It was all about our Abercrombie & Fitch logo, and the company was on fire.

Things were going up and up and up.

But then, those sales started to move in the other direction.

Abercrombie & Fitch is learning the hard way that sex doesn't always sell.

Abercrombie faced rising fast fashion competition and mounting lawsuits over discrimination, and the CEO who built the company's exclusive image retired abruptly.

And everyone was left thinking, well, maybe that was the end of Abercrombie & Fitch.

But Abercrombie's team began wondering, who could have convinced to buy the brand again?

I just knew that the Abercrombie adult brand had a huge opportunity.

Here's the case study on how Abercrombie went against industry standards, abandoned its teenage consumer, and aged up.

First, the company had to distance itself from its former leadership.

Who's going to be their new leader?

Everyone was kind of looking internally at Fran Horowitz.

She's an industry veteran who had an eye for trend, who understood merchandising.

The business was in a downward spiral, and I knew I had an opportunity to bring these iconic global brands back to their rightful place.

The main objective was to stop giving up profits.

Because not only did Abercrombie have a significant discount issue, but its other brand, Hollister, was also cannibalizing its business.

They were essentially the same product with two different logos on them, two different price points.

So the first decision we had to make was, do we actually have one brand or do we have two?

Like, do we pull this together and just own one marketplace?

To answer that, Abercrombie began by looking at other marketplace opportunities.

What part of the consumer base is being underserved?

Typically, we see a younger generation setting fashion trends.

Anyone scrolling through TikTok or Instagram, you're influenced by a younger content creator.

But Abercrombie looked in the other direction.

There's now this absolute huge raft of women making good money.

They need to look cool and they need to look professional.

But really, all they've been offered up until now is the same brands that their mothers were wearing.

So Abercrombie decided to grow up with its customer.

Now we're talking about targeting a 25-year-old.

And that means that we're selling to people 20s, 30s, into their 40s.

A group that Abercrombie calls the young millennial.

But how does a brand just change who it sells to?

Now, the question, not easy.

The buying habits of millennials are different really than any other generation.

You could lose relevancy with them.

The company looked at data around the audience.

With logos out of style, Abercrombie kept them off the majority of its products.

Instead, the company found that this older audience cared more about an item's quality.

Something that had been taken out of the clothes in previous years to lower production costs and compete with fast fashion.

Abercrombie says it reinvested in better buttons, zippers, and softer fabrics.

But the specifics about its fabrics are proprietary information.

It's a little bit of inside baseball to be perfectly honest.

So I won't go too far on it.

But it's about working very well with your sourcing team.

It took several years to see the style and quality changes reflected in the assortment.

But then...

The big, big turn started with denim.

Denim was a strategic starting point since it was a key category for the brand and also one of the main items that excluded customers in the past.

Either you fit in it or you didn't.

Today, they've really focused on fit.

Based on customer reviews, focus groups, and surveys, Abercrombie found that many women in its new audience were frustrated about this waist gap in pants.

The leg might fit, but you might have some room in the waist.

Getting a gap at the back of my waist.

To solve this, Abercrombie invested in 3D fit tools and software that provide data on thousands of body types.

The company also changed its fit models to better align with its average customer.

Through those changes, Abercrombie's team came up with a solution to solve this gap problem.

A new pant design that uses an additional two inches of material from the hip through the thigh.

And that brought us a whole new, much more diverse audience than we'd had in the past.

From there, it was able to expand into other categories of its assortment.

What is the most important thing to this young millennial?

And frankly, that is going away for a long weekend with their friends.

And during that long weekend, there are so many opportunities to clothe them.

But the challenge with expanding an assortment is knowing how much of which products in which sizes.

Old Navy a few years ago started to say, we're going to have plus sizes.

We're going to have petite sizes.

They were just left with too much inventory.

They had an inventory problem.

Abercrombie implemented a strategy of examining its stockpile on a weekly basis and adjusting based on what's happening in the market.

And this helped prepare Abercrombie for the industry's biggest hurdle in the past few years, the pandemic.

