Photo: Abercrombie & Fitch
Abercrombie is abandoning teenagers
Following the flagship’s 14th straight quarter of negative comps, Abercrombie & Fitch is forging ahead on a plan announced earlier this year to go after a slightly older customer: 18-to-25-year olds.
Yesterday on the company’s second-quarter conference call with analysts, Fran Horowitz, chief merchandising officer, said Abercrombie’s brand positioning will be “the iconic American casual luxury brand for the 20-something consumer.”
“Today [the] majority of our customers are over 20,” added Mr. Horowitz. “So we are targeting that particular consumer.”
Shares nonetheless tumbled 20 percent on the day as the company showed a wider loss in the quarter, predicted sales would “remain challenging” through the second half, and revealed it would close another 60 doors, or around eight percent of its store base. While the company blamed its problems on weakness at flagships largely due to dismal tourist traffic, the shift to focus on a slightly-older crowd didn’t excite investors.
“We see limited reasons for older customers to shift back to a ‘teen’ brand and, frankly, there are better brands and lifestyles for the 20+ customer to focus on,” Wunderlich Securities’ Eric Bederv wrote in a research note. “All in all, we believe the company faces a multi-year process before any material operating turn.”
On the other hand, the bankruptcies of American Apparel, Aeropostale, Quiksilver and Pacific Sunwear have underscored the challenges teen chains have faced from newer competitors such as H&M and Zara, weak mall traffic, and changing spending priorities by teens.
While Abercrombie began de-emphasizing logo looks in 2014, moves this year to relax its dress code for associates and remove bare-chested male greeters show the chain is committed to targeting a more mature consumer. A new branding strategy focusing on “confidence” and “character” also marks a shift away from the sex-driven status ads used in the past.
“Research into today’s young adult consumer demonstrates a shift in what confidence means,” said Mr. Horowitz. “It is no longer outer directed but center directed. Image is less important than character and it is more important to feel confident than to appear confident.”
- Abercrombie & Fitch Reports Second Quarter Results – Abercrombie & Fitch
- Abercrombie & Fitch (ANF) on Q2 2016 Results – Earnings Call Transcript – Seeking Alpha
- Abercrombie & Fitch Can’t Get the Grown-Ups Into the Kids’ Clothes – Bloomberg
- Abercrombie & Fitch sales drop as brand faces identity crisis – New York Post
- Abercrombie & Fitch Reports Drop in Quarterly Sales – Wall Street Journal
- Abercrombie & Fitch might have made a huge mistake – Business Insider
- A&F tells models to keep their shirts on – RetailWire
Discussion Questions
Discussion questions: Would Abercrombie be better off targeting young adults over teens? What are the biggest hurdles the chain faces in appealing to the 20-something crowd?
Poll
BrainTrust
Ryan Mathews
Founder, CEO, Black Monk Consulting
Doug Garnett
President, Protonik
In a perfect world, yes, but those young adults grew up thinking of Abercrombie as a teen brand, so that’s likely to be a little harder than it sounds. Twenty-somethings are ready to differentiate themselves from teens for a variety of reasons. Abercrombie has based its brand on its appeal to teenagers. Switching inventory and marketing is one thing; erasing brand image and building a new brand is quite another.
Smart move. Get away from the low-end, moody, neck bent from phones/gaming Millennial and early Generation Zers. Stick with the gang that is making money. Key with this group is to start carrying a broader line. For guys, add in the affordable sport or travel jackets. The business-casual or hip dinner calls for that jacket and shirts that match in a unique manner. Also add in the men’s slacks — jeans just do not always cut it and you can never have too many pairs! Crank it up AF and go get some market share back!
Maybe eight years ago we walked into an A&F on Fifth Ave. It was as dark as a nightclub with music pumping at volumes that matched the ambience. It was clear the company had moved far from its “L.L. Bean-like” roots. We still joke about it.
Oh boy. Talk about an uphill struggle. Rebranding Abercrombie & Fitch would be a huge undertaking, fueled by abundant advertising and serious social media outreach. Pulling working 20-somethings away from H&M and Zara won’t be easy … I don’t envy the people in charge of the campaign.
So in 10 years will they shift to 26- to 35-year-olds?
This is a tough challenge, but the key is bringing the customer along with them as the customer matures. Yes, 13-year-olds do mature into 18-year-olds, though it sometimes doesn’t seem like it.
Allowing best customers in a consumer-centric retail environment to ‘grow-out’ of your brand is a dereliction of someone’s responsibility.
A dereliction of responsibilities indeed where the assets of customer base, brand equity, locations, staff and processes are not adjusted as the demographic changes. “The cheese” has legs and the business of retail has to go where the wallets are in order to succeed and grow. In a sector plagued by incrementalism, shifting offerings to better serve customer needs does make sense.
It’s a tough journey to rebrand and find new customers (or rediscover the older ones … ) It’s probably easier to create a new brand, which isn’t exactly an overnight fix either. Maybe a more likely strategy is to hope enough of the competitors for the teen market go out of business and that A&F can be the last one standing. Hope as a strategy … sell that one to Wall Street.
I think this is going to be an uphill battle for them to appeal to young adults since their brand is so heavily based on teen buyers. However, their current model isn’t working so they need to do something. Getting the word out about their new apparel and strategy will be one of their biggest issues. If they are pursuing young adults over teens, their apparel needs to better reflect the lives of young people who have now entered the workforce.
Probably a good move for them at a time when they need to re-focus the brand. However, to appeal to and fully engage this age group they will need to do more than just focus on the product range and target marketing. Millennials, as we know, are more prone to associating themselves with companies that are ethically sound, treat their employees well and have a high degree of social responsibility. Perhaps part of the brand re-focus therefore should be on these areas too.
Executed well, this just might work for them. It recognizes the problem that no brand is eternally young. And is there really such a thing as a “teen brand”? I don’t think so. There are only brands which at a given point in time have images that attract high numbers of teens. No brand can maintain that position forever.
Abercrombie no longer has that image connection with teens. So “growing up” with the former teen consumers who have brand loyalty can be a good play. In a sense, this is what Banana Republic did as it shifted styles with its loyal buyers as they aged.
Even more, teens generally enjoy a freshness – brands that aren’t old. At this point, in teen eyes, Abercrombie is old. So it’s no surprise they aren’t resonating with teens today.
I hope this works for them
Seeking a new customer base by abandoning the old one is never a wise move.
The bottom line: Teenagers already abandoned Abercrombie. On Abecrombie’s website, their classic flannels are already mixed in with pinstripe and oxford button-downs that appeal to young professionals. It makes for quite the humorous dichotomy.
Will it work? The brands Abercrombie seems to be attempting to emulate, like Gap and J.Crew, are having their own economic woes in the shifting market.
It looks like Abercrombie is trying to revert to their old price-points, but without the trendy name to back it. They’d be smart to sell cheap for a year or two to get their following back. We aren’t willing to pay $70 for an Abercrombie shirt anymore. They’re going to need to win us over.
The problem is that this doesn’t seem to be a position of strength. It’s one thing to target a demographic because you have a great new idea that will “work.” It’s quite another to target because the idea doesn’t work (any longer) on another group. This seems to be the latter.
The biggest challenge is pretty basic: there are a lot of stores out there, and once you strip — no pun intended — the sex angle from A&F, it’s not going to particularly stand out among them.