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Fashion has experienced a revival in the 90s. Buggy jeans, oversized logos and dirty flannel shirts are again in fashion. So does two of the most iconic brands of that decade.
Over the past two years, Abercrombie & Fitch has emerged as one of our biggest comeback stories in retail. The scented, darkly lit store, once infamous for its shirtless model, has rethinked its image and took a more comprehensive approach to appeal to a more range of shoppers.
Sales skyrocketed. Between the start of 2023 and the end of 2024, stocks are typical of value. The stocks were knocked back this year by tariffs and trade war concerns, but they still have 290% profits.
The Gap – another ’90s mall fixture – is receiving its own turnaround under new CEO Richard Dixon and creative director Zack Pausen. The stock has reached fifth place so far this year, earning profits over the past two years to reach 235%. Analysts were hoping to report sales and profits that rose in the first quarter results after the market closed on Thursday.
Much of that momentum is fueled by the nostalgia of the 90s Gen Z appetite. In the most recent quarter, Abercrombie had $1.1 billion in sales for the three months ended May 3rd. This was the best start of the fiscal year in the company’s history, urging management to raise the top range of guidance for year-round sales growth to 5%.
The challenge for two brands that have regained street credibility is to stay relevant. In business driven by fashion and trends, that’s easier than that. At Abercrombie, the first quarter results were completely driven by demand for more affordable Hollister teens and university clothing lines. The brand, which accounts for about half of the group’s overall sales, has grown sales in the same store, but the brand of the same name, targeting millennials, has reduced. Profitability has declined and once again it is possible if US President Donald Trump’s tariffs resurrected.
So 2024 might be as good as Abercrombie gets. However, with the recent decline in valuations, it is a good time for new investors to jump in. This is a multiple discount that is comparable to Gap, American Eagle Outfitters and Urban Outfitters Fetch, below the average of 15 times over the three years. That seems unfair: Abercrombie has not seen this sharp for a long time.
pan.yuk@ft.com