One day we came in and we had to close all of our stores.

And what we learned then is we need less inventory tomorrow.

When Abercrombie closed its stores in March 2020, it also canceled clothing orders with its supplier, which effectively struck its stockpile down 7% from the year prior.

And as the market came back, we were starting from a very low inventory and it was good.

The company has since continued this strategy.

By 2023, it had brought levels down 30% year over year, enabling it to move with changing trends.

To win with the customer, it's all about delivering newness.

You're getting new information.

You're learning stuff every day from the consumer.

And this consumer-centric approach is fueled by Abercrombie's shift away from the storefront.

The Abercrombie stores of today not only look different from its previous iterations, but there's also a lot less of them.

We had a lot of extra baggage when it came to real estate.

The locations were great, but the size was three times what we needed.

From 2017 to 2021, Abercrombie reduced its store square footage by about 25%.

This allowed it to decrease rent costs by about $230 million.

All the while, the company has invested in growing its audience online.

Now, around half of its sales happen digitally, which is about 20 percentage points higher than the industry average.

When you have that much digital business, you get visibility into the browsing patterns and the shopping patterns because it's happening digitally.

And we're leveraging a lot of that data to be able to build rich customer profiles.

These profiles could signal things like which customers have an affinity for denim and which prefer dresses, so that when the company decides to do a discount offer, it knows which customer to target with which deal.

All that data gives us a much better likelihood of converting that customer into a sale.

This data has helped the company become more efficient with marketing spend.

Abercrombie is lucky in the sense that the brand itself is already known.

They don't have to put a ton of marketing dollars into brand awareness.

What they do need to do is convince people that it's good.

A lot of the excitement about Abercrombie Adult particularly happened from the consumer.

It's unreal.

Abercrombie's coming back?

I think I bought every dress that Abercrombie has.

Never thought I'd be wearing this much Abercrombie in my early 30s, but here we are.

That for a marketer is just absolutely the holy grail.

While much of this was organic, Abercrombie also incentivizes its customers to post with a program it calls Creator Suite. 60% of consumers were influenced to buy something when they saw it on social media.

It is not a new story, but it remains a relevant one for the industry.

And in 2022, when the company was still in the thick of its rebrand, Abercrombie announced an ambitious goal.

Achieve top-line sales between $4.1 and $4.3 billion as well as a minimum profit of 8% operating margin.

And?

We executed that almost two years early.

For Abercrombie & Fitch, it wasn't a story of a rising tide lifts all boats.

They've won and they've grown in a really challenging and declining market.

We have seen their stock have this insane rally.

It was even growing faster than Nvidia and this is in the year of AI.

The company says it's been able to sell its products at higher prices with fewer discounts and now pivot to a different focus of the market.

One of the surprising things that happened from that aging up strategy is that the company's audience went from being skewed mostly male to mostly female.

Today it's a bigger women's business.

An analyst say that shift plays into Abercrombie's larger audience change, given that millennial women spent more on apparel for themselves last year than any other generation.

It is the biggest market out there.

If they did not win with their female consumers first, it would have taken so much longer if not been successful at all.

Still, some big questions remain.

In late 2023, a new lawsuit accused Abercrombie & Fitch of enabling former CEO Mike Jeffries to run an alleged sex trafficking operation.

When there's pending litigation, we frankly don't comment on it.

Yet many analysts today see Abercrombie as a successful reinvention.

I think there's a lot of opportunities for brands and retailers.

You know, we think about The Gap, J.

Crew.

They might not need as big of a rebrand as Abercrombie & Fitch had, but definitely looking on how to refresh and stay relevant with their consumer.

Analysts do point to a tumultuous market and declining industry-wide demand as some hurdles ahead for Abercrombie.

Because in this industry, the challenge is always remaining relevant.

Gen Z famously think millennials are very uncool.

Millennials are a big fan of Abercrombie right now.

So how are they going to connect those two dots?

How are they going to transition the people that are in their teenage years now into Abercrombie fans when they're in their 20s?