International expansion driven through flagships
Although A&F in its current guise has been a mainstay in the American retail scene from the 1990s, it took until the end of the 2000s for the brand’s international expansion to gain traction. At the time, it described itself as “the essence of privilege and casual luxury”, with a product offer focused on ‘all-American’ premium casualwear.
International growth was driven by the opening of high profile flagships stores that gained much notoriety by having a highly sexually-charged atmosphere. Take the London flagship, which featured semi-erotic paintings on its dark walls, while its doors were flanked by shirtless models. Other flagships followed as far afield as Tokyo, Milan, Paris, Madrid and Singapore – although advertising in the latter market quickly fell foul of guidelines on decency.
Abandonment of sexualised marketing
While A&F’s performance in its domestic market had already come under pressure from the over-saturation of stores around the time of the global financial crisis, sales at its international outlets also soon began to flag. A turnaround program was set in motion in 2014, focused on cost-cutting and trendier merchandise that abandoned its logo-centric designs to a certain extent.
Most visible, however, was the decision to discontinue its sexualised marketing as consumer preferences had clearly moved on. This included the images on in-store photos, gift cards and shopping bags. The shirtless models also disappeared from the stores and it renamed its store staff ‘brand representatives’ rather than ‘models’. A new, brighter store design was introduced and it quit playing loud, thumping music in its shops.
Repositioning to cater to older crowd
Long-time CEO Michael Jeffries was ousted from A&F at the end of 2014, and was eventually succeeded by Fran Horowitz in 2017. It has fallen onto Horowitz to reposition the A&F brand and target a slightly older target market of 21- to 24-year olds, leaving sister brand Hollister – which actually accounts for 60 per cent of the group’s sales – to focus on the teen market.
This repositioning has created a brand that has abandoned its obsession with chasing after the perfect body, into a much more inclusive and body-positive approach that appears to be resonating with Gen Z shoppers. As part of the turnaround, speed to market has been increased, allowing it to compete more effectively with fast fashion retailers like Zara. Costly flagship stores have also been closed in recent years, including the London store, with eight international flagships shuttered during its last financial year. The Singapore closure can be seen in this context too.
All of the strategic changes had begun to bear fruit prior to the pandemic, with same-store sales at A&F up by 8 per cent in the quarter to January 2020. But even during the Covid-19 outbreak, the brand has performed reasonably well. A&F sales declined by 12 per cent during the year to January 2021, compared with a decline of 15 per cent at Hollister.
Throughout its latest financial year, store sales suffered from lockdowns in many of its markets, but e-commerce has managed to pick up some of the slack. Online sales soared to account for 55 per cent of group turnover – up from a third during the previous year – boosted by investment in its omnichannel capabilities, including the introduction of a curb-side pickup service at its US stores.
Boosting Asia performance is current focus
If there is still some weakness at A&F, it is that its international performance is still lagging behind its recovery in the US. Sales were down by 33 per cent in APAC last year. It currently operates 19 A&F stores in the region, but further closures of flagships could certainly be a possibility.
It could be argued that A&F’s new direction has not been embraced by its international customers to the same extent as those in the US. This has been acknowledged by the company, which has established offices in London and Shanghai to provide localised product and marketing.
A&F recently launched a ‘96 hours’ performance and athleisure range and is currently focused on inclusive fashion and wellness, which is a crowded market, so it remains to be seen if the brand can cut through the noise, particularly in its international markets. So it remains to be seen whether A&F will increasingly retrench to the US over the coming years.