 billion in 2020.
“We had a terrific year,” Horowitz said. “It’s the result of the very hard work of the last several years.”
The work involved reducing brick-and-mortar square footage by shutting down the costly and oversized A&F flagships, with only a few remaining still; replacing them with new retail “experiences” meaning smaller, more efficient and less expensive stores involving downsizings, renovations and relocations; tight inventory control; sharpening and differentiating the A&F and Hollister brand images; advancing the digital business, and developing a robust social media presence.
Horowitz also noted the company achieved a 9.6 percent adjusted operating margin last year, “our highest in over a decade,” she said. “In addition, by returning cash to shareholders through share repurchases, we reduced our ending share count by 15 percent.”
Looking ahead, Horowitz says she sees “a healthy and engaged consumer” despite the challenges of COVID-19, inflation, and geo-political events. Last year, A&F reduced the number and depth of its promotions and raised some prices. This year, the company plans to stick to the program, which mitigates the impact of inflation.
“We raised some prices, selectively, but we’ve earned the trust of our customers, that we are putting out there the right products at the right prices,” said Horowitz.
The 2022 store program marks a major “pivot” for A&F and a “real sign that we are growing this company again. Stores matter,” though she added, “The days of big stores are over.”
Stores will be smaller, and more varied in terms of presentation. “In our tool kit, we’ve got all sorts of stores sizes and layouts,” said Horowitz. The company is leaning toward more off-mall locations.
Recently, the Abercrombie brand opened a 2,300-square-foot women’s-only store in Lincoln Park in Chicago, its first of its kind, though future stores will average around 4,500 square feet.
As part of the corporation’s store expansion, Gilly Hicks, the men’s and women’s innerwear, activewear and accessories brand, is planning to open its second and third freestanding locations: a 3,000-square-foot unit at 39 Carnaby Street in London sometime in late spring, and a 2,500-square-foot store at the Westfield Centro in central Oberhausen, Germany in early summer. More locations are planned this year, both in Europe and in the U.S.
The first Gilly Hicks freestanding location opened last summer in Columbus, Ohio. The brand also has 25 side-by-side locations next to Hollister stores and 60 shops-in-shop locations, or Gilly Hicks carve-out areas at the back of Hollister stores.
Courtesy of Fran Horowitz
Of the 50 openings seen this year, A&F did not break out how many A&F, Hollister or Gilly Hicks would open.
Recapping the fourth quarter, Horowitz said: “Following inventory receipt delays that impacted the peak holiday selling period, sales trends initially improved as product began to arrive. While mid-January was impacted by the Omicron surge, sales rebounded in late January as cases fell and new assortments were set. Momentum has continued quarter-to-date, with an acceleration in the sales trend from total fourth-quarter levels. Importantly, response to early spring assortments has been strong, and we do not anticipate significant inventory supply issues for the remainder of the quarter.”
She said denim, across all brands and genders, was strong, especially with high-waisted and wide-legged styles, while at Hollister, “We are starting to see low-rise jeans becoming popular among very advanced customers.” Denim has been a strong category at A&F for many consecutive seasons.
Dresses are gaining popularity across the brands, and being lifted by what Horowitz said would be a record year for weddings ahead.
At Gilly Hicks, underwear and fleece have been strong performers recently.
By division, Hollister’s fourth-quarter sales rose 2 percent to $668.8 million, from $655.4 million in the year-ago period, and were down 6 percent from the $710.5 million generated in the 2019 period.
Abercrombie’s fourth-quarter sales rose 6 percent to $492.6 million from $466.6 million in the year-ago period and were up 4 percent compared to the $474 million in sales during the 2019 period.
By region, U.S. sales last quarter rose 7 percent to $841.7 million; Europe, Middle East and Africa sales dropped 4 percent to $226.1 million, and Asia-Pacific fell 21 percent to $46.2 million.
For the first quarter of 2022, A&F expects sales to be up low-single-digits, and for the year, sales are seen increasing 2 to 4 percent.
The company repurchased $142 million, or 4.1 million shares, in the fourth quarter for a total of $377 million, or 10.2 million shares in fiscal 2021, contributing to a 15 percent reduction in shares outstanding from fiscal 2020.
Courtesy Photo
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