Abercrombie’s CEO on Giving Consumers What They Want

The retailer is beta testing a shopability format on Instagram for its Abercrombie and Hollister brands.

Hollister has better social engagement with customers than its older sibling, Abercrombie.

Abercrombie & Fitch Co. seems to be doing better at figuring out who the Hollister & Co. customer is — but it has a ways to go before it does the same for the Abercrombie brand.

The divide was evident in the retailer’s fourth-quarter results, with Hollister showing ongoing improvement in comparable-store sales while Abercrombie’s continued to slide at a double-digit rate, not helped by a major marketing campaign that misfired.

Fran Horowitz-Bonadies, chief executive officer, said that at its Hollister brand, the company has been “talking” with the consumer on digital channels on a 24/7 basis and recently rolled out a loyalty program. “We have five million members and our engagement with each one has resulted in higher transactions…We speak with them wherever and whenever they want to speak with us.”

The company did a takeover on Feb. 9 for National Pizza Day with Snapchat, with which it’s partnered before, and there were over six million views, according to the ceo. As it is about to launch a similar loyalty program for Abercrombie, both brands currently also are in beta testing with Instagram, Horowitz-Bonadies said. The beta test provides an element of shopability on Instagram posts so consumers who see an item they like can hit a button and buy that item.

The company also advertises on YouTube.

In the fourth quarter ended Jan. 28, the retailer saw net income fall 15.5 percent to $48.8 million, or 71 cents a diluted share, on a net sales decrease of 6.9 percent to $1.04 billion. Comparable store sales at Abercrombie fell 13 percent, but the surprise was a 1 percent comps gain for Hollister. The gain represented the second quarter of sequential comps increases at the teen brand. Comps were down 2 percent in the second quarter, and were flat in the third quarter. Also showing improvement were sales in international markets for both brands.

The Hollister brand in January brought back its Australian-themed Gilly Hicks intimates line at select U.S. Hollister stores and at the brand’s web site, and more than 65 additional Hollister stores were converted to its new concept store that was first developed nearly two years ago.

At Abercrombie, the company said that it needs to sharpen the brand identity, as well as create an invitational message to its customer base. A major marketing campaign in the fall generated more than a billion views, but didn’t provide any meaningful impact with the consumer.

The company last month showcased its first new store concept prototype in 15 years for its Abercrombie brand in Columbus. While there are still new learnings to be had, Horowitz-Bonadies said the concept was based on “consumer feedback. For the past year, we spoke to one-and-a-half million consumers on what they are looking for in their shopping experience. The store has a runway at the front of the store with over 20 looks. It directs the consumer in understanding how to put the outfits together. We also use technology in the fitting room for a special experience as they spend time in the store deciding what to purchase…. We are still in the early innings. We will be rolling out six more this year.”

The technology in the rooms allows customers to adjust lighting so they can see how an outfit might look at the beach or in a nightclub, ring for customer service in each room; there’s adjustable sound to play music in the room, and an area to recharge their phones while trying on clothes.

“Particularly at Abercrombie, [before] there was a much bigger focus on presentation than on customer engagement and customer focus. There’s been almost a 180-degree turn on making sure we keep the customer at the center of everything we do. It’s been [our] most important singular focus,” the ceo said.

The changes at Hollister over a nearly two-year period, plus a shift in global pricing to be more in line with the competition overseas, have helped the brand compete more effectively on price, product and experience in international markets, Horowitz-Bonadies said. At Abercrombie, international markets also saw an improvement in the response from consumers to the brand’s seasonal assortment, boosted by a change in how the retailer engaged with its customer in the stores, the ceo said.

She acknowledged that there’s some overlap in the age range of the Hollister and Abercrombie customer base, as well as some similarities in the psychographic profile.

Although shares of Abercrombie shot up 15 percent to $13.45 in early-afternoon trading on the New York Stock Exchange, Jefferies analyst Randal J. Konik attributed that in part to “elevated short interest.” He has a “hold” rating on the shares, noting that while the long-term initiatives are on track, several major headwinds are expected to persist for the near term.

The retailer noted in its earnings report that the “environment is likely to remain challenging in 2017.” The company also said it expects comps to improve for the full year, but remain challenging in the first half.