Abercrombie & Fitch beats markets expectations and slows rate of decline

abercrombie and fitch 2015 campaign

Abercrombie & Fitch put a smile on the market yesterday as the teen retailer, saw traces of traction from its long term turnaround strategy. The group which includes the A&F and Hollister brands confounded analyst expectations sending shares up 16%.

Since dispensing with its founder and CEO earlier this year, the business has radically overhauled its image at flagship label Abercrombie & Fitch, shrinking logos and reducing logo reliant product, removing topless male models from store entrances, dispensing with overtly sexualized imagery in ads and judiciously using trends to update product without diluting brand personality.

Q2’s numbers indicated that the business’s efforts are starting to pay off  with a significant slowing in the rate of decline. Most of the gains were from work at Hollister, where management has revamped stores and distinguished the offer from Abercrombie & Fitch. Here, same-store sales beat market expectations falling just 1%, against a 6% fall in Q1, market estimates had been for them to dip by 4.7%.

At Abercrombie & Fitch, Q2 sales were down 7% against a 9% fall in the previous quarter. Group revenues for the same period fell 8% to $817.8m, their slowest decline in four quarters pleasantly surprising analysts who forecast them coming in at around $811.5m.

Abercrombie & Fitch management said that it expects its same-store sales to continue to improve going forward.

But executive chairman Arthur Martinez is very clear about the scale of the turnaround task: “Our results exceeded what we signalled in our first-quarter earnings call and give us confidence that we are on the right track, although we recognise we still have much to achieve.”

“We continue to take steps to revitalise our performance, maintaining an intense focus on improving the customer experience.We made good progress in Hollister and Abercrombie Kids, but more modest progress at Abercrombie & Fitch.

“We understand the challenges ahead. We are taking the steps necessary to deliver continued improvement in our performance and to establish very clear brand positions that will guide all elements of our business and provide the foundation for long-term profitability and growth.”

Earlier this month Abercrombie & Fitch announced a raft of senior hires in buying and merchandising to help jumpstart the brand’s turnaround, bringing in executives from the likes of Tommy Hilfiger and Ralph Lauren.

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