WEBVTT - Abercrombie & Fitch CEO Talks Earnings

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Let's get to that point, because shares with Abercromi and

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<v Speaker 2>Fisher are just absolutely staring today, the retailer raising its

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<v Speaker 2>full year outlook after blowing pass first quarter sales estimates.

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<v Speaker 2>The retailer now expects net growth to rise around ten

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<v Speaker 2>percent for the year. That's up from previous estimates of

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<v Speaker 2>four to six percent. Joining us now is Frand Horr.

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<v Speaker 2>What's the CEO of Abercrombie and Fitch. Friend, It's great

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<v Speaker 2>to get this perspective from you. What drove your killer year?

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<v Speaker 2>I mean, you've just been delivering quarter after quarter. Can

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<v Speaker 2>you pinpoint one or two things that have really helped

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<v Speaker 2>drive it for you?

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<v Speaker 1>Sure?

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<v Speaker 3>So to your point, coming off of a defining year

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<v Speaker 3>for us in twenty twenty three and then taking that

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<v Speaker 3>momentum right into the first quarter and having a record quarter,

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<v Speaker 3>just an incredibly exciting day to hear today today here

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<v Speaker 3>on campus.

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<v Speaker 1>What drove that are a couple of things.

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<v Speaker 3>I think most importantly, our formula of staying close to

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<v Speaker 3>the customer and really understanding what their lifestyle is and

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<v Speaker 3>what they're looking for is key to our success. US

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<v Speaker 3>that companied with a lean inventory and this chase model

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<v Speaker 3>that we have created that helps us make sure that

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<v Speaker 3>we're listening, we're testing, we're learning, and we're reacting to

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<v Speaker 3>the business in real time.

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<v Speaker 1>It's really helping us drive these results.

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<v Speaker 2>We had a great line in our Bloomberg piece that said,

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<v Speaker 2>you extended your bounce back from the teen fashion graveyard,

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<v Speaker 2>and I thought that was a really good image and

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<v Speaker 2>analysts responding to your quarter or asking the question, how

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<v Speaker 2>long can you keep up this extraordinarily strong pace of growth,

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<v Speaker 2>what do you think?

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<v Speaker 3>Well, the exciting thing is that we've actually separated the brands.

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<v Speaker 3>If you go back through the history, Hollister is truly

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<v Speaker 3>the iconic global teen brand, and we've been able to

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<v Speaker 3>really age up Abercrombie.

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<v Speaker 1>We've expanded the addressable market.

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<v Speaker 3>I mean, the consumer now starts with Abercrombie when they're

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<v Speaker 3>in their early twenties, they stay with us well through

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<v Speaker 3>their forties. And additionally, we've just completely grown all the categories,

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<v Speaker 3>no longer being a jeans and T shirt company, but

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<v Speaker 3>caring for all their different lifestyles. It's truly a lifestyle brand.

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<v Speaker 3>Is trying to explain today they come to us for

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<v Speaker 3>all sorts of occasions from their wedding parties to their

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<v Speaker 3>bachelorette parties, to where to.

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<v Speaker 1>Work, to going out on the weekends.

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<v Speaker 3>So the addressable market as well as the range of

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<v Speaker 3>what we offer is much greater than what it used

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<v Speaker 3>to be.

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<v Speaker 4>Friend, I want to talk a little bit about pricing

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<v Speaker 4>and pricing power, if you will. I know the discounting

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<v Speaker 4>has always been an issue for retailers. You've held the

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<v Speaker 4>line at least for the last couple of years on

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<v Speaker 4>that here kind of limiting those discounts in a way

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<v Speaker 4>that certainly helped the bottom line. Do you have confidence

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<v Speaker 4>that you can continue to limit those discounts.

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<v Speaker 3>Jeremy, I'm so proud of the progress that we've been

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<v Speaker 3>able to make. If you think about the aur that

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<v Speaker 3>we have been able to grow since twenty nineteen and

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<v Speaker 3>both brands, double digit is done by twofold.

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<v Speaker 1>One is through reducing our promotions.

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<v Speaker 3>Right this discount to ticket for us used to be

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<v Speaker 3>thirty forty to fifty percent. Today it makes a customer

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<v Speaker 3>happy at fifteen or twenty percent. As well as making

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<v Speaker 3>sure that the inventory is lean, and that's really the

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<v Speaker 3>other key piece to its making sure that they buy

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<v Speaker 3>it when they see it, it may not be there

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<v Speaker 3>the next time that they come into the store, So

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<v Speaker 3>our expectation every season is to come in with basically

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<v Speaker 3>I guess I would call it flat promotions to the

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<v Speaker 3>prior year, and then the customer really tells us, you

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<v Speaker 3>know what their appetite is, and we can flex our

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<v Speaker 3>muscle every week and make those decisions.

