Abercrombie & Fitch Company Business Information, Profile, and History

Company Perspectives:

Abercrombie & Fitch Company is a leading specialty retailer encom passing four concepts: A&F, abercrombie, Hollister Company, and R uehl. The merchandise is sold in retail stores throughout the United States and through catalogs. The company also operates several e-comm erce websites for A&F, Abercrombie, and Hollister.

History of Abercrombie & Fitch Company

Abercrombie & Fitch Company is a clothing retailer marketed towar d young people, from children to young adults. While Abercrombie cons iders its clothing a "lifestyle brand," others have railed against it s often sexually explicit tees and over-the-top marketing campaigns. The company oversees more than 800 stores nationwide, of which about 175 are its children's brand, abercrombie, and 260 are Hollister Comp any stores. Its latest concept, Ruehl, debuted in Ohio in 2004, appea ling to more mature buyers, those in their late 20s and early 30s. On ce owned by fashion firm The Limited, Abercrombie gained its independ ence in 1999 and went public on the New York Stock Exchange under the ticker symbol ANF. Its sales soared to more than $2 billion in 2 005.

The Early Years: 1890s to 1910s

Abercrombie & Fitch Company (A&F) was founded in 1892 in New York City by David T. Abercrombie and Ezra H. Fitch. Abercrombie, a f ormer prospector, miner, trapper, and railroad surveyor, originally p roduced camping equipment in lower Manhattan; Fitch, one of his custo mers, was a successful lawyer in Kingston, New York, who loved the ou tdoors. The two men pooled their interests and opened a sporting good s store.

Fitch was the visionary of the two, anticipating a clientele far broa der than merely those who camped out in the course of earning a livin g. The partners proved ill-matched, and both men were hot-tempered. F ollowing the latest of many long and violent arguments, Abercrombie r esigned in 1907 to return to manufacturing camping equipment. Retaini ng the company name, Fitch continued with other partners. In 1909 he mailed out 50,000 copies of a 456-page catalogue. Since they cost a d ollar each to produce, the catalogues almost bankrupted the company, but the subsequent flood of orders justified the expense. In 1917 A&a mp;F moved into a 12-story building on Madison Avenue at East 45th St reet, a location the advertising department described as "Where the B lazed Trail Crosses the Boulevard." It included a luxuriously furnish ed log cabin that Fitch made his townhouse, with an adjoining casting pool.

By this time A&F's reputation as purveyor to the sporting elite w as well established. It had equipped Theodore Roosevelt for an Africa n safari, outfitted polar expeditions led by Roald Amundsen and Admir al Richard Byrd, and provided goods to aviators Charles Lindbergh and Amelia Earhart. Ernest Hemingway was a customer; and every president from Roosevelt to Gerald Ford would buy something from the store.

Growth and Change: 1920s-30s

Fitch retired in 1928, selling his interest in the company to his bro ther-in-law, James S. Cobb, who became president, and an employee, Ot is L. Guernsey, who became vice-president. In his first year at the h elm, Cobb acquired a similar New York business, Von Lengerke & De tmold, respected for its European-made sporting guns and fishing tack le, and Von Lengerke & Antoine, the Chicago branch, which became a subsidiary of A&F but continued until 1959 under its own name. In 1930 Cobb bought Griffin & Howe, a gunsmith shop. The merchand ise of Von Lengerke & Detmold and Griffin & Howe was added to the Madison Avenue store.

Abercrombie & Fitch was selling outdoor and sporting equipment no t only for hunting, fishing, camping, and exploration, but also for s kating, polo, golf, and tennis. The store also carried a variety of o utdoor clothing, boots, and shoes for men and women, as well as camer as, pocket cutlery, and indoor games. In the 1920s A&F became the epicenter of the burgeoning mah-jongg craze and the place in New Yor k to thumb one's nose at Prohibition by purchasing a hip flask. A&amp ;F also opened a summer-only store in Hyannis, Massachusetts, for the yachting set. Net sales and income, rising steadily during the decad e, reached a record $6.3 million and $548,000, respectively, in 1929. These figures would not be topped in the next decade. Sales in the grip of the Great Depression fell to under $2.6 million in fiscal 1933, when a loss of $521,118 was recorded, on top of a l oss of $241,211 the previous year. During this period, Guernsey's negotiations with the firm's creditors probably saved it from collap se. Subsequent years were profitable, and in 1938 A&F resumed pay ing dividends. It also established golf and shooting schools in the s tore.

