Abercrombie & Fitch CEO: 'fashion sold really well' despite pandemic

Abercrombie & Fitch Co. CEO Fran Horowitz sat down with Yahoo Finance’s Brian Sozzi to discuss how the retailer is faring amid pandemic, break down the company's latest financial results, and weigh in on the fashion trends for 2021 and beyond.

Video Transcript

BRIAN SOZZI: Abercrombie & Fitch shares are mixed this morning after the retailer beat big on earnings. The company also said it's resuming its share buyback plan and that sales so far this quarter have started on the right foot. Joining us now for a Yahoo Finance exclusive is Abercrombie & Fitch CEO Fran Horowitz.

Fran, always good to speak with you. Thanks for coming on this morning here. You know, right on the top of your earnings release, you mentioned this new reality that your consumers are living through. And I guess we're all living through it over a year into the pandemic. How has the pandemic changed how you design clothes for Abercrombie, and even Hollister?

FRAN HOROWITZ: What a year, Brian, a year like no other. So many-- so many learnings and so many changes that have occurred over the past year, trying to figure out where to start. First of all, leaning into our digital business has been a huge win for us. You know, you are close to our story. You know that we had invested in those digital channels pre-COVID, and they really paid dividends this year.

That's helping us get and stay very close to our consumer, and that's how we know what their consumer preferences are. So our product is resonating. Our message is resonating. And just staying close to he and she and really understanding what their mindset is is helping us to design those clothes. We saw an incredible balance this year between both soft and cozy product, as expected, but as well as fashion, and fashion sold really well this year.

BRIAN SOZZI: Who is the Abercrombie & Fitch shopper? Because I was on the site last night, and it is even-- it seems more of a different brand than when I last saw you and we walked around a mall in October 2019. It's got-- it's got an edge to it.

FRAN HOROWITZ: Incredible progress, I mean, and so proud of what the team has done, what they've been able to accomplish. I think you know the story well, Brian. When I started here back in 2014, the brands were very similar, and we set out on a journey to separate the Hollister brand to be the iconic teen brand and Abercrombie to really appeal to that young millennial. And we've achieved that. The brands are stronger than ever and their brand positioning closer to their consumer than ever before and really resonating.

When you talk about Abercrombie specifically, we have a franchise called 96 Hours that really speaks to that young millennial. When we started 96 Hours, it was pre-pandemic. Then we went into the pandemic, and the whole purpose of it was 96 Hours, the young millennials love to look forward to their four-day weekends, and we wanted to outfit them for that. The product still resonated this year, and it's going to continue to resonate as we head into the future. So lots of exciting things happening.

BRIAN SOZZI: I will say that I think you-- Abercrombie dropped the hammer late last year, meaning you closed a lot of flagship stores, eight flagship stores closed last year. Now, you have seven open. What are your plans with those stores?

FRAN HOROWITZ: So Brian, you know better than anybody stores matter. As you mentioned, you know, we walked stores together, and we have set up some incredible new prototypes. And those stores are smaller. They're omnicapable. They're more efficient than our old stores.

And the consumer has shifted in the way that they're thinking and the way that they're shopping. So the journey to close those flagships started several years ago. To be able to get through more than half of those this year was a major accomplishment by the team.

And the mall stores that we closed, as well, they were just simply-- they were too big. They were too expensive. They were outdated. So we're excited about where we're headed on this journey, because we're going to continue to be opportunistic. We have a very strong balance sheet, and we're going to open up stores this year that are the right size, the right location, and the right economics.

BRIAN SOZZI: So you have 735 stores now-- excuse me-- open around-- around the world. You closed 129 non-flagship stores this year. Is this a march to 500 of your very best stores globally?

FRAN HOROWITZ: You know, Brian, there's actually-- there's no finish line. Our goal is to have productive square footage. So this year, we took out 1.1 million of unproductive square footage. That was 17% of our base.

Since we started this journey, we've taken out 2 million square feet. So again, there's no finish line on the number of stores. We're a global retailer. There's opportunities around the world to be in the right size and the right location. So no-- no finish line, but it's really a productivity call on reducing our square footage.

BRIAN SOZZI: You mentioned this morning that you are, quote, "pleased" with the start to the first quarter. Does pleased mean you're back to growing sales?

FRAN HOROWITZ: We are pleased. If you saw our plan for the first quarter, we're looking to grow sales 30% to 40% over last year. Again, our product is continuing to resonate. We're going to continue to lean into digital.

There's still some unknowns out there. We mentioned this morning, as well, we still have some store closures and some limitations within some of the stores that are open, but pleased with where we are, strong product resonation by the consumer.

BRIAN SOZZI: If I did my math right, now you're starting to think about the back-to-school shopping season in the fall. How are you starting to plan for what could be-- really, what is likely to be a very different back-to-school shopping season this year compared to last year?

FRAN HOROWITZ: Exactly. Last year was-- was like no other. But what we learned last year, and what we were able to accomplish with the team from an inventory perspective, was really sensational. The team did an outstanding job. I think you know Scott, my CFO, we worked so closely with the teams last year. Normally, we would manage our inventory monthly. We got to a weekly cadence, and we'll do the same.

So as we head into back-to-school this year, we are agile. We have a supply chain where we produce in 17 countries around the world, so we can stay agile and stay very fluid. That's how we run our business. You know, we have an open to buy every week. We see what's happening in the business, and we make decisions on a weekly basis.

BRIAN SOZZI: All right, we'll leave it there. Abercrombie & Fitch CEO Fran Horowitz, good to see you. Maybe the next time I see you we'll actually be back in the mall this time.

FRAN HOROWITZ: I would love that. Sounds great. Thanks, Brian. Have a great day.