Many store marketers are recognizing that today’s young shoppers are looking for trendy new looks and fabrications, particularly in jeans, and are stepping up to address this demand. Early results have been very encouraging – Hollister (a division of Abercrombie & Fitch) reported a comparable store sales increase of 5% in the 2017 second fiscal quarter while American Eagle Outfitters saw sales increase by 2%. Even Abercrombie & Fitch stores had a smaller drop in sales (down 7%), giving hope that in the second half of this year, even this division will improve the sales momentum. I believe Hollister’s acceptance and growth is sustainable.
Today, Hollister is a brand that teenagers are coming back to. It has the California laid-back look, and its clothing is engaging and well designed. Hollister now also features the Gilly Hicks brand of intimate wear, swimwear, lounge wear and sleepwear. These products round out the Hollister assortment. I think it is notable that Club Cali, Hollister’s loyalty program, has over 6.6 million members after just one year of operation. That suggests that customers are engaged and will come back to shop.
Meanwhile, the Abercrombie & Fitch stores are finding their niche with young customers as well. Here, too, management initiated a loyalty program this year. It already has 2.3 million members, indicating to me that there is new, growing enthusiasm for the A&F merchandise. This division is striving to stress quality and good taste. However, the company must continue to work to refocus its merchandise look since very few customers still want to wear the logo and the irrelevant date of its founding (1892). And, it seems that Hollister is giving its brother division strong hints on how to better attract and serve a target customer. New A&F prototype stores are smaller, about one third to one half of existing store size. So far this year, 6 new prototypes have opened.
It’s worth noting that these performance improvements are taking place despite the impact of reduced mall foot traffic. And, when you look at other mall-based retailers serving the junior and young adult market, there are some other gains as well.
America Eagle Outfitters also had a comparable store sales increase of 2% in the last quarter. American Eagle now has reported 10 consecutive quarters of sales increases. They are benefitting greatly from the popularity of many of their jeans, a top seller for the entire company.
The Urban Outfitters portfolio saw an overall drop of 2% because of self-admitted poor merchandising choices in their woman’s apparel and accessories categories that did not resonate with customers. At a store level, comparable sales increased 2.9% at their Free People stores, but decreased 4.9% at Anthropologie Group and 7.9% at Urban Outfitters. The company indicated that the decline of sales was offset partially by continued growth of internet sales which grew by 10%.
At the same time, one senses that there are fewer promotions being offered by Hollister and American Eagle to attract customers. That makes sense given positive customer response to the latest trends, such as the destructed jeans that are so popular right now. And, I like that it will once again focus management attention on merchandise decisions rather than get caught up in promotions.
At Abercrombie & Fitch, the stores are focusing on reaching out to a broader customer base to attract some slightly older customers as well. Of course, Abercrombie & Fitch’s recent entry into China on Alibaba’s TMall should also provide another way to boost their sales. Hollister has been on TMall since 2014 and American Eagle will undoubtedly be there soon. In addition, an A&F store will open in Saudi Arabia in September 2017 with Majid Al Futtaim. The Middle East could be a new area of growth for the company.
I think the back to school season is kicking off a better sales period for these stores. Stores are ready with fresh looks and seem committed to keeping up with trends to stay that way. While the recent hurricane Harvey decimated shopping in Texas, which may affect total results, I think the rest of the country saw a better shopping momentum. And, that suggests positive news that should carry into the all-important holiday season.