Abercrombie & Fitch’s rebrand struggles to maintain financial growth

Abercrombie & Fitch traded their sex appeal and discriminatory hiring practices for diverse models, sizing, and more sophisticated apparel offerings. This massive rebranding allowed the company to successfully reach young adult audiences in the first two years, but has failed to maintain momentum in 2022. 

The company’s financial success in early years of the rebranding has essentially disappeared, as they report net losses of over $33 million so far this year. Sales in the first two quarters of 2022 were down 1.7% and cost of sales increased by 19.4% compared to the same period last year, according to the latest SEC filing. The increase in cost of sales accounts for approximately 62.5% of total income loss during the first two quarters of 2022. 

Abercrombie’s risk factors in their 2022 report, which have been consistent since fiscal year 2020, included maintaining favorable brand recognition, marketing products to consumers in several diverse demographic markets effectively, and failure to engage customers. 

“The goal of a rebrand is because you think that there is a problem with perception and that you need to change it,” said Chad O’Connor, part-time marketing professor at Northeastern University. 

It’s a “tougher road” to recovery for a business that has had constant bad exposure, said O’Connor. He stresses the importance of proving long-term commitments to representation and support of social causes. Without consistency, the company loses credibility and their rebranding efforts seem less sincere.

Factors such as name, logos, and experience with a brand contribute to the consumer perception of a brand and what they stand for. 

In the case of Abercrombie, a rebrand meant a reversal of aspects of the brand that incited a negative consumer perception. The company had to make changes that reflected the new direction of the brand and aligned with consumer demand, said Carlos Castelán, Managing Director at the Navio Group, a retail management consulting firm. 

“They’re looking to get out from under those negative associations by, in some cases, taking more drastic measures,” said O’Connor. 

The company saw gradual growth in sales and income between 2017 and 2019, but took a step backward during the 2020 pandemic due to their retail-based strategy. In 2021, Abercrombie experienced a significant recovery with a 18.8% growth in sales since 2020, but has failed to maintain growth into fiscal year 2022. 

Abercrombie’s shirtless male models and logoed t-shirts were all the rage in the early 2000s, but the brand’s problematic exclusivity strategy, culturally insensitive designs, and waning customer interest led to its financial downfall. 

“Abercrombie was such a common example of a company that does not have your best interests at heart that I could see why they would feel that they would need to pivot,” said Alexander DePaoli, an associate marketing professor at Northeastern. 

After the resignation of former CEO Mike Jeffries, Abercrombie closed unprofitable stores, widened their size offerings, and shifted their target demographic older. They also aimed to create a new store experience and increase the diversity of models and employees. 

CEO Fran Harowitz took control of the company in 2017 and facilitated these changes. Abercrombie’s net income grew from $7,094,000 in 2017 to $74,541,000 in 2018, according to their 2018 SEC filing. With extreme net income growth, it seemed clear in this first year that Abercrombie’s changes were producing positive returns for the company. 

“I think this is definitely a pretty successful revitalization of the brand, even if it may never get to the heights that it once was,” said Castelán. 

Abercrombie will need to address both their increasing cost of sales and improve their customer perception in order to increase revenue during the rest of fiscal year 2022. They have an opportunity to harness the excitement around the new brand again, but have not made a full recovery yet.

“I think having a really good understanding of the customer, then buying into that and creating great experiences around it is really important,” said Castelán.

DePaoli ran a sentiment analysis on Abercrombie, which provides a report on how consumers feel about the brand through social media. Based on his sentiment analysis, he believes consumers have an “overwhelmingly positive” perception of the brand at this time and that their rebrand has been received well by consumers. 

Abercrombie increased their marketing expenditures from 14.3% of net sales in 2021 to 15.4% of net sales in 2022, despite their decrease in sales and income. 

“In the case of Abercrombie & Fitch, there’s a certain calculation that they’re trying to figure out. People know this name. They’ve seen it in malls. They’ve seen stores. They’ve seen stuff with our logos,” said O’Connor. “But they might not have a clear, problematic perception with the brand because they didn’t experience it themselves.”In Abercrombie’s second quarter report, they announced their 2025 Always Forward Plan which sets goals for the company over the next three years. Their focus areas for fiscal year 2022 include executing brand growth plans, accelerating digital capabilities, and integrating ESG practices and standards throughout the company.