Abercrombie & Fitch reported a strong fourth quarter of 2017, returning to positive comp territory, besting revenue and profit estimates, right-sizing its store footprint, increasing direct sales and continuing integration of its omnichannel initiatives.
Direct-to-consumer (DTC) sales comps were up 18% for the quarter, representing 34% of total sales, up from 31% in the fourth quarter of 2016. More than 70% of Abercrombie’s DTC traffic came from mobile during the quarter, a key metric given the deep penetration and engagement with smartphones.
“The investments we made in this area are paying off with a 14% improvement in (mobile) conversion,” CEO Fran Horowitz told analysts on an earnings call.
Omnichannel continues to be a major focus and is especially critical given the company’s youth demographic.
“The focus of our efforts is on continual testing, learning and adapting to make sure we have the most effective integration of the physical and digital world,” Horowitz said. “That’s the foundation of making sure our customers’ engagement with our brand is the best it can be whenever, wherever and however they choose to shop with us.”
In 2017, Abercrombie expanded its omnichannel capabilities in more markets and saw an increasing number of customers take advantage services like buy online, pick up in store, order in store and reserve in store, said Joanne Crevoiserat, EVP and COO
“We’re continuing to learn and improve the customer experience with these capabilities both online and in our physical stores, allowing seamless migration between the two environments,” Crevoiserat said. “Gen Y and Gen Z customers have an increasing expectation of being able to engage with the brand on any platform or medium they have at the moment, wherever they are in the world.”
Crevoiserat said Abercrombie is finding the physical and digital experience increasingly connected. “Digital is often a starting point for product discovery and purchase generally, but not always the endpoint,” she said. “Our physical stores still serve an important role for the customer journey, from a brand experience, trial familiarization and fulfillment perspectives.”
Since 2010, Abercrombie has closed more than 400 stores, representing a third of its total, with plans to shutter 60 more in 2018 as it searches for the ideal footprint in the new era. Like many other retailers it has been retooling its physical spaces, rolling out more small-format stores with larger fitting rooms that integrate technology into the customer experience.
For the quarter, Abercrombie handily beat estimates on the bottom line, by 28 cents per share, and the topline, besting Wall Street’s consensus by $30 million. This compares to a rough Q4 in 2016 when the company missed on both scores as its retool was in process and retail in general was in a worse spot.