WEBVTT - Abercrombie & Fitch CEO Fran Horowitz Talks Sales, AI

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

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<v Speaker 2>Let's continue this conversation now with fran Horwitz. She is

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<v Speaker 2>the CEO of Abercrombie and Fitch, joining us again on

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<v Speaker 2>open interest.

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<v Speaker 3>It's great to have.

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<v Speaker 2>You, and I want to go straight to the outlook

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<v Speaker 2>because you mentioned that increasingly uncertain environment for retailers in

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<v Speaker 2>the statement earlier today, but at the same time raising

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<v Speaker 2>the full year sales outlook so square that circle for me,

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<v Speaker 2>how do you plan to navigate through that period of uncertainty?

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<v Speaker 1>Hey, Ky, you know we're going to continue to do

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<v Speaker 1>what we've been doing.

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<v Speaker 4>We just put up a incredible first half of the

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<v Speaker 4>year record Q one, record Q two, double digit increases,

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<v Speaker 4>a double digit in every month of the quarter in fact,

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<v Speaker 4>and we're.

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<v Speaker 1>Thrilled with the start to August.

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<v Speaker 4>What I tell the teams all the time is we

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<v Speaker 4>got to stay focused on the customer. Control what we

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<v Speaker 4>can control, and that's what we've been doing. The customer

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<v Speaker 4>always has a choice somewhere shop and they are choosing us.

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<v Speaker 3>Let's talk about what you can control.

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<v Speaker 2>Of course, you can't bring down the rate of inflation,

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<v Speaker 2>but you can bring down your pricing.

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<v Speaker 3>You can boost promotions.

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<v Speaker 2>We've heard a lot of retailers also warn about the

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<v Speaker 2>second half of the year and that stretched consumer. How

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<v Speaker 2>would you characterize the level of promotions that you're planning

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<v Speaker 2>relative to maybe past quarters in past year ends.

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<v Speaker 4>Yeah, No, our promotions are under control. They're less than

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<v Speaker 4>they were last year. We've had double digit increase of

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<v Speaker 4>our au R since twenty nineteen. Our product acceptance and

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<v Speaker 4>our inventory control is really what's driving our ability to

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<v Speaker 4>make sure that we continue to drive the aur growth

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<v Speaker 4>that we have seen. We do go into every quarter

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<v Speaker 4>with the expectation of keeping it flat and then the

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<v Speaker 4>customer votes.

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<v Speaker 1>It helps us understand what they're willing to pay.

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<v Speaker 4>And again, as I mentioned, do you get that product, voice,

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<v Speaker 4>and experience lined up like we are and the consumer

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<v Speaker 4>is ready to buy.

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<v Speaker 3>It's fascinating.

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<v Speaker 5>I'm really curious about your conversations with investors, Fran because

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<v Speaker 5>if you yes, it's spent a little bit less of

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<v Speaker 5>a gain over Nvidia over this year, but still over

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<v Speaker 5>a twelve month basis, your stock has been expanding at

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<v Speaker 5>a faster rate than even the most beloved tech giant

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<v Speaker 5>out there. So you have a traditional retailer expanding at

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<v Speaker 5>the rate of a technology company. What is it that

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<v Speaker 5>investors really expect of you at the end of the day,

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<v Speaker 5>and how do you really define to them what you

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<v Speaker 5>grow as as a retailer.

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<v Speaker 4>I think what they're expecting from us is what we

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<v Speaker 4>continue to do, which is deliver. You know, we've spent

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<v Speaker 4>a lot of years transforming this company and really rebuilding

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<v Speaker 4>our operating model, and we've spent time and time and

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<v Speaker 4>time again with the investors really explaining and helping them

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<v Speaker 4>understand what all of that means. And they truly understand

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<v Speaker 4>what that means. Obviously evidence in the stock prices you

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<v Speaker 4>guys just illustrated over the past year. So what that

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<v Speaker 4>means is staying close to your customer, making sure that

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<v Speaker 4>we're reading and reacting to the business. Having by financial

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<v Speaker 4>discipline and how we control our inventories. It's a new

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<v Speaker 4>way of thinking about retail and our operating model continues

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<v Speaker 4>to drive results.

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<v Speaker 5>How are you also thinking about partnerships During the call,

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<v Speaker 5>you were talking about, for example, your NFL partnership. What

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<v Speaker 5>does this really bring to you at the end of

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<v Speaker 5>the day. Is it new customers, is it more customers?

