Abercrombie’s growth eclipses Nvidia. 📈 While Nvidia (NVDA) continues to make headlines with their not insignificant one year stock climbs, growing quietly in the background has been all-American collegiate company, Abercrombie & Fitch (ANF). Last year Abercrombie soared 300%, and year-over-year (YOY) they have lifted 355.39% - ahead of Nvidia, which climbed nearly 240% in 2023 and has lifted 273.49% YOY. And while Abercrombie faced a downturn in 2022, and their stock has dropped 14.28% over the last five days after reporting, over five years since 2019, they’ve surged 341.53%. 

Despite being ‘haunted by the alleged sins’ of former CEO Mike Jeffries and being sued by thousands of former employees, the fashion retailer appears to have won the hearts of the youth market with their Southern Californian beachy vibes brand, Hollister. After clearing inventory, Abercrombie set their sights on ‘young millennial and Gen Z shoppers heading back to work, school and social lives after the pandemic’, according to Bloomberg.

Abercrombie’s fourth quarter (Q4) net sales grew 35%, and Hollister brands grew 9%. 👖 Abercrombie last week beat Wall Street estimates with ‘a mind-boggling 21% sales gain’ in their ‘holiday’ quarter. They reported significant profit growth that they attributed to increased sales prices boosted by lower freight and material input costs. And perhaps they also benefited from the 90s fashion revival. 

Abercrombie’s Gen Z brand Hollister is not new to metacommerce, either. The company embraced Snapchat with AR (augmented reality) Shopping Lenses for virtual clothes try-ons, and has invested in interactive fitting rooms, and channels like Instagram and TikTok. CEO Fran Horowitz reported that their teen consumers have been bucking trends, saying:

‘While we saw growth in both channels, stores outperformed digital, with around 70% of Hollister sales done in stores in 2023. The teen consumer tends to start their journey digitally, but more often finishes in the store.’ - CEO Fran Horowitz

Chief Financial Officer and Chief Operating Officer Scott Lipesky warned, however, that the benefits of steady cotton pricing since 2022 could be offset later in the year by ‘supply chain snags’ caused by Red Sea shipping rerouting.

Can AI help fashion retail?

We’re getting more middle class and AI presents new opportunities. 🛍️ An estimated 113 million people could enter the global consumer class in 2024 - that’s more than 20 times the population of Aotearoa New Zealand. This has the potential to increase opportunities for global fashion retailers to scale up by using AI and virtual reality. 

A Global Market Insight report valued retail AI in 2022 at US$6 billion. 🤖 The report projected growth of 30% by 2032, suggesting that tech-savvy Gen Z’s desire to seek out digital shopping destinations is likely to ‘encourage traditional retailers to adopt AI solutions’. 

Vogue Business predicts 2024 will see an AI takeover, but warns of technology teething issues: 

‘Don’t be surprised if a brand gets unwittingly caught up in an AI-related misstep: perhaps a transparency disclosure might be left off when an AI model underhandedly steps in for a human one, or an ad campaign could give someone six fingers.’ - Vogue Business

And while ‘long, lanky humanoid robots’ do the heavy lifting for Blackstone-owed (BX) Spanks - literally - and Amazon (AMZN) - which tallied 750,000 robots in 2023 - Inside Retail’s Cassandra Kelsall suggests ways AI could make fast fashion faster, writing:

‘Artificial intelligence (AI), the metaverse and ChatGPT are creating the biggest buzz so far this year, and it’s no surprise to see the fashion industry catching the wave.’ - Cassandra Kelsall, Inside Retail

Kelsall lists the opportunities for apparel retailers, which include:

• Personalised experiences: Using AI to create unique marketing, from chatbot virtual stylists, virtual try-ons, to multilingual support
• Fast-track processes: AI data gathering to speed-up trend analysis to new clothes production
• Modelling new looks cheaper and faster: Using avatars, 3D AI models and the metaverse 
• Swift design activation: Using AI to design packaging and eliminate focus groups analysis

Are people buying what retailers are selling?

