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How Abercrombie & Fitch Snapped A Five Year Losing Streak

March 7, 2018, 9:04 PM UTC
An Abercrombie & Fitch Co. Store Ahead Of Earnings Figures
Pedestrians are reflected in the window of the Abercrombie & Fitch Co. store on 5th Avenue in New York, U.S., on Tuesday, May 26, 2015. Photographer: Craig Warga/Bloomberg via Getty Images
Photograph by Bloomberg via Getty Images

The Abercrombie & Fitch brand has finally stopped shrinking.

Parent company Abercrombie & Fitch Co (ANF) said on Wednesday that comparable sales—a key measure of a retailer’s performance that strips out newly closed or opened stores—rose 5% at the 126-year-old flagship brand in the three months ended Feb. 3, their first quarterly increase in five years and well above Wall Street estimates. In that time, A&F has closed dozens of stores, and grappled with general consumer boredom with its apparel and the rising popularity of chains like Zara and H&M.

That performance, coupled with an 11% jump in same-store sales at Hollister, its larger sister chain, lifted companywide comparable sales 9%, and bolstered Wall Street’s confidence that the company is firmly emerging from a dark period.

Shares rose 12.5% to their highest level in two years.

After a bumpy difficult period following the exit of CEO Mike Jefferies in 2014—when A&F was known for hyper-sexual catalogs, semi-naked store models, and its ubiquitous logo—the 126-year-old brand is finding a new identity among shoppers. The brand is also being smarter about how much merchandise it stocks, and how. It has pared back a lot of its assortment to focus on what works, sped up production so it can jump on trends with more agility, and it has exited many weak malls, the better to focus on perhaps fewer but certainly better locations.

“We had a huge opportunity to be much more focused on our key items, make sure our inventory is invested in the right items,” Abercrombie & Fitch Co CEO Fran Horowitz told Fortune in an interview. “It’s about being much more focused in the stores, having a stronger point of view.”

At the same time, A&F’s performance was so strong that it scaled back its 2017 store closing plans to 39 stores across its brands from 60. Improvements were across the board at A&F, with products for both genders performing well. The company has also introduced a new store prototype for A&F that eschews doors at malls to make the store seem more open, and includes better lit fitting rooms. At Hollister, 150 remodeled stores have better light and lower sight lines to give the store a more open, spacious look.

The company is also being more inventive on the marketing side, such as a 12-episode reality show starring social influencers on YouTube for Hollister brand. And it is focusing more of its promotion on mobile devices, where 70% of online visits take place.