Why Is Abercrombie & Fitch Crushing the Stock Market?

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The Abercrombie & Fitch comeback story is a financial fairytale in search of the screenplay. The price-per-share graph is Tesla-esque and even though the success of the resurgent brand feels about as likely as the return of Blockbuster, the numbers are eye-popping.

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A&F’s stock price, which held steady in the $20-$40 range between 2019 and the spring of 2023, now sits at $98.63 a share. That’s a $77.91 (+376.01%) increase in the past five years. At the same time, American Eagle’s stock price has declined 4.17%, Gap Inc. has declined 24.38%, and Levi’s has declined 30.90%. The only competitor (read: mall brand) with much real growth has been Urban Outfitters, which is up 19.98%.

In its third-quarter report, A&F reported a revenue of $1.06 billion, up 20% from the same period in 2022, and A&F estimates that its net fourth-quarter sales increased by roughly 15% year-over-year.

“It reflects a comprehensive strategy spanning brand positioning and merchandising, creating relevance with a new consumer base and a new store strategy,” Marie Driscoll, a senior retail analyst at Driscoll Advisors, tells SPY. “The strategic actions taken in 2021 and 2022 gained traction last year and investors took note. The company just raised guidance for Q4 so the trend continues. A very strong brand turnaround story.”

Abercrombie started its life (way back in 1892) as a high-end outfitter; it struggled at that price point in the mid-20th century, eventually filed for bankruptcy in 1976, and was revived by Oshman’s Sporting Goods in 1978. Oshman eventually sold A&F to L Brands (then The Limited), where it was rebooted as a teen-skewing mall brand.

Former CEO Mike Jeffries made A&F successful in that niche. A&F spun off into a separate, publicly traded company – when Jeffries took over in 1992, A&F had 36 stores and was making $50 million in sales. By the time the company went public in 1996, it had nearly quadrupled its number of stores and posted $335 million in sales.

In the early 2010s, numerous lawsuits plagued A&F. Among them: a religious discrimination case from a Muslim teenager, who said she was denied a sales job because her headscarf violated the company’s “look policy,” a case that went all the way to the Supreme Court, which ruled in the teen’s favor; a class action suit alleging race and sex discrimination; an age discrimination suit levied by a 68-year-old pilot on the A&F jet, which notoriously required its flight crew to be clean-shaven, Abercrombie-clad, and pantless3.

At the same time, A&C was receiving backlash to a well-documented, carefully curated thin and white image1, both in its employment and marketing – a 2004 suit, for instance, alleged that the company discriminated against African Americans, Latinos, and Asian Americans who tried to work in the stores or as models for A&C ads.

In 2014, Current CEO Fran Horowitz, who previously worked as brand president of Hollister and chief merchandising officer of Abercrombie, shifted strategy to target customers between the ages of 18 and 25, rather than mall rat teens2. In 2015, A&F revamped its stores, closing 60 low performers (shuttering more in subsequent years, too). Additionally, Abercrombie began to discontinue the brand’s infamous marketing campaigns.

Also in 2015, Aaron Levine, a designer with a resume including Jack Spade, Club Monaco, and Hickey Freeman, became Senior Vice President of Men’s and Women’s Design. Levine leaned into knits, a more neutral color palette, and a higher price point. A&F chased an audience that had previously belonged to J. Crew. In 2020, during the early days of the pandemic, A&F saw a 43% increase in digital net sales.

The stock price deflated slightly between the end of 2021 and the beginning of 2023 (few were spared from the impact of inflation), but it rose steadily for most of last year, skyrocketing around May (and continuing to). People have been starting to spend more again as inflation cools – and leading up to that cooling, A&C had positioned itself as the kind of place where you want to spend a modest amount of leftover cash. Condolences to the Gap and American Eagle.

That May surge coincided with the release of the company’s 2023 Q1 report, in which A&C reported decade-high first-quarter net sales and a gross profit rate up 570 basis points. That was after what Horowitz had described as a simply “solid” finish to 2022 (net sales up 3% between 2021 and 2022). It looks like inflation was stalling the kind of brand (and stock) momentum A&C has been building since Horowitz took over. Time passed and the time bomb detonated. BOOM. 

The BOOM was based on Abercrombie turning “into a style-focused, occasion-based brand that targets young professionals,” Janet Kloppenburg, an equity analyst for retail brands, told SPY. “When the product and marketing is right, the customer finds it.”

Abercrombie expects its upward swing to keep going – the brand has a 2025 target of $4.2B in revenue and an 8%+ EBIT margin. Still, some analysts still say that its sales margins don’t quite justify investors’ extreme stocktimism.

“Nothing is all that impressive about the numbers and it seems quite overvalued,” says Sucharita Kodali, a retail analyst at Forrester Research.

And that might be the most interesting part of this retail fairy tale. A twist ending could be right around the corner.

1 Obviously racist, unless you sell paper.

2 A defunct category, like working-class homeowners or good Marvel movies.

3 Not just the dress code for fraternity rush events.

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