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<v Speaker 5>And what kind of cost does it come at?

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<v Speaker 1>You know, what. It's a little bit of both. It's

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<v Speaker 1>been very excited.

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<v Speaker 4>I like to say we are no longer genes and

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<v Speaker 4>T shirt company. We're a certainly lifestyle brand and we

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<v Speaker 4>hear from our customers what is important to them. So

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<v Speaker 4>a great example is the NFL partnership. We started this

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<v Speaker 4>partnership about three years ago. We tend to do things

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<v Speaker 4>small and then build on them as they work for

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<v Speaker 4>our consumer. It's a real test and learn culture that

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<v Speaker 4>we have here. The NFL is a fantastic example of that.

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<v Speaker 4>We now have all thirty two teams. We've got expanded

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<v Speaker 4>product categories. Last year mostly focused on genes I'm sorry,

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<v Speaker 4>mostly focused on police and T shirts. Now we have

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<v Speaker 4>outerwear and hats and sweaters. The collections off to a

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<v Speaker 4>great start. And if you look at our Hollister brand,

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<v Speaker 4>same thing. You know, how do we expand that consumer's

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<v Speaker 4>product categories. And we just launched a terrific collegiate assortment

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<v Speaker 4>over thirty universities across the United States and again off

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<v Speaker 4>to a great start with that. It's really helping drive

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<v Speaker 4>art strong back to school performance.

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<v Speaker 2>And I also want to talk about geographic footprint as well.

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<v Speaker 2>I'm taking a look at the notes you sent over

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<v Speaker 2>to our producers. You plan to be a net opener

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<v Speaker 2>of stores next year. What areas of the country are

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<v Speaker 2>you thinking about there when you take a look at

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<v Speaker 2>your map right now.

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<v Speaker 4>Yes, so we are actually going to have almost one

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<v Speaker 4>hundred and twenty new experiences this year, twice as many

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<v Speaker 4>as we had last year. And to your point, it's

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<v Speaker 4>our third year of being a net store opener. Those

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<v Speaker 4>reference stores actually around the world, so it's our global

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<v Speaker 4>footprint that we're looking to expand, both through the Abercrombie

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<v Speaker 4>and the Hollister brands.

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<v Speaker 2>And I want to talk internationally as well. There's some

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<v Speaker 2>news on the terminal out today that Abercrombie and Fitch

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<v Speaker 2>has plans to return to Hong Kong, eight years after

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<v Speaker 2>you shut down your flagship store. According to people familiar,

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<v Speaker 2>the plans are to rent two large stores in prime

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<v Speaker 2>locations in Hong Kong.

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<v Speaker 3>Are you able to confirm those reports?

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<v Speaker 4>So we have stores in Hong Kong, so we saw

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<v Speaker 4>that earlier this morning. We sent in a correction, so

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<v Speaker 4>we're not returning to Hong Kong. We are currently in

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<v Speaker 4>Hong Kong with several stores. We are in the APEC

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<v Speaker 4>region as I mentioned earlier this morning, you know, we

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<v Speaker 4>saw a three percent net growth at twenty one percent

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<v Speaker 4>comp growth throughout that region this year.

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<v Speaker 5>You mentioned something earlier Fran as well that I want

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<v Speaker 5>to go back to for a second here, this back

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<v Speaker 5>to school moment that many people are having. You were

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<v Speaker 5>talking about the NFL partnerships. Not just back to school,

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<v Speaker 5>it's back to watching football. I think this weekend is

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<v Speaker 5>a lot of the first big games or next weekend.

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<v Speaker 5>I'm still learning my football lingo. But what can you

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<v Speaker 5>tell us about the demand that you are seeing headed

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<v Speaker 5>into this fall season.

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<v Speaker 1>A lot of.

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<v Speaker 5>People out there worried about the consumer, but this is

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<v Speaker 5>a critical time to sell.

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<v Speaker 4>Yeah, listen, we were thrilled with the beginning of August,

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<v Speaker 4>which I mentioned this morning. We have momentum coming out

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<v Speaker 4>of the second quarter and it's remained into the third quarter.

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<v Speaker 4>To your point, the NFL is certainly driving a piece

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<v Speaker 4>of that. It's one part of our business, but it's

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<v Speaker 4>just only one part. We're also seeing tops and bottom selling.

