Fourteen-million club loyalty members are helping Abercrombie & Fitch Co. learn how to engage and bond with its consumer base.
According to Fran Horowitz, chief executive officer and president, there are some similarities between how both brand customers are using mobile. She said that for both the Hollister and Abercrombie loyalty programs, “The customer spends more, and [shops] more often.”
Hollister’s membership totaled 10 million at the end of 2017, while Abercrombie was 4 million.
Consumers spending more and more often, plus the data metrics obtained from mobile engagement, helped Abercrombie best Wall Street’s consensus estimates for the fourth quarter ended Feb. 3.
Net income jumped 52.1 percent to $74.2 million, or $1.05 a diluted share, on a sales gain of 15.1 percent to $1.19 billion. On an adjusted basis, EPS was $1.38. Wall Street was expecting EPS of $1.10 on sales of $1.16 billion.
More importantly for the quarter, comparable sales rose 9 percent, with Hollister up 11 percent and Abercrombie showing signs of life at up 5 percent. It’s the first indication for the core Abercrombie brand that the strategic initiatives to turnaround the brand are finally resonating with the targeted customer base.
In a telephone interview with Horowitz, she said the data metrics from mobile motivates the company to “continue to add [more features] to both of the loyalty programs.”
She further explained that with Hollister, Snapchat and gaming is a strong component with how consumers engage with the brand, and they also respond to initiatives such as gift with purchase, exclusives, and being first to see and buy new items. Data mining is still relatively new for Abercrombie’s program, which began last year, about a year after the introduction of Hollister’s club card. The brand’s “This Is The Time” campaign from October is focused more on Instagram and YouTube.
There’s also been talk in the fashion markets that logo apparel could be making a comeback, an area that Abercrombie pulled back on in 2014. According to the ceo, the influence of the Nineties has placed a greater emphasis on “graphics and logos.” She noted that while there is a place for logos in the offerings from both brands, it’s an area that sees “ebbs and flows.”
On the conference call to Wall Street analysts, Horowitz said outerwear and jeans, as well as fleece and graphic tees were popular items in the fourth quarter. She also said the company sees an “enthusiastic response to Gilly Hicks, and our ongoing testing is helping us to assess the scale of its full potential.”
Joanne Crevoiserat, chief operating officer at Abercrombie, said in the telephone interview that 2017 was a strong denim year for the core Abercrombie brand, mostly due to the company’s investment in the “fashion, fit and high-rise.”
Craig Johnson, president of retail research firm and consulting firm Customer Growth Partners, said, “Abercrombie is on the way back. They are benefiting from a confluence of three things that has created a positive perfect storm.”
He identified the three as a better holiday retail season in 2017, the continued decline of fast fashion and improved pricing at both Abercrombie and Hollister to give customers a better value-price ratio.
What’s interesting is the fast-fashion component, which Johnson said “peaked out a couple of years ago. It has declined even further over the last two quarters.” The larger players in the U.S. are H&M and Forever 21, both of which he said has over expanded their retail operations. In contrast he said even smaller players like Inditex’s Zara is “moving sideways,” while Uniqlo isn’t growing.
During the rise of fast fashion, teen consumers moved away from traditional mall retailers such as Abercrombie and American Eagle Outfitters, which will report earnings on Thursday. With fast fashion falling out of favor, Johnson said they are now “reverting back to the traditional teen retailers.”