Comeback Kid: The Fall and Rise of Abercrombie & Fitch

Roughly 10 years ago, walking into an Abercrombie & Fitch (ticker: ANF) store was an all-out sensory experience. You were hit with the scent of the brand’s signature fragrance, “Fierce,” and greeted by shirtless male models/sales associates. The lighting was dark and edgy, and the music was thumping.

Abercrombie described it as a “charged atmosphere that is confident and just a bit provocative.”¹ While iconic at the time, this in-store experience, synonymous with the Abercrombie & Fitch brand, reflected the roots of its downfall.

Abercrombie’s Exclusionary Branding: Signs of Trouble

In 2013, the Abercrombie brand was extremely popular. The company generated record sales of $4.5 billion in its 2012 fiscal year.² That same year, however, the company came under fire for issues related to its brand image and employment and environmental practices, including ignoring larger body types and people of color, sexual harassment in the workplace and burning unsold clothes rather than donating them.

These problems had existed for some time. Back then, Abercrombie’s branding consistently suggested the company cared little about appealing to a diverse customer base, despite the demographics of its potential market. In an analysis of ANF’s summer 2003 catalog, researchers found that 67 of 68 female models were white, and in its back-to-school catalog, only about 4% of the models were non-white.³

Back in 2012, you couldn’t find clothes bigger than a size Large in an ANF store. In contrast, competitor H&M had recently launched its first plus-sized line, and American Eagle carried sizes up to XXL.⁴ Former CEO Michael Jeffries built Abercrombie’s brand around the concept of the “preppy, youthful All-American lifestyle.”⁵ It was clear this meant a look that didn't reflect the size-related diversity of its customer base.

As depicted in the Netflix documentary White Hot: The Rise & Fall of Abercrombie & Fitch, the company had been accused of racial discrimination as early as 2003, facing class action lawsuits that alleged discrimination against minorities who applied for sales positions and reduced hours for minority employees.⁶ And in one incident, customer backlash led ANF to recall a line of T-shirts with offensive caricatures of Asian people.”⁷

According to Business Insider, "CEO Mike Jeffries doesn't want larger people shopping in his stores; he wants thin, beautiful people.”⁸ In a Salon magazine interview, Jeffries said: “We want to market to cool, good-looking people. We don’t market to anyone other than that. A lot of people don’t belong [in our clothes], and they can’t belong. Are we exclusionary? Absolutely.”⁹

Abercrombie’s Decline: ‘Toxic’ CEO’s Role in Falling Stock and Declining Sales

By 2013, despite record-high revenues, Abercrombie’s stock price had lost about a third of its value, according to FactSet. A long string of negative publicity and inflammatory comments from the CEO drove consumers away. The company’s exclusionary brand was perceived as alienating, not aspirational, especially since its clothes were usually priced higher than competitors’ offerings.

Consumers began to flock to other retailers such as Aeropostale and American Eagle, which promoted more accessible brands, and fast-fashion stores like Forever 21 and H&M that offered style at a significantly lower price. Abercrombie’s sales fell, declining by almost $1 billion between 2013 and 2016, and its stock price badly underperformed its peers.

It became clear that Jeffries’ leadership style had caused many of the company’s ethical and sustainability-related problems. Analysts noted that Jeffries’ vision for the company and his comments about larger bodies and “ugly people” no longer resonated with the target customer base.

While the industry was moving toward fast fashion with its lower price point, Jeffries maintained ANF’s higher prices to indicate a degree of economic exclusivity. The emphasis on Abercrombie’s club-like shopping experience (including salespeople who fit the brand’s exclusionary criteria) supported the company’s image but resulted in a costly overinvestment in its brick-and-mortar retail spaces.

We find it interesting that mounting problems with the ANF brand coincided with the rise of social media. Did the increasing availability of information help bring the company’s negative practices to light? Did social media allow consumers who felt rejected by ANF’s exclusionary marketing and limited sizing to share their views about the company more widely? Or were the brand’s problems exacerbated by a combination of these social media influences in a self-reinforcing cycle?

