Abercrombie & Fitch is cool again, after years as the most hated retailer in the US, because it caught up to what millennials and Gen Z want

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Abercrombie & Fitch has made a comeback.

  • It’s official – Abercrombie & Fitch is cool again.
  • The brand has seen a surge in its stock price and consumer interest in the past few years.
  • After being one of the most hated brands in America, A&F is now tapping into what millennials and Gen Z want.
  • See more stories on Insider’s business page.

Abercrombie & Fitch is cool again.

Yes, the same brand that former CEO Mike Jeffries once described being geared toward high school’s “cool kids” who weren’t “overweight or unattractive.” It featured dimly lit mall stores that emanated cologne and welcomed shoppers with shirtless male greeters. But the exclusive lifestyle Abercrombie sold wore thin, and what was once a teen status symbol became America’s most hated retailer in 2016.

The stock of Abercrombie’s parent company, Abercrombie & Fitch Co. (ANF), began falling in the early to mid-2010s and dropped below $10 per share four years ago, its lowest point since May 2000. Meanwhile, the company struggled to find a buyer.

Jeffries’ standard of beauty for the brand wasn’t resonating, and neither was he. “Companies that are in trouble are trying to target everybody: young, old, fat, skinny,” he once told Salon. “But then you become totally vanilla.”

Abercrombie
The brand was once a teen status symbol.

He stepped down in 2014, and current CEO Fran Horowitz joined three years later. Roughly a year after, ANF’s stock started to climb, and it’s soared 266% over the past year alone. The underlying reason is simple: the brand became cool again. And it doesn’t look like the Abercrombie of yore.

Ditching the privilege and the prep for a more down-to-earth look and refined basics, Abercrombie has emerged a more wholesome and on-trend brand targeted to those entering adulthood, a reflection of the increasing spending power and changing consumer behavior of millennials and Gen Z.

More diverse, authentic, and on-trend

Along with A&F’s shirtless models and stark black-and-white photo campaigns, Jeffries’ “cool” kids comment went out of style years ago. An A&F Co. spokesperson said that statement was made over 15 years ago and doesn’t reflect the brand’s current values.

While Hollister drives the majority of A&F Co.’s revenue (which totaled $3.6 billion in 2020), Abercrombie is growing its contribution thanks to a brand revival. JP Morgan CPA Matt Boss noted in a recent report that the Abercrombie product has “improved materially” over the past two years.

The shopping experience of scrolling through the Abercrombie brand’s website today is much brighter than its low-lit mall stores. The colors and fonts are light and breezy, rather than dark and somber. The clothes are casual and familiar, mostly free of the brand’s iconic moose logo. The floral dresses and ripped jeans, photographed against a white background and worn by a diverse set of models of all colors and sizes, give a vibe that places it between Reformation and Mango.

A post shared by Abercrombie & Fitch (@abercrombie)

Horowitz has affected a mentality shift for the brand. “We are all about encouraging a culture of belonging and brands that celebrate the individuality and authenticity of our associates and customers,” the spokesperson continued. It’s no coincidence that individuality and authenticity are part of the values that next-gen consumers want – everybody is a “cool kid” in the TikTok era.

The company was “wise” to evolve to a more accepting image, Jonathan Treiber, cofounder, and CEO of management solutions company RevTrax, told Insider. He recalls the brand’s “raunchy” days where couples kissing adorned the walls of the stores. Today, there are no pictures of lip-locking on the website, and no more high-contrast black-and-white photos. The photos now are colorized, depicting people smiling, lounging, and bike riding on the beach.

There aren’t even as many shirts or hoodies emblazoned with the words “Abercrombie” on them anymore. “This was likely a big move that was likely motivated by bad public opinion during some of the scandals but was something that resonated with younger shoppers who want less billboard-type apparel these days,” Treiber said.

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An ad from the old days of Abercrombie & Fitch.

He added that, although the company has previously relied heavily on teenage customers, “they’ve been trying to attract older youth and young professionals with casual wear.” A company spokesperson confirmed this, stating that Abercrombie seeks to cater to “global young millennials” while Hollister is the “quintessential brand of the global teen customer.”

In fact, Boss noted that the canny update of Abercrombie and its sister brand Hollister has carved out separate niches for the digital consumer in their mid-20s and the teen mall shopper, respectively.

That transition seems to have been in the works since shortly after Jeffries’ departure. In 2016, Abercrombie’s former executive chairman, Arthur Martinez, told Insider that the brand wanted to appeal to an older demographic, subsequently tuning down its once sultry ads. “They’re entering a true adulthood,” he said of Abercrombie’s targeted shopper. “They have a more refined sensibility, a great sense of themselves.”

Speaking to millennials and Gen Z

Abercrombie’s new look plays right into the hands of millennial and Gen Z consumers, who are less enticed by logos and more by brand values.

Younger generations also care about building a “capsule wardrobe” to be more sustainable, buying a few good items of good quality that will be seen as timeless as the endless cycle of fast fashion prevails.

