Despite growing concerns about where the economy and consumer spending are heading, Abercrombie & Fitch Co. doesn’t seem too worried about the future. Quite the opposite, in fact.
The specialty retail company has grown into a family of brands that each support and complement the other, according to CEO Fran Horowitz. “The benefit of having a diversity of brands is that we are not dependent on just one customer, economy or fashion cycle for us to be able to achieve our long term plan,” she told investors gathered in New York City’s Tribeca neighborhood Tuesday.
Now, the company’s long-term agenda as laid out in its newly unveiled Always Forward plan envisions $4.1 billion to $4.3 billion by the end of January 2026 before reaching $5 billion soon after.
“Today we are fundamentally different than we were just a few short years ago, having transformed who we are and how we operate,” Horowitz said. The once scandal-plagued company has proven it’s able to “navigate through unprecedented challenges, while maintaining our focus on making progress on our long-term goals,” she added.
All five Abercrombie & Fitch, Abercrombie Kids, Hollister, Gilly Hicks and Social Tourist brands each speak to a specific customer while maintaining a common focus on positivity and inclusion, Horowitz said.
The Abercrombie brand is gaining “significant momentum,” which helps as it drives the highest gross and operating margins companywide, Horowitz said. The brand is looking to denim and the new Your Personal Best activewear collection to drive an addition $300 million to $400 million in revenues to the bottom line by 2025 on top of its current $1.56 billion. It’s also plotting new small-format, omni-first stores and leaning on data and analytics to nail the size, location and product mix to serve the local consumer base.
Hollister has an opportunity to add more stores in the U.S. and Europe while serving older Gen Z consumers who complain about a lack of options focused on their needs, she pointed out. Denim is and will remain a key category heading into the back-to-school season.
Horowitz believes Gilly Hicks broadly appeals to both Gen Z and millennials. While mostly women’s intimates and loungewear, it expanded with a dual gender collection and plans to grow the men’s business. It’s eyeing 30 to 40 new standalone stores over the next few years, in addition to opening side-by-side stores, brand president Kristin Scott noted.
Though inventory was up 45 percent at the end of Q1, 93 percent comprised current inventory, Horowitz clarified, quelling concerns over aged and undesirable product that needs to be marked down.
The company resisted raising prices last year, but inflation and higher raw materials costs left it little choice in the past few months. “We have been judicious about raising some of our prices, very specifically in categories where we know we can find that elasticity,” Horowitz said.
The company is increasingly making technology and AI central to the decision-making process.
“We’re moving away from how a traditional retailer operates and more towards how a tech company operates,” chief digital and technology officer Samir Desai said.
“We are customer obsessed. Over the last 18 months, we’ve analyzed tens of millions of customer records [and] organized segments based on behaviors and attitudes,” he said. The company looks at intel such as how many times they open a brand’s app, buy multiple sizes and send back items that don’t fit, Desai pointed out.
“Our merchants are using Google search trends, data and digital price testing tools to help them better predict fashion trends and how to build their seasonal strategies,” Desai continued. “Merchants, or merchandise planning teams, are moving away from manual tasks and [toward] more and more targeted algorithms and AI to help them make decisions based on data.”
Abercrombie and Abercrombie kids combined are shooting for a combined annual growth rate (CAGR) of 6 percent to 8 percent through 2025. Women’s products and new stores are expected to drive that growth. Hollister’s CAGR is seen coming in flat to up 2 percent.
Gilly Hicks, which has seen double digit sales growth since relaunch, is forecasted to a sales CAGR of up 15 percent, or sales to $170 million from $100 million, through increased brand awareness, growth in assortment base and an expansion in men’s.