A brand is an intangible asset that can significantly drive value. If that perceived value is damaged, a company's stock price can take a hit, even if it recently achieved record sales.

Furthermore, a negative work environment caused high turnover among rank-and-file employees and ANF executives. Relying on Jeffries to guide the company made it hard for Abercrombie to adapt to a changing market. His age (69 years old in 2013) and the absence of a clear successor contributed to the problem. Investors expressed dissatisfaction through say-on-pay proposals, as shareholder approval of executive compensation deteriorated — from an already low 56% in 2011 to 25% in 2012 and 20% in 2013.¹⁰ Jeffries resigned in 2014 amid escalating criticism from the media and shareholders.

Abercrombie & Fitch’s Rebranding and Comeback

Abercrombie realized it needed to turn its business around and started to make changes. In addition to a new focus on online sales, the company made several improvements in the sustainability arena, as described below. In 2021, the company’s Investor Day presentation focused on the “Abercrombie is Back” theme, emphasizing efforts to appeal to a customer base that is increasingly conscious of sustainability and body positivity, and acknowledging the impact of workplace culture on financial performance.¹¹

Abercrombie’s Commitment to Ethical and Sustainable Sourcing

As part of its rebranding effort, Abercrombie implemented more sustainable practices, including ethical sourcing (a McKinsey survey found that Gen Z cares about ethical consumption, with 65% of respondents reporting they want to know the origin of everything they buy, including where, of what, and how it is made).¹² The company publicized new sustainability goals such as reducing water use in denim production by 30% and recycling 100% of hazardous waste from its U.S. stores by 2022.

ANF now publishes a Restricted Substance List to provide transparency around limiting certain chemicals in its products. They also test items regulated by law annually and publish ingredients and allergens on personal care products.

The company pledged to reduce total greenhouse gas emissions by 47% by 2030 and joined several industry groups that promote better environmental practices, including the Textile Exchange, Sustainable Apparel Coalition and Better Cotton Initiative. Abercrombie has pledged to source 100% of linen, standard down and standard wool, and 25% of cotton and polyester from sustainable sources. As a part of this effort, the company implemented a robust supplier management program that includes:

• Regular supplier audits.

• A vendor code of conduct.

• Policies to prevent using child labor.

• A policy against using sandblasted denim.

• Policies against sourcing from Uzbekistan, Turkmenistan and the Xinjiang Uygur Autonomous Region of China.

• A monitoring and remediation process.
  

ANF also became a signatory of the U.N. Global Compact, and in 2022 the company conducted its first materiality assessment to identify the most important sustainability issues for its stakeholders, focusing on its long-term business success.

All ANF suppliers are now audited and graded using a vendor code of conduct with metrics for work hours, wages, safety and controversial sourcing. Factories with multiple failing scores undergo a remediation program, and the company will stop doing business with plants that fail to remedy violations.

We appreciate that Abercrombie works with its suppliers on these efforts, particularly as it has first-hand experience with a turnaround. We believe these vendor policies will help to build a stronger, more stable supply chain and reduce headline risk. We also expect that using more environmentally friendly inputs for its clothes may resonate with today’s issue-driven Gen Z (and Generation Alpha) consumers.

Abercrombie’s Improved Human Capital Management

Before embarking on its rebranding effort, Abercrombie was criticized for the way it treated its employees. The company has since adopted industry-standard practices in human capital management, including employee incentive bonuses and training programs. For example, in the early days of the COVID-19 pandemic, when many retailers shuttered stores and furloughed employees, ANF offered severance pay to affected staffers.