By 1939 A&F was calling itself the "Greatest Sporting Goods Store in the World." It boasted the world's largest and most valuable coll ection of firearms and the widest assortment of fishing flies obtaina ble anywhere (15,000 in all) to accompany its array of rods, reels, a nd other fishing tackle. Riders, dog fanciers, skiers, and archers al l found every conceivable type of gear. Guns and camping and fishing equipment accounted for 30 percent of the New York store's sales volu me in 1938. Sales of clothing, shoes, and furnishings accounted for 4 5 percent. Inventory on hand was valued at about 40 percent of annual sales, an extremely high ratio that reflected A&F's readiness to meet its customers' demands. Catalogue mail orders accounted for abo ut 10 percent of business.

Abercrombie & Fitch at Mid-Century

Net profit during the 1940s was highest in fiscal 1947, when it reach ed $682,894, which turned out to be an all-time record. In 1958 A &F opened a store in San Francisco. Soon thereafter, it added sma ll winter-only stores in Palm Beach and Sarasota, Florida, and summer stores in Bayhead, New Jersey, and Southampton, New York. Guernsey, who had succeeded Cobb as president, explained his firm's mission at this time in frankly elitist terms: "The Abercrombie & Fitch type does not care about the cost; he wants the finest quality."

The New York store remained the company's flagship. At the close of t he 1950s the main floor sported heads of buffalo, caribou, moose, elk , and other big game, stuffed fish of spectacular size, and wastebask ets made from elephants' feet. The store sold an unmatched variety of contraptions for indoor and outdoor pursuits: one corner held dog an d cat items; the basement was a shooting range; and the mezzanine con tained paraphernalia for skindiving, archery, skiing, and lawn games. Floors two through five were reserved for clothing suitable for any terrain or climate. Floor six had a picture gallery and bookstore con centrating on sporting themes, and there was a watch repair facility and the golf school, complete with a resident pro. On the seventh flo or was the gun room with about 700 shotguns and rifles, constituting the most lavish assemblage of sporting firearms on earth. The eighth floor was devoted to fishing, camping, and boating, and housed a fish ing instructor who gave lessons at the pool on the roof. He also hand led mail and telephone inquiries on fishing, hunting, and skiing. The fishing section alone stocked about 48,000 flies and 18,000 lures.

In 1960 Abercrombie's net sales rose to a record $16.5 million, b ut net profits fell for the fourth straight year to $185,649. The next year net sales fell below $15.5 million and net profit drop ped again to $124,097. Guernsey's successor as president, John H. Ewing, saw no cause for alarm, and rejected the idea of a budget sho p or to "splash ads for storewide sales." He told a Business Week< /I> interviewer in 1961 that A&F enjoyed a special niche "by stic king to our knitting; by not trying to be all things to all people."

Fall from Grace: Mid-1960s to Late 1970s

During the 1960s A&F opened new stores in Colorado, New Jersey, F lorida, and Michigan. It also opened small shops in other stores. In 1968, a year in which city riots, protests against the war in Vietnam , and the assassinations of Martin Luther King and Robert Kennedy see med to be tearing the country apart, A&F was finally ready to sha ke up its way of doing business by holding a warehouse sale. More tha n 90,000 bemused customers sifted through the Manhattan store one sum mer day for bargains that included pop-up tents bought so far in the past that no one remembered how to pop them up, boots made of long-ha ired goatskin hide, miniature antique cannons, leather baby elephants , and Yukon dog sleds.