Earnings a wolf in sheep’s clothing for some. 🐑 Last week was quarterly earnings reporting for some big US fashion retailers listed on the NYSE, with mixed results. While in the past five days Gap (GPS) climbed 13.17%, following their reporting, investors sent other retail brand stocks plummeting: American Eagle Outfitters (AEO) fell 5.56%, Nordstrom (JWN) sank 12.52%, Abercrombie & Fitch (ANF) dropped 14.28%, Victoria's Secret (VSCO) plunged 27.45%, and Foot Locker (FL) nose-dived 28.03%.

Fashion retail reporting wrap 

🧢 American Eagle 

Zack’s attributed ‘brand strength’ as a force for American Eagle Outfitters (AEO), which also benefited from lower costs of freight and materials to beat earnings. Like Abercrombie, American Eagle has used AR, debuting their AE x Snapchat AR Jeans Guide in 2021, following their 2020 shoppable TikTok live streams collab with GenZ home shopping brand, Ntwrk. American Eagle last week beat earnings, reporting sales up 12%, and announced their ambitious growth strategy.  

👕 Gap 

Gap (GPS) owns Gap, Banana Republic, Athleta and Old Navy, which grew 6% over the holiday period during their Q4, with the company’s overall gross margin jumping 5.3% to a profitable 38.9%. The news boosted the company’s after hours trading, ending up 13.17% over the past five days. Gap announced this February they’d brought on fashion designer Zac Posen as creative director, with CEO Richard Dickson telling CNBC, ‘We’re getting our vibe back’.

🧥 Nordstrom 

While North American fashion retailer Nordstrom (JWN) announced they expect a revenue decline in their department store in 2024 - prompting a stock fall of 12.62% over the last five days - they announced their focus on Nordstrom Rack stores and digital sales, which have a higher sales conversion rate, according to CEO Erik Nordstrom.  

👙 Victoria’s Secret

Victoria's Secret (VSCO) ‘forecast a glum first quarter’, says CNBC, which rounds out an overall five year stock slump of 54.79% for the world’s largest intimates retailer that also owns clothing brand Pink. JP Morgan analyst Matthew Boss suggested Victoria’s Secret has fallen out of favour with consumers, who may have swapped over to Amazon or Lululemon (LULU). 

US fashion retailer snapshot 📸

While Abercrombie & Fitch’s growth appears untouchable, the majority of US-based fashion brands are up year-over-year (YOY):

• Abercrombie & Fitch (ANF) stock has lifted 28.03% year-to-date (YTD), and is up 355.39% year-over-year (YOY) 
• American Eagle Outfitters (AEO) stock is up 6.32% YTD, and up 76.06% YOY 
• Capri (CPRI) is a holding company with ready-to-wear brands Versace, Jimmy Choo and Michael Kors. They have slumped 7.49% YTD, but are up 13.49% YOY
• Foot Locker (FL) is a global footwear and apparel retailer. Their stock is underperforming in the markets, down 21.78% YTD and down 39.53% YOY
• Gap (GPS) stock has lifted 3.83% YTD and has soared 111.14% YOY
• Hanesbrands (HBI) includes global brands Hanes, Champion, Bonds, Bras N Things, Playtex, Wonderbra, and Berlei. They are up 19.91% YTD and up 6.72% YOY
• Nordstrom (JWN) is down 4.43% YTD, and down 3.59% YOY
• PVH (PVH) owns brands including Tommy Hilfiger and Calvin Klein. Their stock has climbed 7.17% YTD, and soared 80.27% YOY
• Ralph Lauren (RL) is an American brand known for iconic polo shirts. Their stock has lifted 22.06% YTD and surged ahead 61.29% YOY
• Victoria's Secret (VSCO) is down 29.65% YTD and has fallen 38.29% YOY

And Birkenstock (BIRK), which made their NYSE debut last October, has benefited from high US demand of their popular sandal, sending their stock up 18% since listing. 

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