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<v Speaker 4>As you sort of try it. Though you have to,

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<v Speaker 4>of course, stay ahead of the trend to a certain

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<v Speaker 4>extent in order to sort of make sure you have

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<v Speaker 4>the right inventory for those folks when they come into

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<v Speaker 4>the store. Has that gotten more complicated or have you

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<v Speaker 4>found ways to make that process a little bit more

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<v Speaker 4>efficient or at least a little bit more reliable.

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<v Speaker 1>Great question.

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<v Speaker 3>Yeah, I would tell you that with both the digital

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<v Speaker 3>business as well as the in store business, we can

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<v Speaker 3>test our product pretty efficiently today. And then the key

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<v Speaker 3>is being ready with your supply chain and making sure

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<v Speaker 3>that it's agile enough that you have your fabrics ready

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<v Speaker 3>and that you can get the product in on a

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<v Speaker 3>very quick basis.

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<v Speaker 2>When you take a look frand at the overall consumer appetite,

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<v Speaker 2>we keep seeing lots of different signals that the consumer

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<v Speaker 2>is slowing down. Are you noticing any of that. And

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<v Speaker 2>if you had to predict out the next twelve months,

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<v Speaker 2>how would you describe your consumer?

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<v Speaker 3>Yeah, Alex, I guess my answer to that would be

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<v Speaker 3>if you look at the results for twenty three and

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<v Speaker 3>you look at the results for the first quarter, clearly

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<v Speaker 3>that's not what we're seeing from our consumer. I think

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<v Speaker 3>the key is if you offer the consumer the right product,

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<v Speaker 3>the right fashion component at the right value, they are responding.

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<v Speaker 3>And the customers in any economic time have a choice

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<v Speaker 3>on where to shop, and they are choosing us, and

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<v Speaker 3>that is true in Hollister as well.

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<v Speaker 2>Are you noticing how they're paying it all? Like? I

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<v Speaker 2>know you do the buy now, pay later stuff, Like

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<v Speaker 2>are we seeing any more sort of on credit? Are

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<v Speaker 2>there delinquencies on that or delay payment or buy now

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<v Speaker 2>pay later any other read through I can get.

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<v Speaker 3>No, there's been no change to any of the payment

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<v Speaker 3>That's really amazing.

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<v Speaker 4>And what about expansion going off forward? Frand I mean,

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<v Speaker 4>what are you at around like seven hundred and fifty stores?

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<v Speaker 4>Are you planning to increase account?

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<v Speaker 1>Yeah?

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<v Speaker 3>We have an opportunity both bastically as well as internationally

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<v Speaker 3>to continue to grow our store base. In twenty twenty three,

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<v Speaker 3>we opened up sixty five new experiences around the world.

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<v Speaker 3>We'll open up about one hundred and twenty five this year.

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<v Speaker 3>You know, the opportunity for us is to gain back

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<v Speaker 3>a lot of share internationally. We've been on quite a

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<v Speaker 3>chair in North America for the past few years and

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<v Speaker 3>just starting to see our playbook you know, exported internationally

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<v Speaker 3>and really starting to work there as well.

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<v Speaker 4>Where internationally, because I mean, this is still a company

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<v Speaker 4>that it's the lion's share of its sales here in

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<v Speaker 4>the US and North America. Where internationally are the best opportunities.

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<v Speaker 3>I would tell you that in the Maya region, the

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<v Speaker 3>UK and Germany are two biggest countries outside of the US.

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<v Speaker 1>That is what we're currently focused.

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<v Speaker 3>We've built a team in London that's helping us localize

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<v Speaker 3>our assortments and localize our promotions and make sure that

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<v Speaker 3>we deliver our product appropriately.

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<v Speaker 1>From a calendar and a customer wearing perspective.

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<v Speaker 4>All right, friend, well, we really appreciate you taking time

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<v Speaker 4>to be with us today. Our Frand Horwitz there, the

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<v Speaker 4>CEO of Abercrombie and Fitch, coming off of its first

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<v Speaker 4>quarter earnings report here and some pretty decent numbers twenty

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<v Speaker 4>one percent comp sales growth ALEX and of course the

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<v Speaker 4>guidance that they gave going forward also pleasing investors. You

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<v Speaker 4>see that in the share price of twenty four percent

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<v Speaker 4>on the day