In early 1970 the company initiated another gigantic sale. A horde of hopefuls turned up to seize such bargains as a 15-foot inoperative h overcraft for $3 and eight $100 surfboards for $17 each. An offbeat newspaper advertising campaign followed, featuring a singl e item, such as hunting shoes, accompanied by diagrams and copy that overwhelmed the reader with product information. If these antics indi cated a measure of desperation, it was because A&F had recorded a loss of more than $500,000 in the latest fiscal year. In October 1970 William Humphreys, the new company president, said the ads woul d be changed and sales would cease because the people who showed up w ere not A&F's kind of customer.

In the ensuing years, Humphreys, a former Lord & Taylor executive , concentrated on cutting the company budget, improving inventory con trol and credit practices, and expanding into the suburbs. A new A&am p;F store opened in Oak Brook, Illinois, west of Chicago. To win a br oader range of clientele, the New York store moved its expensive sail boats upstairs from the main floor, expanded its gift and sportswear lines, added a discount clothing shop on the tenth floor, and hired n ew buyers for women's wear. Nevertheless, the company continued to lo se money under Humphreys and his successor, Hal Haskell, its chief st ockholder.

In August 1976, after a year in which the company had lost $1 mil lion, Abercrombie filed for Chapter 11 bankruptcy. When it closed its doors for good in November 1977, postmortems pointed out the obvious : the company had failed to make the transition from supplying fat-ca t sportsmen of the old school to the skiers, bikers, and backpackers of the 1970s. One advertising man described management as "ossified," and another said company officers had no faith in television's abili ty to draw in customers even after its first TV commercials, in 1969, filled the store.

The Oshman Decade: 1978-80s

Oshman's Sporting Goods, a Houston-based chain, bought the Abercrombi e & Fitch name, trademark, and mailing list in 1978 and opened a store in 1979 under the A&F name in Beverly Hills, California. Wi th a 52-page catalogue and eclectic merchandise, including exercise m achines, Harris-tweed jackets, and $70 pith helmets, the company gained attention by outfitting actor Jack Lemmon for an Alaskan fishi ng trip and Dodger baseball star Steve Garvey for grouse hunting in M innesota. A bigger Dallas store opened in 1980, complete with $40 ,000 elephant guns and an Abercrombie Runabout sports convertible for $20,775.

Abercrombie returned to New York City in 1984, opening in the renovat ed South Street Seaport area of lower Manhattan. By the end of 1986 t he chain had grown to 26 stores, including a second Manhattan outlet in midtown's glitzy Trump Tower. Net sales reached an estimated $ 40 million in 1985. The Oshman-owned A&F chain stocked relatively few hunting and fishing supplies or exotic items, concentrating on e xercise machines, tennis rackets, golf clubs, and other paraphernalia of more contemporary interest, much of it designed exclusively for t he chain. Men's and women's clothing departments featured business an d casual dress as well as sportswear, and the gift departments offere d an array of goods, including gourmet edibles.

An upbeat assessment of the new A&F by Chain Store Age Executi ve in September 1986 was followed by a more skeptical appraisal b y Forbes six months later, which described the chain's merchan dise as a hodgepodge of unrelated items and concluded, "Sometimes it is better to bury the dead than to try reviving them." Forbes estimated sales for 1986 at $48 million and profits at "a so-so & #36;1.5 million."

In January 1988 The Limited, Inc. acquired 25 of the existing 27 A&am p;F stores from Oshman's for about $45 million in cash. The organ ization was moved to corporate headquarters in Columbus, Ohio, and th e inventory was cleared out. A stronger emphasis was placed on appare l, with 60 to 65 percent of the merchandise men's sportswear and furn ishings, 20 to 25 percent women's wear, and the remaining 15 to 20 pe rcent gifts, including grooming products and nature books. "We can't get caught up in guns and fishing rods," the chain's president, Sally Frame-Kasaks, told a Daily News Record reporter. Nearly all t he goods were mid-priced and bore an A&F label.

Expansion and Independence: 1990s

When Frame-Kasaks left to head Ann Taylor in February 1992, she was s ucceeded as president of A&F by Michael Jeffries, an executive at Paul Harris Stores. At this time the chain had 36 stores credited wi th annual sales of about $50 million. From the outset, Jeffries f ocused on transforming A&F into the retailer of choice for Americ an youth, a demographic said to be growing the fastest during that ti me. He replaced conservative clothing lines, primarily for men, with high-priced casualwear for both young men and women à la Ralph Lauren.

