This story first appeared in the March 3, 2016 issue of WWD. Subscribe Today.
Abercrombie on Wednesday gave investors a fourth-quarter surprise with a 30 percent jump in profits, and its first positive comparable-store sales gain since the first-quarter of 2012.
“We’re very pleased with the way Q4 turned out, but there’s still a tremendous amount of work to get these brands to where they belong,” Martinez said.
The company — which operates the core Abercrombie brand, Hollister and abercrombie kids — said net income for the period ended Jan. 30 rose to $57.7 million, or 85 cents a diluted share, on net sales of $1.11 billion. Comps rose 1 percent in the quarter.
According to Martinez, the “tipping point has been reached in many respects with [the consumers’] first engagement with the brand.” The company has initially focused investment on the digital side to improve site design and ease of use because the “digital engagement has to be the showpiece of the brand going forward,” he said.
About 75 percent of sales still are from brick-and-mortar locations. About a dozen Hollister stores were revamped last year to reflect a new store prototype, a change that Martinez said has resulted in a double-digit lift in traffic and sales performance. “That gives us confidence to roll out our Hollister remodel to at least 60 stores in 2016,” he said.
Work on the core Abercrombie brand has been slower as the company redefined its positioning, from what its voice should be to its target customer, how the design aesthetic be reflected in the product and in-store elements from layout to fixtures to lighting. Martinez said the company is in the process of identifying a location for the new store concept prototype.
All that should help the company hit its stated goal to have the brand target a slightly older consumer, one who is post-collegiate around the mid-20s and far different from the teens who buy the California lifestyle aesthetic of Hollister.
Logo represents just 13 to 17 percent of the total business, although it’s slightly higher in the international business. In men’s, the bottoms business has stabilized, even though it still lags behind the women’s business and there is still some challenge in tops. Product for spring will show Aaron Levine’s design aesthetic, which Martinez said is “more colorful and with more different fabrications than before. There is an emphasis on wovens. Based on the early response, we are in a position to turbocharge the business.” Levine joined the company last summer as head of men’s design at the namesake division.
For women’s, dresses, accessories and sleepwear performed well in the quarter.
The company has included a selection of accessories products from other brands, such as Sam Edelman bags for women and a Jack + Mulligan weekender bag and knapsack for men. The company has also improved its mix of sunglasses and leather wallets on its site, as well as online exclusives such as an Abercrombie branded watch with leather strap for $120. For holiday, the site carried for the first time leather carryall tote options at $300 each, labeled A&F Collection.
According to Martinez, third-party products were included to extend the reach of the site and create some “stickiness” for online customer traffic. “Abercrombie & Fitch is underpenetrated in accessories in both the physical channel and online. We made a concerted effort to include jewelry, scarves and hats and expand the assortment. This is a high margin business and there’s no reason why we can’t have a strong competitive presence. Fran [Horowitz] believes this is a big profit-making opportunity for us,” Martinez explained.
Horowitz in December was promoted to president and chief merchandising officer, with the cmo spot a newly created role. She now has responsibility for all of the firm’s brands, and was formerly brand president for the Hollister division.