Dressed for Post-Pandemic Success: Abercrombie & Fitch (ANF)
traditional retailers Show Unexpected strength During covid recovery
Pandemics – and email – drive unexpected winners. Among the most unlikely is Abercrombie & Fitch.
The clothing retailer does business under three main brands: Hollister, Abercrombie, and more recently a social-media platform branded as Social Tourist. And over the past several months, email and web intelligence firm Random Walk began to sense improving performance.
(Full disclosure: Brookside Research has a data-sharing relationship with Random Walk.)
“Both Abercrombie and Hollister are showing declining significant email promotions,” says Greg Robin, founder and CEO at Random Walk. Reductions in such email discounts often indicate improving performance at a company, Robin says.
That robust operating picture was also bolstered by improved organic online engagement, as stores were reopened to post-pandemic foot traffic.
Sure enough, last month, Abercrombie reported its best results in more than a decade.
Was Random Walks’s email-based analysis a fluke? We dug into the retail supply chain in the Eastern U.S. and learned it probably wasn’t.
A Well-Planned Road to Retail Recovery
Our independent research reveals that Abercrombie’s success has been roughly a decade in the making. Starting back in 2013, lagging performance drove activist investors to push for the ouster of quirky CEO Mike Jeffries. In 2017, a web rebrand went horribly wrong. Many of its flashy destination flagship stores were shuttered. Retail square-footage was slashed. As recently as March 2020, the retailer was under intense pressure from Covid-driven store closures.
Financial performance was equally tacky. In the quarter ending in November of 2020, the company hemorrhaged $37 million in operating cash flow, to report a $47 million loss in net earnings.
Return on operations was a municipal-bond–like 4%.
But beneath the carnage, new CEO Fran Horowitz quietly repositioned the company. Starting in 2017, she began focusing on a local-oriented retail strategy that placed stores within reasonable distance of her youthful customers.
The goal was for Abercrombie to take advantage of its diverse geography.
Courtesy Abercrombie & Fitch
Direct reports revealed improving foot traffic and demand by both shoppers and distributors in the Northeastern United States. Sales in key brands were up about roughly 60% year-over-year, in both in-store and online sales. The company also reported that some lines rebounded to higher than pre-covid levels.
What Random Walk’s email analysis picked up on was the reduction in discounting that emerged as this brick-and-mortar retailer understood that price isn’t what drove its customers.
Growth was all about which clients wanted to go out and shop – and which ones didn’t. It only took 10 years, and a ton of promotional emails, to figure that out.