Soon A&F had a corporate and retail culture all its own, one dedi cated to youth, good looks, and fun. Jeffries ensured that the compan y kept in touch with the demands of young Americans by hiring executi ves and designers in tune with their preferences in clothing, music, and entertainment. The company also began publishing its own catalogu e/magazine, A&F Quarterly, featuring its clothing lines as well as articles on pop culture, sex, music, and other teen topics. Photographer Bruce Weber imbued the catalogue and A&F's advertisi ng with an open sexuality, which appealed to target customers but con cerned some parents and their legislators. The changes initiated by J effries began paying off; sales increased to $85 million in 1992, $111 million in 1993, and $165 million in 1994. There were 6 7 A&F stores at the end of January 1995, compared to 49 a year ea rlier. Moreover, the A&F division established new records for mer chandise margin rates and profitability for its parent, The Limited, in 1994.

When The Limited spun off Abercrombie in February 1999, headquarters moved from Columbus to nearby Reynoldsburg, Ohio, and Jeffries contin ued to helm the operation. By this time competition had heated up, pa rticularly from American Eagle Outfitters, which began offering simil ar merchandise, marketed in a similar manner, and for lower prices. A &F sued American Eagle for violating its trademarks, but the laws uit was dismissed when a judge determined that clothing style and ima ge were not copyrightable. Amid reports that the company's growth mig ht be slowing, its stock dropped but rebounded again after the 1999 h oliday selling-season produced satisfactory results: net sales had re ached $1.03 billion for the fiscal year with net income topping & #36;149 million.

Continuing its provocative advertising methods, A&F had issued a Christmas catalogue featuring nude models and overt sexual content in 1999; a predictable outrage ensued and proof of age was required to purchase it thereafter. While A&F continued to have record sales and a loyal following, the company decided to broaden the scope of it s clientele by opening a children's and preteen store, abercrombie, i n 1999 and planned to launch another chain geared toward West Coast s urfer types the following year.

Wider Horizons: 2000s

True to its word, Abercrombie launched its latest "lifestyle brand," Hollister Company, in Columbus, Ohio, in 2000. While the store's them e was surfing and fun in the sun, Hollister carried the same cheeky t -shirts and sexy clothing that had made its sibling famous. Ironicall y, few realized the new company was a part of the A&F empire and many considered Hollister a rival to A&F. As more stores opened i n California, Georgia, Kansas, and New Jersey, buyers bought into Hol lister's surf chic, with some believing they were snubbing A&F, a nd the company's executives laughed all the way to the bank. By the e nd of the new millennium's first year, Abercrombie had 275 A&F st ores, 44 abercrombie stores, five Hollister Company stores, and net s ales of over $1.23 billion with net income of over $158 milli on.

For 2001 A&F continued to roll out its Hollister stores, opening shops across the country for a total of 32 by the end of the year. Bo th its original A&F stores and the abercrombie kids' stores also grew, with the former occupying 485 mall stores and the latter climbi ng to 144 shops nationwide. Despite more venues, however, sales began falling mid-year and the company's stock tumbled to under $10 pe r share, when it had traded as high as $50 two years before.

While the A&F legend for sexually charged advertising and daring or barely there clothes drew in young buyers, the pricing often sent them to buy imitation tees from rivals American Eagle and Aéro postale. Despite some lackluster same-store sales during the year, A& amp;F finished 2001 with net sales of just under $1.4 billion and net income up slightly to $168 million. In the following year as A&F moved to its new headquarters "campus" on 300 wooded acres i n New Albany, Ohio, the company was once again courting controversy. This time A&F drew the ire of Asian Americans with a perceived ra cial slur ("Wong Brothers Laundry Service, two wongs make it white"), parent and advocacy groups for the latest edition of the A&F Quarterly, and practically everyone with the introduction of thon gs for young girls. Though the company quietly withdrew the suggestiv e thongs from its abercrombie kids' stores, they remained a staple in its A&F and Hollister locations.