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<v Speaker 4>Our dress business remain strong. The wedding shop that we

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<v Speaker 4>talked about last time we were together has gained momentum,

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<v Speaker 4>and those weddings honestly go all year round now and

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<v Speaker 4>then as far as collegiate goes.

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<v Speaker 1>Same thing. Exciting to see that consumer.

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<v Speaker 4>You know, they start freshman year in high school start

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<v Speaker 4>thinking about aspirational places that they.

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<v Speaker 1>Want to go to college.

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<v Speaker 4>So another good opportunity for us to connect with the consumer.

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<v Speaker 5>Friend. The other question I have here about Abercrombie and Fitch.

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<v Speaker 5>Of course, Abercrombie and Fitch Hollister have been two iconic

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<v Speaker 5>brands for a very long time. You've certainly reinvigorated it

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<v Speaker 5>in a pretty massive way. But do you see A

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<v Speaker 5>and f having more brands? Do you see yourself expanding

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<v Speaker 5>into even more categories, perhaps even through the means of

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<v Speaker 5>mergers and acquisitions, given how far your stock has come

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<v Speaker 5>as currency.

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<v Speaker 4>You know, our focus today is on investing in the business,

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<v Speaker 4>and that's our number one plan for our capital allocation

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<v Speaker 4>as we continue to do. We're currently making some very

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<v Speaker 4>big investments in the business from digital and technology.

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<v Speaker 1>The stores piece that you asked.

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<v Speaker 4>About earlier, investing in opening and transforming our stores as well.

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<v Speaker 4>We will continue to stay close to that customer to

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<v Speaker 4>understand what they're looking for. You know, YPB is a

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<v Speaker 4>great example of a brand extension that's our performance brand

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<v Speaker 4>under Abercrombie and Fitch called Your Personal Best, which I'm

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<v Speaker 4>seeing on the screen right now. You're showing lots of

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<v Speaker 4>pictures of so again it's staying close to the customer

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<v Speaker 4>and listening to what their insights are telling us.

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<v Speaker 2>I want to talk a little bit more about technology investments,

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<v Speaker 2>in particular because we're all awaiting in video earnings after

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<v Speaker 2>the bill. You can't get through a conversation without talking

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<v Speaker 2>about AI and.

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<v Speaker 3>When you think about your own investments.

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<v Speaker 2>Has Abercrombie started using AI in any capacity when it

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<v Speaker 2>comes to generate AI for.

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<v Speaker 4>Example, Yeah, I mean AI has been a part of

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<v Speaker 4>our business and nobody talks about it like it's it

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<v Speaker 4>was just founded last year, but it's actually been something

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<v Speaker 4>that we've been working with for some time now. There's

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<v Speaker 4>lots of applications, certainly within our business that you can

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<v Speaker 4>use AI for, so we're continuing to explore like everybody else's.

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<v Speaker 4>We have our own you know, AI task force to

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<v Speaker 4>make sure we're staying up to date on what the

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<v Speaker 4>opportunities are.

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<v Speaker 5>To that end. Also, I have to say, fran I

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<v Speaker 5>am very very guilty when it comes to shopping on

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<v Speaker 5>social media. My Instagram gives me something and I am

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<v Speaker 5>going to click on it. And so has AI helped

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<v Speaker 5>you with kind of figuring out what users want more of?

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<v Speaker 5>Has it somehow made you more efficient? Could you put

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<v Speaker 5>more numbers around it? And how has that kind of

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<v Speaker 5>online channel become more important to you?

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<v Speaker 4>Yeah, and listen, we have our marketing today is the

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<v Speaker 4>majority of it is is digital, and I would say

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<v Speaker 4>that we are certainly a leader in social commerce for

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<v Speaker 4>sort for sure, and in social media and digital platforms.

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<v Speaker 1>The data and analytics team helps us understand what the

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<v Speaker 1>customers are looking for.

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<v Speaker 4>They relay that to both our marketing and our digital

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<v Speaker 4>teams to make sure that we're staying up on what's

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<v Speaker 4>working for them and what's not working for them.

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<v Speaker 2>All right, Fran, really appreciate you taking some time with

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<v Speaker 2>us this morning, and also appreciate the clarification on Abercrombie's

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<v Speaker 2>Hong Kong presence.

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<v Speaker 3>Hope to speak to you again soon.

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<v Speaker 2>And that is Fran Horowitz, the CEO of Abercrombie and

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<v Speaker 2>Fetch