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Abercrombie & Fitch is \u201cno longer a jeans and T-shirt brand,\u201d CEO Fran Horowitz boasted on Wednesday\u2019s fourth-quarter earnings call<\/a>. The apparel retailer soared on a 21% increase in 2023 sales of $1.45 billion\u2014up from $1.2 billion the year before\u2014but tepid sales growth predictions for 2024 have halted its skyrocketing stock. Following the earnings report, shares fell 9.7% in Abercrombie\u2019s worst week since August 2022.<\/p>\n The retailer expects net sales growth from 4% to 6%<\/a> for fiscal 2024, in line with estimates but lower than last year. Concerns over Abercrombie\u2019s ability to sustain revenue growth have caused shares to sink, Bloomberg reported<\/a>.\u00a0<\/p>\n Morgan Stanley<\/a> analyst Alex Straton said in a March 7 note that Abercrombie\u2019s profitability expectations could be too optimistic. Fashion brands, which rely on cyclical seasons and trends, are vulnerable to missteps, should they miss the mark on product rollout.\u00a0<\/p>\n \u201cThe risk-reward skews to the downside from current levels\u2026 We caution current growth and profitability levels could be difficult to maintain heading into [the second half of the year],\u201d she said.<\/p>\n Abercrombie reached high highs in 2023, with its performance landing it at the top of the S&P 1500 Index. It gained 285%<\/a>, higher than AI darling Nvidia\u2019s 239% surge. The retailer owes its sales success to revamping its inventory<\/a> to appeal to younger shoppers, as well as customers who don\u2019t mind inflation-induced higher prices.<\/p>\n Horowitz said the company intends to continue to lean on its expanding audience of both older Gen Zers and young millennials for future growth.<\/p>\n \u201cThe addressable market has gone from customers in their early twenties to late thirties, and we\u2019ve broadened all the offerings from a category perspective,\u201d Horowitz said. Abercrombie has launched both special occasion, casual, and activewear lines to dress young people for their weekend endeavors.<\/p>\n Young generations have a strong interest in clothing with 87% of Gen Z, as well as 82% of millennials, planning to buy fashion items over the next six months, according to a February UNiDays survey<\/a> of over 5,000 UK students. While Gen Z is cost-conscious and thrifty<\/a>, they also don\u2019t mind splurging a little extra on luxury goods. Gen Z and millennials are the generations most likely to make splurge purchases, including pricier fashion items. A June 2023 Harris Poll<\/a> of over 2000 U.S. adults found that 75% of Gen Z and 68% of millennials made splurge purchases last year.<\/p>\n But even young fashion enthusiasts may not be able to reverse the trends of uncertainty in the fashion industry. McKinsey & Company\u2019s State of Fashion 2024 report<\/a> predicts a 2% to 4% \u201cslower but normalized\u201d growth in the industry as a result of inflation and lack of consumer confidence. The Bureau of Labor Statistics noted a 0.6% uptick<\/a> this month in CPI for urban consumers in apparel.<\/p>\n The fashion industry may have an uncertain future, but Abercrombie has built back from hardships in the past. A decade ago, the company was struggling to remain relevant and liked.<\/p>\n Only eight years before being the highest-performing stock, Abercrombie earned the 2016 superlative of most hated retailer<\/a>. Previously the company leaned on the appeal of low-rise jeans and hypersexualized models, but its image soured after a slate of controversies<\/a>, including a class-action racial discrimination lawsuit and comments by former CEO Mike Jeffries calling the retailer \u201cexclusionary\u201d in a 2006 interview.<\/p>\n Horowitz, who became Abercrombie\u2019s CEO in 2017, actively worked to change the company\u2019s cliquey reputation perpetuated by her predecessor.<\/p>\n \u201cWe are a positive, inclusive brand, with a nice sensibility, very different from what they encountered in the past,\u201d Horowitz said in 2016<\/a>.<\/p>\n By 2019, Abercrombie had completely overhauled its inventory<\/a> and expanded its sizes. Stores ditched the loud music and thick clouds of perfume<\/a>. In a bid to separate itself from sister brand Hollister, it moved away from dressing teens in favor of pursuing young graduates and adults entering the workforce.<\/p>\n The strategy worked. In November 2022, the company posted an expectation-exceeding profit<\/a>, even in the aftershocks of the pandemic and high inflation. Over the past five years, it has more than tripled its market capitalization, which grew from $1.83 billion in March 2019 to nearly $6 billion.<\/p>\n \u201cWe grew up Abercrombie,\u201d Horowitz said in a 2022 Fortune<\/em> interview<\/a>. \u201cWe really focused on this young millennial, this young, mid-twenties consumer, and we got the response that we were hoping for.\u201d<\/p>\n<\/div>\n\nHow Abercrombie reclaimed the hearts\u2014and wallets\u2014of millennials<\/strong><\/h2>\n
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