Last year, Abercrombie’s high-rise super skinny was named top jeans on the top popular shopping app LIKEtoKNOWit. (More recently, its 90s-high-rise and ‘mom’ jeans have been all over TikTok.) According to Piper Jaffray’s semi-annual Taking Stock with Teens survey, the number of teens who said they didn’t wear Abercrombie and Fitch declined from 8% to 4% between spring 2018 and fall 2019.

The company says it has doubled-down on social media and influencer marketing. Its Instagram has nearly 5 million followers and has been featured on popular content creators such as Mik Zazon and Whitney Wiley.

A post shared by Abercrombie & Fitch (@abercrombie)

Last year, the brand launched The Abercrombie Equity Project, a social and racial justice initiative to “empower” the voices of “marginalized” communities. It partnered with The Steve Fund, a nonprofit that supports mental health initiatives for people of color. In support of Black History Month, Abercrombie Equity Project donated $250,000 to the organization. A spokesperson said the company is looking at becoming more sustainable, telling Insider the brand knows there is still more work to be done.

Despite Abercrombie’s social revival, the brand has become unprofitable in the past 12 months with revenue dropping by 14%. This might, in part, be because the pandemic hit the retail industry harder than the Great Recession did. By June 2020, Insider Intelligence predicted that retail sales worldwide for the year would be down 5.7% from 2019. The A&F spokesperson also noted that they made long-term investments to grow the brand.

Simply Wall St. estimates ANF stock will be up 62.7% in the next one to three years based on estimates from 10 analysts. UBS upgraded ANF stock from neutral to buy earlier this month, and JP Morgan raised ANF stock price target from $32 to $37. Boss of JPMorgan noted that Abercrombie expects a low-single-digit long-term growth rate in revenue.

As Saunders wrote in 2018, “In our view, the range – especially at Abercrombie – is now more sophisticated, is more on-trend, and better reflects what modern consumers want.”

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Americans are expected to spend their third stimulus checks on clothes, home improvement, and dining out – and it could boost stores like Kohl’s and Home Depot

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  • Outdoor dining and home improvement stores will benefit from Americans spending stimulus checks.
  • Value retailers like Walmart and Dollar General will also benefit, as in the past, Jefferies said.
  • Past stimulus checks have provided a crucial boost to the economy amid the COVID-19 pandemic.
  • Visit the Business section of Insider for more stories.

Retailers and restaurants are poised to see a boost in Americans buying goods if President Joe Biden signs the $1.9 trillion stimulus package, as expected.

Apparel, home improvement, outdoor dining, and travel companies are set to benefit from Americans who receive the extra $1,400 in their bank accounts, analysts at Jefferies said in a Monday note.

After the last stimulus checks in January, retail sales that month saw an 8.9% bump, indicating consumers want to spend the extra dollars, Jefferies said. This time around, the checks, which in most cases are more than twice the amount of January’s, could boost sales once again.

Read more: Buy these 14 stocks set to go into overdrive as consumers’ stimulus checks arrive in March, Cowen says

Some retailers who didn’t see much of a lift in the last stimulus round because of the “dead of winter” will likely benefit this time because of the spring season. With the nice weather, home-improvement projects and outdoor dining will be on the rise, so Home Depot, Lowe’s, Olive Garden-owner Darden Restaurants, and Outback Steakhouse-owner Bloomin’ Brands are poised to benefit. Apparel stores such as Ross and Burlington Coat Factory also will see a bump, per the report.

The January spending bill increased Americans’ year-over-year spending 20%, according to Bank of America research. Those who received the checks also spent 30% more on their credit cards than people who didn’t. Value-based retailers, like Walmart, Kohl’s, Dollar Tree, and Dollar General, saw an increase from the January checks, and they’ll “see outsized benefits” this time around, too, Jefferies said.

Companies most affected by shutdowns caused by the COVID-19 pandemic a year ago were department, clothing, and shoe stores, along with restaurants and furniture stores, Jefferies said. Those same companies are now likely to “generate the most opportunistic areas for spring 2021 stimulus benefit,” the note said.

One survey, however, wasn’t as optimistic that spending would ensue from the next round of stimulus checks. The survey, conducted by Morning Consult and commissioned by Bloomberg, found that 34% of Americans, many of whom lived in wealthier households, planned on putting the $1,400 into savings.

In April last year, many Americans received the first round of stimulus checks, worth $1,200. Most people used the money to buy the basics: groceries and medicine. Many also used the cash to buy takeout meals and even streaming and gaming services as they hunkered down at home. Big box retailers like Walmart and Target posted blowout sales for that quarter last year, saying stimulus checks were largely to thank.

At the time, the checks gave the economy a crucial boost, according to experts. Now, on the third round of government spending as the federal debt increases, President Joe Biden has said, “now is the time to go big,” adding that the government can’t spend too much to help the economy.

Read the original article on Business Insider