Buckle Up: Abercrombie (ANF) Is Hot Again

Mar 20, 2022

Do you remember that MTV show “Laguna Beach”?

Maybe I’m dating myself here. But ask any MTV-obsessed millennial.

Without giving away any spoilers, I can safely say this show from the early 2000s encompassed the mantra of Abercrombie & Fitch.

Beachy. Preppy. And skin-tight.

And I bet if you close your eyes, you can smell the spicy scent of Abercrombie cologne wafting out of a dimly lit store and rushing over fellow mall-shoppers walking by.

Are you there in your mind? (My apologies if this stirs up memories of teenage angst.)

I led you down this sensory path to demonstrate what Abercombie represented two decades ago. Simply put, it was a brand for young, “beautiful people.”

And this branding ultimately proved to be Abercrombie’s Achilles heel.

The company was eventually found to have discriminatory practices, including its dress code. In fact, at one point the company would only hire “attractive” people. Now, you’re probably asking: How was that legal? It used a loophole by calling employees “models.”

With the changing social sentiment in years past, this policy was canceled in 2015.

But the market had “canceled” Abercrombie well before.

After peaking in 2007, ANF shares plunged more than 89% over the next decade, trading below $9 in July 2017.

And now, something interesting is happening.

Abercrombie Is Making a Comeback

Dare I say Abercrombie is getting its groove back?

Let’s dive into the LikeFolio data and have a look.

Mentions are pacing +46% YoY and +20% QoQ on a 30-day moving average.

In fact, Mention volume is reaching levels we haven’t recorded in years.

But the stock is trading below 2021 highs, alongside many other names at the moment.

A lackluster earnings report didn’t help; ANF shares dropped about 15% after the company released Q4 2021 earnings. The company blamed this on holiday inventory delays and omicron, which hurt them during the busy holiday season.

However, according to CEO Fran Horowitz, sales rebounded in late January as COVID-19 cases fell.

LikeFolio data confirms this.

And sentiment has been strong with the company as well, beating out notable competitors Gap (GPS) and American Eagle Outfitters (AEO).

So now I’m asking myself, does this present an opportunity for investors?

Alongside positive LikeFolio data, external research presents a compelling case for ANF:

  • Supply-chain constraints can be expected to improve alongside pandemic recovery. On its last earnings call, Abercrombie leadership noted, “We are caught up on receipts and do not anticipate significant inventory supply issues for the first quarter. We continue to execute against multiple initiatives to mitigate go-forward inventory disruptions, including updating our product calendar and diversifying our ports, carriers, and countries of origin.”
  • Abercrombie is expanding into activewear. Earlier this week, the company announced the move into the activewear space with a new brand: Your Personal Best, or YPB.
  • Abercrombie is transforming its brand perception. Its new activewear line encompasses a wider range of sizes, from XS to XXL.

And it is re-courting its millennial audience by providing outfit options for weddings, showers, and bachelor/bachelorette parties ahead of what is expected to be a record year for weddings.

Moves like this are making a real impact when it comes to ANF’s consumer happiness.

Abercrombie Sentiment is +79% positive, a 6-point improvement YoY.

Bottom Line: This Isn’t Your Momma’s Abercrombie

While Abercrombie faced major pains in the last decade-plus, rebranding efforts are working.

And the Street is punishing the company for short-term headwinds.

It feels like an opportunity is brewing. Looking ahead, we’re keeping an eye on a couple of key turnaround indicators:

  1. Have supply and inventory issues been resolved?
  2. What is the initial consumer response to Abercrombie’s new YPB athletic brand?
  3. Can the company continue to draw in a new generation of shoppers?

If we spot continued traction for ANF, LikeFolio members will be the first to know. And in the meantime, I just hope Abercrombie leaves low-rise jeans in the past. A girl can dream.

Megan Brantley
Head of Research, LikeFolio