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Abercrombie Cites Tourism in Closing 8 Flagship Stores Last Year

Last year, Abercrombie & Fitch walked away from eight stores that relied on traffic from tourists, a population largely forced to curb travel plans amid the coronavirus pandemic. It also grew digital sales as consumers shied away from stores.

In a Nutshell: In total, the specialty retailer closed 137 stores during 2020, and tweaked products to better match evolving consumer lifestyles, CEO Fran Horowitz said when the company reported fourth-quarter and full-year results Tuesday. Plus, Abercrombie & Fitch also leveraged its infrastructure to boost digital to 54 percent of annual revenue while driving 34 percent growth in sales originating on the web, she added.

Overall, the company shed 1.1 million gross square feet of its brick-and-mortar fleet, or 17 percent, including “eight tourist-dependent flagships.” The closures are part of a store optimization strategy first disclosed in 2018. Reconfiguring the store footprint has been one way some fashion chains have been right-sizing their businesses.

“We remain focused on controlling what we can control,” Horowitz said, “and ended 2020 even stronger than we started.”

Many stores open today are operating under government-ordered restrictions.

Net Sales: For the period ended Jan. 30, net sales fell 5 percent to $1.12 billion from $1.18 billion, largely due to Covid-19.

Digital net sales rose 34 percent to $639 million, reflecting strong growth in every month of the quarter, the company said.

By brand, sales at Hollister, including Gilly Hicks, were down 8 percent in the quarter to $655.4 million, while Abercrombie slipped 2 percent to $466.6 million.

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By region, sales were down 3 percent to $788.1 million in the U.S., and down 8 percent in Europe, the Middle East and Africa. Sales dropped 23 percent in Asia Pacific to $58.9 million.

Hollister Co. sales struggled in large part because of its “larger global store base, including over 110 locations in EMEA, and its lower digital penetration.” Top-performing clothing reflected consumers’ at-home lifestyle. Fleece and knit tops were standouts in the quarter, as were sweatpants. Gilly Hicks customers favored hoodies and loungewear, Horowitz said.

CEO Fran Horowitz details Abercrombie's formula for navigating 2020's pandemic for Abercrombie, Hollister and Gilly Hicks brands.
A look from Abercrombie Kids for Spring 2021. Courtesy

The Abercrombie brand pulled back on promotions in the quarter and saw record volume across two-thirds of its categories, with most registering sales improvements. Knits and jeans led the way, Horowitz said. Sherpa and soft fleece resonated with Abercrombie kids shoppers.

Inventories fell 7 percent to $404 million from the prior year’s level. Cash equivalents totaled $1.1 billion, versus $671 million a year ago. Along with borrowing availability, total liquidity was $1.3 billion, versus $914 million a year ago.

Despite closing 137 stores last year, Abercrombie & Fitch continues investing in smaller omni-enabled brick-and-mortar experiences that better meet customer needs. In fiscal 2020, the company opened 15 new doors, remodeled four locations and right-sized an additional six sites.

For the year, net sales fell 14 percent to $3.13 billion from $3.62 billion.

Earnings: Net income fell 1 percent to $82.4 million, or $1.27 a diluted share, from $83.1 million, or $1.29, in the year-ago period. On an adjusted basis, diluted earnings per share was $1.50, versus $1.31 a share on a non-GAAP basis for the same year-ago quarter.

Wall Street was expecting adjusted diluted earnings per share of $1.22 on revenue of $1.12 billion.

For the year, the net loss was $114.0 million, or $1.82 a diluted share, against net income of $39.4 million, or 60 cents, in the prior year.

CEO’s Take: “As we enter 2021, we are pleased with our start to the first quarter and have proven strategies in place to build on recent successes in product, marketing and digital. Our solid foundation and strong liquidity position enable us to be on the offense as we continue to focus on profitable topline growth, square footage optimization, digital transformation and global market share gains,” Horowitz said.