Abercrombie & Fitch Co.

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Abercrombie & Fitch Co.

founded: 1892

Contact Information:

headquarters: 4 limited pky. e
reynoldsburg, oh 43218 phone: (614)577-6500 fax: (614)577-6565 email: [email protected] url: http://www.abercrombie.com

OVERVIEW

Abercrombie & Fitch is a retailer of high-quality sport and casual clothes, with spring and fall lines. The back-to-school and December holiday seasons are its busiest. Merchandise comes from 58 different manufacturing contractors throughout the world. The company operates over 150 stores, primarily in regional shopping malls. Principal customers are college students and the Generation X age group, though older generations can be seen wearing its clothes, too. Chairman and CEO Michael S. Jeffries calls the company a "lifestyle retailer."

COMPANY FINANCES

In the company's 1997 annual report, CEO Jeffries wrote, "[We] surpassed all our financial goals, outpacing even the most generous forecasts. Our growth is managed and healthy. . . ." Sales in 1997 were $521.3 million, with comparable store sales up 21 percent. Net income was $48.3 million, up 96 percent from 1996. Earnings per share were $.94, up 74 percent from 1996.

In its first day of trading on the New York Stock Exchange in 1996, the stock grew 45 percent, from $16.00 to $23.13. Since then, earnings have been spectacular, with significant increases and several quarters beating Wall Street's projections. In 1997 alone, the stock nearly doubled in price. By the end of 1997, Abercrombie & Fitch had seen 22 straight quarters of improved profits. The company's first monthly sales report in April of 1998 triggered a stock price rise of 9.7 percent.

HISTORY

Abercrombie & Fitch began as an outfitter of campers, hunters, and fishermen in 1892 in Manhattan with the partnership of David Abercrombie, a former miner and trapper who owned a camping-equipment factory and shop, and Ezra Fitch, one of his customers who was an outdoorsman and an attorney. The two had conflicting visions of the company's mission, and Abercrombie ultimately decamped in 1907. Fitch continued on with new partners, though in 1909 the company almost folded due to the expense it incurred in mass-mailing a 456-page catalogue of its inventory. The efforts eventually paid off, however, and the business built up a sizeable customer base.

In 1917 the company opened its first store in mid-town Manhattan, which housed its own casting pool and a log cabin that founder Fitch had built. It became a purveyor of hip flasks during the country's Prohibition years. Other non-sporting equipment included cameras and indoor games like mah-jongg. It boasted many prominent patrons such as Teddy Roosevelt, whose African safari's required many of their wares; Charles Lindbergh; Amelia Earhart; Admiral Richard Byrd; and Ernest Hemingway. Fitch retired in 1928 selling his stake to his brother-in-law, James Cobb, and an employee named Otis Guernsy, who would become president and vice-president, respectively. Shortly thereafter, the company acquired Von Lengerke & Detmold, a New York carrier of guns and fishing equipment, as well as the gunsmith Griffin & Howe. In its heyday from the 1920s through the 1960s, the company's stores featured 15,000 kinds of fishing lures and 700 kinds of shotguns. Eventually it diversified to cater to tennis and polo players, ice skaters, and golfers. In the 1920s it gained a presence outside of New York with a yachting-related store in Hyannis, on Cape Cod in Massachusetts. By the time of the stock market crash of 1929, annual sales stood at well over $6 million, but at the high point of the Depression, they sank to a low point of $2.6 million.

The enterprise that had come to tout itself as The Greatest Sporting Goods Store in the World added stores in various other cities, though its store in Manhattan remained its epicenter. It featured taxidermed fish and big-game heads such as, elk, moose, caribou, and buffalo as wall decor. Winter-only stores opened under the Abercrombie & Fitch name in Palm Beach and Sarasota, Florida. Summer-only stores appeared in Southampton, New York; and Bayhead, New Jersey. In 1968 the company held a one-day warehouse sale, where it sold off all manner of archaic and unusual items at terrific bargains, attracting 90,000 patrons. A loss of $500,000 the following year inspired a similar sale in 1970. By that point, Abercrombie & Fitch seemed to have passed its prime as a retailer of products meant to help people experience and enjoy the great outdoors.

The company fell upon hard times in the 1970s, and by 1977 it filed for Chapter 11 bankruptcy protection and shut its doors, possibly forever. In 1978, a sporting retailer called Oshman's bought the company and proceeded to expand the erstwhile number of stores and the range of products it had sold. In 1988 Oshman's sold Abercrombie & Fitch to The Limited, a popular garment marketer, which limited the fallen empire's focus to clothes. In 1992, when it was having further financial difficulties, Michael Jeffries took the helm of Abercrombie & Fitch and shifted the target consumer base toward college-age youth. In 1996, then-owner The Limited spun off about 16 percent of it in an initial public offering, and in 1998 it distributed the rest to its shareholders.

STRATEGY

According to the 1997 annual report, the company will be keeping its annual store growth at no more than 20 percent per year, as it seeks to prevent "dilution of the brand." Brand-name recognition is central to Abercrombie & Fitch's appeal, especially to youth. Many of its garments sport the company's name or initials, often with "1892," the year of its birth. The company envisions itself and its products as being "in." The aesthetic it fosters and conveys in its stores' environments—from the overhead music to the attitude of the personnel—are similarly calculated to instill a sense of leisure. In the 1997 annual report, Jeffries wrote that the customers "come to be part of the lifestyle," and that they "want to be part of the experience," which involves "being seen in our stores."

Company representatives travel the country to visit colleges and youth "hot spots," in order to gain a sense of what its target age group is wearing, or would want to wear, as well as how they live in general. According to Jeffries, "[We] know what they wear, listen to, read, how they spend their time, what's hot, and what's not."

