Abercrombie CEO and CFO Believe ‘Less is More’ for Stores and Inventory – Sourcing Journal
Abercrombie & Fitch’s brand reinvention in recent years has focused on moving away from its image-conscious marketing, but as the specialty retailer navigated the Covid-19 pandemic, its latest positive changes have been purely operational.
“The most important thing we talked about is running the business with less square footage and less inventory, and those are two big chunks of expense,” said Scott Lipesky, chief financial officer at Abercrombie & Fitch, during from the Jefferies Virtual Consumer Conference. “Moving inventory right now is very expensive, and the less you move – using this mantra of doing more with less – is good for the bottom line. “
Rising labor costs in stores and distribution centers as well as shipping and fulfillment have been a barrier to running a retail business, but Lipesky believes that Abercrombie was able to absorb some of the significant inflationary pressures in part thanks to its store optimization initiatives, which reduced occupancy costs by $ 115 million, or 20%, last year. A & F’s moved away from traditional flagship locations and instead focused on smaller format locations.
A&F plans to reinvest these occupancy savings into the accomplishment as it reconsiders its store base going forward. In total, the brand has around 250 leases expiring at the end of 2021, representing nearly a third of its store base.
“We will go into these negotiations as we always do,” Lipesky said. “For the department stores, we want to make them smaller, and for the stores we’re in, we want to switch to variable rent and try to find a deal that works for both us and the owner. We believe that we have continued long term employment opportunities.
Although the company took a little break from store remodeling plans during Covid-19, it is now waiting to see how mall traffic plays out as shoppers return to normal.
While it is uncertain how many stores the retailer will operate beyond 2021 – it had 731 stores open globally as of May 1 – expanding into Europe is a top priority.
CEO Fran Horowitz said during the session that the retailer is taking a close look at opportunities across the continent, setting up a team in London 18 months ago to “get closer to the customer”. Despite closing nearly 60% of its European store base for most of the quarter due to restrictions and lockdowns from Covid-19, Horowitz remains confident in the future potential of the market.
“We have been able to recruit some great talent, and we are excited about the acceptance of the product and the way they are getting closer to the consumer between marketing and the product,” said Horowitz. “We are making a lot of progress, and once the business normalizes, I hope the next door is opened and we will continue to see that acceptance. We looked at digital and we saw a great company in these countries. “
Lipesky co-signed Horowitz’s Business Confidence Levels of 2019, which reached $ 1.2 billion outside the United States that year despite what he called a “relatively high level of marketing. weak “and small teams in the EU.
Asia is another market that Abercrombie & Fitch management is looking to break into, with the retailer opening an office in Shanghai alongside London in late 2019. But Horowitz admitted the company is “behind” in the region because progress has lagged behind that of Western Europe. Asia is still Abercrombie’s smallest region with the lowest brand awareness.
Horowitz said the retailer has seen a “nice shift in proportion” in denim, one of the merchandise trends being addressed by executives.
“For anyone who thinks skinny jeans are dead, I’m here to tell you, I don’t believe it. I think skinny is just part of her wardrobe depending on the type of top she wants to wear or the shoes she is wearing that day, ”said Horowitz. “It’s exciting that they now have a new figure to buy, which is much looser, taller, wider leg and they have different names: mum, dad, boyfriend, cousin, brother. she needs a reason to buy something new, both the Hollister consumer and the Millennial consumer.
Going forward, Lipesky hinted at various investments A&F plans to make for the remainder of the year, including expanding its data and analytics practice and expanding the intimate apparel brand Gilly Hicks and recently launched Social Tourist, co-created with TikTok stars Charli. and Dixie D’Amelio and marks the first new brand Abercrombie has launched since 2008, according to Horowitz.
” We contacted [the D’Amelio sisters] and started collaborating with them in the fall of 2020, and everything we’ve done with them has been successful, be it publications, product, whatever, ”said Horowitz. “So we got together and said, ‘Why don’t we do something a little more long term together? The girls dreamed of creating a clothing line, and we were certainly in a great position. The combination of knowing this teenage consumer so well and having another larger audience that we can reach out to, this was the right time for both of us. “