In 2003 A&F managed to anger folks again: this time it was reside nts of West Virginia, with a t-shirt that read "It's All Relative in West Virginia." The stink went as far as the state's governor, who de manded A&F pull the shirt from store shelves; Jeffries refused. H is next battle was a proposed boycott of all A&F labels over the increasingly racy A&F Quarterly. This time Jeffries capitu lated, shelving the periodical in late 2003. Despite or perhaps becau se of the continued controversy, sales reached $1.7 billion for f iscal 2003, with net income rising to over $205 million.

By early the next year, Hollister had become the company's fastest gr owing segment, expanding to 177 shops nationwide and overtaking its y ounger sibling abercrombie's 170 stores. A&F still operated the l ion's share of stores, however, with over 700 shops featuring a seaso nal range of clothing from bathing suits and flip flops to its tradem ark hoodies and racy tees. While retail pundits had considered A& F in a slump for several years due to its same-store sales, Jeffries decided to make over the company's image by channeling one of its fou nders, Ezra Fitch. The new A&F was a casual luxury clothier, a st ep up from its previous incarnation, with the launch of the Ezra Fitc h line and the arrival of Bob Singer as A&F's new president and c hief operating officer. Formerly of the Gucci Group, Singer understoo d luxury brands and brought considerable panache to A&F's transfo rmation.

Jeffries' gambit worked as A&F sales began climbing across the bo ard in 2004, topping $2 billion with net income reaching more tha n $216 million. Jeffries also announced the company would introdu ce another lifestyle brand, one directed to an older clientele. To A& amp;F, "older" was a relative term, meaning post-college buyers in th eir mid- to late 20s and early 30s. The new concept, called Ruehl, op ened its first prototype in Columbus, Ohio, resembling a Greenwich Vi llage brownstone more than a store. A&F planned to build several hundred Ruehl stores over the next few years, while continuing to exp and its core brands as well.

By 2005 A&F's image took a few serious hits. The first was the se ttlement of a lawsuit the previous year amidst complaints of racial d iscrimination. Though the company admitted no wrongdoing, it did alte r its hiring and promotion policies. Next came questions about Jeffri es and his compensation packages, including an investigation into A&a mp;F's corporate governance in 2005. Jeffries gave up a number of per ks and slashed his compensation to appease shareholders, though many believed his rapid concession had more to do with preventing further investigation than anything else. Then came the resignation of Presid ent and COO Singer, who left due to disagreements with Jeffries over A&F's international expansion. Singer walked away with a compensa tion package rumored to be worth more than $13 million, Jeffries offered little comment and concentrated on the company's expansion in to Canada and the United Kingdom.

Entering 2006 A&F continued to provoke mainstream America, sellin g the company's oversexed ideal of casual and luxury clothes to kids, teens, and young adults through its four "lifestyle" brands, A&F , Hollister Company, abercrombie, and Ruehl.

Principal Operating Units: A&F; Abercrombie; Hollister Com pany; Ruehl.

Principal Competitors: Aéropostale, Inc.; American Eagl e Outfitters, Inc.; Gap, Inc.; The Limited, Inc.; The Buckle, Inc.; U rban Outfitters Inc.

Chronology

• Key Dates:
• 1892: Abercrombie & Fitch (A&F) is founded in New York City.
• 1917: A&F relocates to flagship store on Madison Avenue.
• 1969: The company runs its first television ad.
• 1976: A&F files for Chapter 11 bankruptcy protection.
• 1978: The chain is bought by Oshman's Sporting Goods.
• 1984: A&F returns to New York City, opening a store at Sou th Street Seaport.
• 1988: The Limited takes over A&F.
• 1992: A&F is repositioned toward casual apparel.
• 1999: A&F becomes an independent company again and launche s abercrombie for kids.
• 2000: The first Hollister Company store opens in Columbus, Ohi o.
• 2002: A&F moves to its new headquarters in New Albany, Ohi o.
• 2004: A&F hires a new president from Gucci and moves into the casual-luxury clothing segment.
• 2005: The first Ruehl store opens in Columbus, Ohio.