In a rare company/customer relationship, Abercrombie & Fitch individually answers each of the 2,000-plus monthly e-mails it receives from its public. A note on the comments section of the company's web site reads, "Every e-mail we receive is read and considered by a real live person." As further evidence of the company's positive relations with its customers, there is a liberal return policy: "No Sale Is Ever Final."

INFLUENCES

A significant goal is to expand the company's geographic reach. Plans for 1998 included adding 32 more stores. The chain grew rapidly within the United States in the late 1990s. It discontinued selling men's neckties and dress shirts in 1996; but it has diversified by adding additional women's fragrances and personal products. In 1997, the company stopped allocating additional space to women's apparel. A children's garment line is under consideration.

CURRENT TRENDS

Abercrombie & Fitch has created a unique venue as a menu for its next seasons' garments—a quarterly release appropriately named A & F Quarterly, which seems to function as a magazine, too. (How many clothing catalogs sell for $5.00 on the newsstands or include editorials and lifestyle articles, such as musical and culinary comment?) It welcomes submissions of stories, essays, and photos. With a circulation of over 100,000, A & F Quarterly, has grown more quickly than expected, and in 1998 the magazine began accepting advertisements. Jeffries calls it "a powerful brand reinforcement," and "an innovative sourcebook of what's cool and new." A year's subscription can be had for $10.00 by calling (800)432-0888. The company's web site, a similar medium where the company promotes its wares and culture, with 2.5 million hits per month, also takes subscription order information for the publication.

PRODUCTS

Abercrombie & Fitch sells men's and women's casual clothes, such as sweaters, sweatshirts, shorts, boxer shorts, baseball-type caps, T-shirts, and jackets.

FAST FACTS: About Abercrombie & Fitch Co.

Ownership: The company was once a wholly owned subsidiary of the clothing retailer The Limited, but it is now fully independent and traded on the New York Stock Exchange.

Ticker symbol: ANF

Officers: Michael S. Jeffries, Chmn. & CEO, $1,796,154; Seth R. Johnson, VP & CFO, $526,923

Employees: 6,700 (5,500 part-time). The company also hires temporary help at peak selling times, such as the December holiday season.

Chief Competitors: Abercrombie & Fitch competes with a number of other retailers of casual clothes, including: The Gap; J. Crew; Spiegel; and American Eagle Outfitters.

EMPLOYMENT

The company seeks college-age employees for its stores. Its web site includes current employment openings,

CHRONOLOGY: Key Dates for Abercrombie & Fitch Co.

1892:: Founded as an outfitter for campers and hunters
1907:: David Abercrombie leaves the company
1909:: The company almost goes bankrupt because of the expense of a mass mailing of a 456-page catalog of its products
1917:: Abercrombie & Fitch opens its first store in midtown Manhattan
1928:: Ezra Fitch retires, selling his share to James Cobb
1933:: During the Depression, the company's sales dropped from $6.3 million to $2.6 million
1939:: Abercrombie & Fitch boasts the most valuable collection of firearms and the widest assortment of fishing flies available
1947:: The company records its all-time record for net profits of $682,894
1958:: Their first store in San Francisco opens
1968:: The company holds a one-day warehouse sale in Manhattan attracting 90,000 customers
1977:: Files for Chapter 11 bankruptcy
1978:: Oshman's, a sporting retailer, purchases the company
1988:: Oshman's sells the company to The Limited, refocusing the company on clothing
1992:: The company shifts its target market toward college-age youth
1996:: The Limited spins off about 16 percent of Abercrombie & Fitch in an initial public offering
1998:: The rest of the company stock is distributed to its shareholders

both for local stores and the corporate headquarters. A formal, 90-day management-training program ("MIT") offers recent college graduates an opportunity to become in-store Assistant Managers. Within a year, graduates of the program are eligible for promotion to store manager, and eventual promotion to district and regional managerial positions is possible.

SOURCES OF INFORMATION

Bibliography

"a&f sizzles on 1st day on nyse." wwd, 27 september 1996.

"abercrombie & fitch, co." form 10-k, for the fiscal year ended 31 january 1998, june 1998. available at http://www.sec.gov/cgi-bin/srch-edgar.

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"abercrombie & fitch co." international directory of company histories. detroit, mi: st. james press, 1995.

abercrombie & fitch co. 1997 annual report. reynoldsburg, oh: abercrombie & fitch co, 1998.

"abercrombie & fitch co. quarterly financial information." 18 may 1998.

abercrombie & fitch home page, june 1998. available at http://www.abercrombie.com.

"abercrombie & fitch profits skyrocket in third quarter; first report since public filing." daily news record, 20 november 1996.

"abercrombie & fitch to become a fully independent public company." abercrombie & fitch press release, 17 february 1998.

edelson, sharon. "net sales increase 51 percent in abercrombie & fitch quarter." wwd, 1 august 1997.

"the limited, inc. commences tax-free exchange offer to create fully independent abercrombie & fitch." pr newswire, 15 april 1998.

"the limited spinning off abercrombie & fitch." daily news record, 18 february 1998.

moin, david. "a&f finds new life by aiming its weapons at a younger shopper." wwd, 2 february 1997.

sandler, linda, and leslie scism. "limited's planned sale of abercrombie isn't giving the stock the lift many expected." wall street journal, 13 april 1998.

sheban, jeffrey. "a&f to keep its sights mainly on men's wear." daily news record, 21 may 1997.

——. "abercrombie: women's to get new products, no more space." wwd, 21 may 1997.

williams, stan. "catalog & cool." daily news record, 13 march 1998.