Looks from the Gilly Hicks brand.

Abercrombie & Fitch Co. Inc. is learning how to do more with less.

As the specialty chain works on improving its merchandise assortment to better meet the needs and wants of its customer base, it’s also taking a closer look at operational efficiencies.

Joanne C. Crevoiserat, executive vice president and chief operating officer, told Wall Street analysts on Friday that the company is taking a holistic approach across its operations to “transform our business model to support our longer-term ambitions in a rapidly changing retail environment.” That approach includes the creation of a transformation management office to work with internal teams and external consultants to accelerate the firm’s transformation.

“Our focus at this early stage has been on identifying and prioritizing the areas with greatest potential upside from both a customer experience and an economic benefit perspective. As a result, we are now running multiple pilots across all work streams to inform our investments in people, processes and systems,” she said.

Crevoiserat made those comments during a conference call to analysts following the company’s report of first-quarter results.

The company is working on four pillars, with the first involving its real estate portfolio and the optimization of its store network. Other areas of focus include its digital and omnichannel infrastructure; a concept-to-customer focus aimed at improving speed and efficiency through all supply chains, whether through new vendors or geographies, and scaling investments in marketing coupled with leveraging of customer data to drive personalization and improved targeting of offers and experiences.

Over the last couple of quarters, the company has said it would close stores as part of natural lease expirations, and it has developed new store concepts for both its Hollister and core Abercrombie brands. At its Investor Day presentation earlier this year, the company spoke about the shift from large-format flagships to smaller, mall-based stores to attract the local customer base.

In a telephone interview, chief executive officer Fran Horowitz told WWD that the company has a “very productive European mall-based business for Hollister,” and that the Hollister playbook will “serve as the path for Abercrombie.” She noted Abercrombie’s historic focus on flagships, but said given the retail trends, “We think the Hollister playbook is the right one.”

The company has given as an example its new Hong Kong mall-based store, opened in December, where it said productivity has tripled versus that of its former flagship that was closed in January 2017. The aim is to focus on the local consumer, which is a more loyal base, than relying on the tourist customer. Those overseas tourist-focused stores continue to drag down operations at the Abercrombie brand. A new mall-based Abercrombie store is slated to open in the U.K. this fall.

On the product and merchandising side, Horowitz spoke about the assortment focus on the must-win and must-grow categories. Must-win are the core categories, while must-grow are the category adjacencies that have upside potential.

At Hollister, the core categories are graphic Ts, outerwear and jeans, while must-grow are the areas of swim, outerwear and the Gilly Hicks line. At Abercrombie, the core lines are outerwear, fleece, jeans and pants, while the must-grow categories are T-shirts, swim and dresses.

The ceo told WWD it continues to see “enthusiastic response” to Gilly Hicks and there’s been an “across-the-board positive response to the collection of bras, panties and sleep.”

When asked about the possibility of stand-alone Gilly Hicks stores, Horowitz said that’s not currently in the game plan. As the company is growing the brand’s presence, it’s relying on “side-by-side” spaces that repurpose some of the square footage within a Hollister store. Some of those locations allow for a separate entrance to the Gilly Hicks line, which helps bring in new customers, she said. Depending on the store set up and size, some showcase Gilly Hicks along a wall, while other locations can provide “a couple hundred square feet” of space, Horowitz said.

What’s also helped the company better meet its customers’ needs has been its loyalty programs for the brands. The company has about 17 million member accounts across the brands, the ceo told analysts.

“Our loyalty club members continue to spend more and more often. These programs are providing valuable data and insights that enable us to direct special attention to our most valuable customers and explore how to harness their engagement through exclusive product and experiences,” Horowitz said.

For the first quarter, the company posted an adjusted earnings per share loss of 56 cents, or 21 cents better than analysts’ estimates of a loss of 77 cents. Net sales for the period rose 10.6 percent to $730.9 million. And the Abercrombie brand reported its second consecutive quarter of positive comps at up 3 percent. Hollister’s comps were up 6 percent.

And while those numbers are better than expected, shares of Abercrombie on Friday closed down 8.7 percent to $21.77.

While shares of Abercrombie tend to be heavily shorted, the decline could also be due to a comment from Crevoiserat during the call regarding Abercrombie’s overseas flagships. She said there were still “persistent traffic headwinds” at those locations, which are primarily high-street tourist areas, and that investment to improve conversion and rolling out the loyalty program hasn’t helped the company “offset the headwinds” in traffic.

That’s an issue that could recur over the next few quarters until the company can roll out more mall-based stores as it plans its shift away from an overreliance on the tourist-oriented flagships in its overseas business.