Abercrombie & Fitch credits ‘fewer promotions’ and brand building after record results

Abercrombie & Fitch has posted record first quarter results on the back of “fewer promotions” and strongly “defining” what each of its brands stand for.

The clothing retailer delivered net sales of $1.02bn (£801m) in Q1 2024, the first time the business has ever cracked a billion in sales in a single quarter throughout its entire history, even in its 00s heyday, up 22% from last year’s already impressive results.

CEO Fran Horowitz told investors on a call today (29 May) that its “women’s and men’s divisions grew across our brand families”, which include Abercrombie + Fitch as well as Hollister, and that it entered Q1 with a “clean inventory position” allowing it to make “fewer promotions” contributing to the gross profit margin improvement of 66.4%, up 540 basis points.

This Much I Learned: Asos’s top marketer on transforming a brand“We’ve further defined what each of our brands stand for and the customers that they serve,” she said. “Presenting a significant, global addressable market opportunity which we are capitalising on with relevant assortments and compelling brand voice.”

Its operating margin for the quarter sat at 12.7%, up 860 basis points year-over-year, and net sales for its Abercrombie brand increased by 31% year-over-year while its Hollister brand grew by 12% year-over-year.

Marketing spend for the quarter grew to 5% of total sales, an increase on the 4% from the same point last year, which its CFO Scott Lipesky described as a “sweet spot” the brand hopes to maintain. “You can drive the business short-term, sure, but you also want to drive the business long-term and we’re super focused on customer acquisition and getting people involved with our brand,” he added.

You can drive the business short-term, sure, but you also want to drive the business long-term and we’re super focused on customer acquisition and getting people involved with our brand.

Scott Lipesky, CFO, Abercrombie + Fitch

Horowitz said what’s “exciting” about its current marketing spend is that due to the strength of its brand it can invest that spend over the “top, middle and bottom” of the funnel. While Hollister marketing spend was “pulled back” at the start of last year it has started to increase again and Horowitz expects the brand, in the “difficult” teen clothing category, to follow the playbook set by Abercrombie + Fitch.

“We’ve been building Abercrombie over the years starting in the bottom and the middle and now doing lots of top of funnel to make sure we acquire those customers. We will follow that same pattern for Hollister,” she said.

A brand transformed

Abercrombie & Fitch was once a cautionary tale for marketers. A brand which at one point was the peak of teenage fashion, but it’s exclusionary tactics aimed at what former-CEO Michael Jeffries described as the “attractive, all-American kid” fell out of fashion in the 2010s, with the brand eventually hitting a 17-year low stock price in 2017.

Horowitz joined the business at its lowest in 2017 and has since transformed the brand from one that targeted a small number of teenagers to one that appeals to working millennials, in particular, its Sloane tailored pant which has become a social media darling as well as repositioning its teen-focused Hollister brand.

It’s turnaround since has been notable, in particular, the speed of it. In the past year, its stock price jumped by a remarkable 245%, outpacing the growth of AI darling Nvidia albeit at a much lower price, as it regularly outperformed expectations.

Luxury brand Montblanc on returning to its ‘core’ to drive future growth“Fiscal 2023 was defining year for our company,” she told investors. “We delivered 16% revenue growth and operating margin over 11%. These results would not have been possible without the hard work from our teams to transform our operating model and playbook.”

With its turnaround seemingly complete, the brand is now targeting global growth with the UK and Germany identified as key markets to expand into, as well as China in the APAC region.

“We made strategic investments in marketing to drive brand awareness in these two key EMEA markets,” said Horowitz. “We saw great digital engagement conversion from new marketing campaigns along with the benefit of new store experiences, particularly in Greater London.”