By Vicki M. Young
with contributions from Arthur Zaczkiewicz
 on December 22, 2015
The scene at the party for Abercrombie & Fitch's Stars On the Rise campaign.

Shares of Abercrombie & Fitch Co. climbed 6.6 percent after the company promoted its Hollister brand president to president and chief merchandising officer.

Fran Horowitz’s promotion is effective immediately. The chief merchandising officer post is a newly created position at Abercrombie. In her new role, Horowitz will have responsibility for all of the company’s brands and will report to Arthur C. Martinez. Those responsibilities include all customer-facing activities across the company’s brands, such as merchandising, design, planning, inventory management, marketing and stores.

Martinez, who is executive chairman of the teen retailer, said, “Fran’s merchandising skills and her exceptional leadership, which has inspired associates to focus all their efforts on an intense understanding and commitment to our customers, has ignited a turnaround at our Hollister brand. The promotion provides Fran the opportunity to play an even greater role in our future success as we focus on building shareholder value by positioning each of our brands for sustainable growth.”

With the change in leadership, A&F president Christos Angelides has left the company. Martinez said the company would name two new presidents for its Abercrombie and Hollister brands, with each one reporting directly to Horowitz.

Shares of Abercrombie closed at $27.23 in trading Tuesday on the Big Board.

R.W. Baird analyst Mark R. Altschwager said the promotion of Horowitz is “another step toward establishing a permanent leadership structure” and that she is “now clearly [the] top chief executive officer candidate.”

Both Horowitz and Angelides joined Abercrombie in October 2014. Each one was viewed as possible candidates for the ceo spot, since the retailer said it would consider both internal and external candidates for the top job. Although the company has been conducting a search since former ceo Michael Jeffries resigned in December 2014, there didn’t seem to have been much progress on the search for the past year. That led to some industry sources speculating that the search was put on hold while the company waited to gauge consumer reaction to the initiatives by the two former brand presidents.

Martinez said, “Abercrombie & Fitch Co. continues to make encouraging progress executing on its strategy to provide compelling, customer-focused shopping experiences based on clearly defined brand positions. We are pleased with our performance for the quarter to date and are on track to deliver continued sequential improvement in comparable sales and achieve the profit expectations we had coming into the quarter.”

And while Hollister’s offerings were improving, that wasn’t the case over at the core Abercrombie brand.

Stifel analyst Richard Jaffe said, “What quickly became evident to us and to consumers was that Hollister’s offerings improved progressively through the fall and holiday season, with comp-store sales improving sequentially.” Jaffe noted that comps were -6 percent in first quarter; -1 percent in the second quarter, +3 percent in the third quarter and is expected to be +3 percent in the fourth quarter. Those results are “unlike Abercrombie, which remains negative.” He said comps were -9 percent in the first quarter, -7 percent in the second quarter, -5 percent in the third quarter and is projected to be -2 percent in the fourth quarter. The analyst added that the “Abercrombie assortment lacked newness and customer appeal.”

According to Jaffe, “Good news is that the company now has a strong merchant leader; bad news is that the Abercrombie business is performing poorly and needs a leader.”

Still, despite the lackluster performance at the Abercrombie brand, Jaffe considered the performance of the Hollister brand and promotion of Horowitz significant enough to keep both his “Buy” rating and a $28 target price for Abercrombie shares from November, when the company posted third-quarter results.

Jefferies analyst Randal J. Konik also has a “Buy” rating on shares of Abercrombie, with a price target of $30. He noted that Hollister’s third-quarter +3 percent comp was the first positive comp for the third quarter in over three years.

To be sure, even though the business seems to be stabilizing, there are still questions that remain unanswered. While Hollister definitely targets the teen consumer seeking the freedom and fun represented in a Southern California lifestyle, the Abercrombie brand has been skewing older toward college students, and even those slightly older through graduate school, according to Martinez. This past May, Martinez said, “The Abercrombie brand can travel a bit up the age scale. It’s still predominantly a casual brand, but now it’s more sophisticated in style in the design [particularly] on the tops [component] of the business.”

Whether skewing older remains the positioning for the Abercrombie brand hasn’t been determined yet, although Horowitz is likely to have some say on that direction. Horowitz was unavailable for comment and Martinez declined comment. And while Horowitz and Angelides had responsibility for their respective brands’ merchandising and positioning, having a new chief merchant raises the question of what exactly will be the roles for the new brand presidents when they are named. Martinez said, “There is no change to the branded structure or the brand president’s role.”

The company has been going through some growing pains for the last two years, trying to find its footing in a retail world where grabbing the attention of the Millennial consumer means sharing the wallet with electronic purchases and eating out. That shift in mind-set has meant less spending on fashion. The company has been showing improvement — focusing on the consumer and not store theatrics, as well as doing away with sexualized marketing helped the company post third-quarter results that more than doubled Wall Street’s estimates — and Horowitz will be working with new leadership team at the core Abercrombie brand. That team, disclosed in August, includes Aaron Levine, head designer for A&F’s men’s and Kristina Szasz, head designer for A&F women’s.

Before joining Abercrombie, Horowitz was brand president at Ann Taylor Loft. Before that, she served in a variety of roles at Express Inc., Bloomingdale’s, Bergdorf Goodman, Bonwit Teller and Saks Fifth Avenue.

In a Securities and Exchange Commission filing, Angelides will receive his base salary for the next 18 months, which equals nearly $1.5 million. Further, he will receive an additional cash amount of $4 million related to the forfeiture of his “equity replacement grant” from his former employer, Next, when he joined the company. He also signed a non-compete agreement for 12 months.

load comments
blog comments powered by Disqus