How Abercrombie & Fitch Went From Teen Fringe Brand to Market Trendsetter

Sarah Freedman started shopping at Abercrombie & Fitch at age 12 in 2007, but by the time she was in high school, the brand had fallen out of favor with her fashionable Manhattan peers.

After a long absence, she returned to Abercrombie after seeing social media influencers praising the American retailer’s new branding. Now 30 and a size 12, Freedman finds that few stores have clothes that fit her as well. Abercrombie also offers “better value” at a time when she has become much more selective in her clothing spending, she says: “I tell everyone to go shop at Abercrombie.”

Freedman’s conversion helps explain how Abercrombie, a mall-themed star of the early 2000s whose preppy style and high prices eventually fell out of favor, has pulled off the rarest of retail comebacks. Over the past year, the brand has become one of the strongest performers in the U.S. stock market, outperforming Nvidia, the chipmaker that led the market’s rally.

“It’s a completely new company,” said Corey Tarlowe, an analyst at Jefferies. “What you see today is the result of years of work to reinvent this brand.“

The retailer once prided itself on being an exclusive brand that sold logo-emblazoned polo shirts to “cool, popular kids,” as former CEO Mike Jeffries put it in 2006. While the exclusive branding worked in the early 2000s, it quickly became a recipe for disaster, and allegations of discrimination and sexual exploitation followed.

The company officially began its turnaround when Fran Horowitz took over as CEO in 2014 and rebranded its Abercrombie & Fitch and Hollister brands. It now markets its namesake brand to millennial and Gen Z shoppers of all sizes, offering stylish clothing they can wear to work, home or even weddings. Hollister, its second brand, is aimed at today’s teens.

“We’ve looked at every part of this business,” CFO Scott Lipesky told the Financial Times. “We’ve completely transformed every part of the business.”

Abercrombie expects annual net sales growth of 10% this year, making it a standout among its peers. Last year, its revenue grew 16%, even as other apparel retailers said discretionary spending had declined.

Analysts expect Abercrombie to maintain its momentum this year, even as consumers tighten their belts. But its trendy, well-fitting products are only part of the reason: They also credit management with a behind-the-scenes inventory management strategy that has helped it make the most of its newfound popularity.

“Abercrombie and its merchants anticipated consumer trends and met them,” said Greg Portell, senior partner at consulting firm Kearney.

“We often hear about retailers looking to gather information about their consumers and investing in their knowledge of them,” Portell added. “But being able to implement these measures at scale and at pace remains the biggest challenge in retail.”

Jessica Ramirez, an analyst at JHA, said Abercrombie now offers more tailored and “basic” items, which include staples such as T-shirts, button-down shirts and separates, making it less reliant on seasonal items that are more likely to be on sale.

While Abercrombie has seen viral success with its tailored “Sloane” women’s pants, a trend that fashion forecasting firm WGSN says first emerged about five years ago, it has continued to diversify its offerings rather than relying on a few popular items.

“We want a balanced assortment,” Lipesky said. “If you’re overloaded in a certain category … that can be really good if that category is performing or it can be really bad if it’s down.”

Abercrombie began managing its inventory more strictly after stores temporarily closed in 2020 due to pandemic-related lockdowns, Lipesky noted. The company quickly realized it could be more productive with less inventory by working with suppliers to “hunt,” or quickly order, styles that sell well.

Depending on the category, Abercrombie now places orders a few months or weeks in advance, versus the traditional industry norm of about nine months in advance.

“The customer is changing faster than ever, the industry is changing faster than ever, and as a result, your inventory process needs to be as agile and flexible as ever,” Lipesky said.

Abercrombie announced fewer promotions in the first quarter, which helped it increase its gross profit margin from 61% to 66.4%. Rivals Aritzia and American Eagle Outfitters, on the other hand, reported gross profit margins of 38.3% and 40.6%, respectively, for the quarter.

“The best traders in this field don't rest too long on what has already proven to be a popular trend…[they]“Buy lightly based on what will work or be popular,” said Dylan Carden, an analyst at William Blair.

Abercrombie also emphasized fit and finish, which Mark Cohen, a Columbia Business School professor and former CEO of Sears Canada, said was a winning strategy.

“Making sure the merchandise fits well…that’s what’s caused the downfall of a lot of brands that create beautiful things that no one can wear,” Cohen said.

Better-fitting clothing hasn’t just attracted plus-size customers. Sabrina Ramkhelawan, 30, said that even as a size 0 in the U.S., she struggled to find clothes that fit her well elsewhere.

“If I can’t even fit it, who is it for?” Ramkhelawan asked, adding that the fit of Abercrombie’s clothes has made it his go-to clothing store since 2021.

Joey Yu, 24, said he started shopping at Abercrombie last year for the first time since high school after noticing it was selling trendy styles he sees on TikTok at a reasonable price.

“Abercrombie does a good job of balancing trend and style with quality and comfort of clothing,” he said, adding that the brand beat out Uniqlo and PacSun to become his top retailer.

Despite continued inflation, Lipesky said Abercrombie has been able to add higher-priced products to its assortment, which consumers have embraced.

“We are selling dresses at prices we have never seen before, but that is because we have earned the right to sell them to our customers,” he said.

After reestablishing itself in its home market, Abercrombie is now looking to expand abroad. Its operations in Europe and Asia combined accounted for less than 20% of its net sales in the first quarter, but grew even faster than its U.S. business.

The company is now building teams in Shanghai and London to “localize its assortments,” Lipesky said.

“The company is in an ideal position to launch its global growth,” he said. “That's what's ahead of us.”