In 2013, the company allegedly discriminated against people of color. Now, it embraces diversity among its employees, in the Abercrombie & Fitch brand and among its customers. As a testament to these efforts, Abercrombie was listed among Fortune’s Best Workplaces in Retail™ 2021.¹³

In keeping with our emphasis on making a Just Transition to a sustainable business environment, we believe evaluating labor relations across supply chains is crucial. ANF now requires factory workers to complete training on human rights, health and safety and trafficking. It is a Buyer Partner of Better Work, a partnership between the International Labor Organization and International Finance Corp., which brings together governments, employers, workers and international buyers to improve labor standard compliance and promote competitiveness in global supply chains. Abercrombie’s HERD (Helping Empower, Recognize and Develop) initiative is dedicated to developing female leaders in its supply chain.

From Exclusion to Inclusion: Abercrombie’s Extended Size Range

In what may be the most visible change from its outdated image, Abercrombie now sells a plus-sized line and offers many of its staples in extended sizing. Pants range from 23W to 37W and include extra-short, short, regular and long inseams. Dresses and shirts can range from XXS to XXXL.

While some critics say there is still room for improvement, the company is working to make an intentional line of extended sizes rather than making standard sizes larger. Corey Robinson, ANF’s Head of Design and Merchandising, noted, “We’re deliberately taking time to study the unique concerns in each category, speak to our customers and associates who wear those sizes, and test the fits with multiple body types.”¹⁴

The brand has become famous for its Curve Love jeans, which are made with a fabric designed to stretch and flatter a range of body types while retaining the structure of denim. The company has also invested in better-quality fabrics, zippers and buttons.¹⁵

Abercrombie’s Commitment to Sustainable, Value-Creating Changes

Abercrombie has clearly recognized the need to repair its relationship with consumers. “We began truly building relationships with our customers and with those who felt they were not served by the brand in the past. Developing any relationship is reliant upon two-way communication, so we started with listening,” Robinson said.

CEO Fran Horowitz has ensured her mission is highly visible on Abercrombie’s website: “Abercrombie isn’t a brand where you need to fit in — it’s one where everyone truly belongs. We lead with purpose, and that inclusive and equitable spirit is woven throughout all we do.”¹⁶

We do note areas where we think Abercrombie’s sustainability practices need further improvement. For example, while the company advertises environmentally friendly products and reports on these initiatives on a case-by-case basis, we find limited disclosures or product life cycle assessments of the sustainable products currently offered. But we give the company credit for making significant improvements and working to integrate sustainable practices and standards throughout the organization.

ANF’s Sustainable Future: Results and Potential Prospects

After years of effort by the company, consumers are reevaluating the Abercrombie & Fitch brand and many like what they see. ANF uses social media and influencer relationships to reach Gen Z and millennials. Examples include TikTok videos that feature influencers of all types demonstrating the fit of Abercrombie clothes and how they style them in their daily lives.

While still aspirational, we think this type of marketing is far more relatable than images of cookie-cutter models frolicking on the beach. The company says its social media reach increased by 1,980% from 2018 to 2021, achieving 343 million hashtags on TikTok.¹⁷

These new marketing efforts have paid off. Since 2021, ANF’s sales have increased by 54%, and the company’s stock has risen an eye-popping 775% over the last five years.¹⁸ It's important to note that past performance is no guarantee of future results, however, Abercrombie appears to have turned a corner. Its recent Investor Day presentation noted that the company is targeting sales of $4.1B - $4.3B from 2022 to 2025, which would return the company’s revenues to the peak in 2013. The company reported strong financial results in the third quarter of 2024, with a 14.2% year-over-year revenue increase, driven by double-digit sales increases across all regions and brands.

The Abercrombie & Fitch experience today is entirely different from what it was in 2013. With its rebranding, customers shopping online are likely to see photos of models of various sizes, across all races. The new Abercrombie appeals to a new generation of sustainability-minded, body-positive shoppers who previously felt scorned by the brand.

The company’s comeback demonstrates that sustainability practices such as workplace culture, leadership and environmental awareness can greatly affect a brand, its operations and financial performance.

The Abercrombie experience shows that customers will abandon companies unaligned with their values. It also shows that companies can recover from mistakes with more sustainable product, organizational and marketing changes.