Store Most Likely to Succeed: A&F;
With its blaring music, racy photos and hot magazine, clothier Abercrombie & Fitch has found the formula for creating up-to-the-minute cool that--for now--has young fashion mavens flocking to its stores for pricey plaids and cargo pants.
Of course, today’s hip is tomorrow’s passe. The trick now for A&F; will be staying hot enough to beat already sky-high sales and earnings, which is no easy task, especially given its core customer, the notoriously fickle trendy crowd in their late teens and early 20s.
As it stands, many on Wall Street and on hundreds of College Avenues nationwide are betting on the company, one so adept at giving customers what they want that its shopping bags are sought-after commodities and its catalogs are sold by subscription.
To analysts, A&F;, which started out more than a century ago as a camping outfitter, is a case study in how to build and sell an image, and a model to such brands as Levi Strauss that are struggling to redefine how young people perceive them. In its continual drive to remain on the leading edge of hipness, A&F; overlooks not even the smallest details, from the appearance of its stores and store staff to the magazine, posters and shopping bags it uses to hype its name.
“They are very single-minded and very driven,” said Richard Baum, senior retail analyst at Goldman, Sachs & Co., who said earlier this year that the stock was his favorite for the second year in a row. “Everything they do is directed to making sure they are truly representative of the lifestyle of their core college-age customer.”
Abercrombie & Fitch reinvented itself in 1992, when the company, now independent, was an ailing part of Limited Inc. Chief executive Michael Jeffries fashioned the store as the place to get all things collegiate--fresh, young and still traditionally styled. The now 196 A&F; stores sell updated classics, bright plaids in soft materials, preppy dresses and tops with modern, skinny straps, and plenty of athletic-type clothes meant to be worn off the playing fields.
Said one teen shopper about her favorite clothing, “It’s not that you blend in, you just don’t stand out.”
Abercrombie recruits 75% of its sales staff, known internally as “brand representatives,” from a particular university campus near each store; the rest are from other area colleges. They are hired, the company said, for their ability to project the Abercrombie & Fitch ideal.
“We’re not interested in salespeople or clerks,” said Lonnie Fogel, the company’s representative and director of investor relations. “We’re interested in finding people who represent the brand’s lifestyle, which is the college lifestyle--leaders who have charisma, who portray the image of the brand.”
At the stores, loud rock music is kept at a decibel that seems designed to keep anyone older than their target age group out of the store, a virtual grown-up-free zone sure to gain the favor of anyone younger than 25.
And those younger than 25 can’t get enough.
In 1998, sales increased 56%, from $521.6 million to $815.8 million, with sales in stores open at least a year up 35%. Net income during the period increased 111%, rising to $102.1 million from $48.3 million the year before.
Abercrombie & Fitch stock, which opened at $16 in the fall of 1996, closed at $91.25 on Thursday. The company, which sold 15% of shares to the public in 1996, completed its separation from Limited Inc. last May.
A&F; plans to boost sales by expanding into a new market with an offshoot store aimed at children from 7 to 14 called Abercrombie. The company hopes to add 15 to 20 stores this year to its 13 existing Abercrombie stores, a company executive said. None are yet planned for California.
The company also plans to open 36 Abercrombie & Fitch stores in 1999.
A&F;’s skyrocketing growth is about the only thing that gives analysts pause. The company is charged with beating its own stellar sales performance, a difficult task.
“They can’t afford to miss a single beat,” said Baum of Goldman, Sachs. “Their challenge is to remain popular, which oftentimes isn’t that easy to do.”
It is a lesson for which Abercrombie need look no further than its former sister chain, The Limited. Once lauded for its ability to tap into teen trends, the chain announced last year that it would close stores to staunch a $40-million operating loss.
Limited has since worked to add more conservative clothes, to court women in their 20s and 30s and to leave the younger market to one of its parent company’s other chains, Express.
A&F; hopes to stay relevant by keeping in touch with its customers. In addition to input from its store staff, the company employs a network of college students throughout the country, called “field editors,” who every week call in information about what’s cool on their campuses. The students also write articles for A&F;’s catalog, the Quarterly, a compendium of the chain’s lifestyle.
Liberally sprinkled between articles on surfing and other leisurely pursuits are Bruce Weber photographs of beautiful young men and women cavorting on athletic fields and romping on waterfronts. Many of the models are scantily dressed, to the consternation of many parents who have complained about the explicit shots.
The same black-and-white photography appears on posters in A&F; stores and on its shopping bags, which have become hot collectibles among young teens. Seven bag styles are issued each quarter, with extras during the holiday season.
Marissa Purcelli, a 13-year-old who lives in West Los Angeles, confesses that one of the biggest reasons she shops at the A&F; store at the Century City mall is for the photo-adorned bags, which she and her friends cut up and hang on their bedroom walls.
“The guys are really good-looking. I saw them and I’m like, oh my God, I love these bags,” she said, adding that she hesitates to request specific bags for her collection.
“It’s a lottery,” she giggled. “Whatever they give you, be happy with it and count your blessings.”
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Dressed for Success
Since its 1996 spinoff from The Limited, Abercrombie & Fitch has outperformed its former parent on the New York Stock Exchange. In just the last year, Abercrombie stock has surged 120%, versus a 35% return for The Limited. Monthly closes and latest (stock market was closed Friday):
Abercrombie & Fitch
Thursday: $91.25
The Limited
Thursday: $38.75
