From Sweeping the Country to Starting Over: Was Sexy Marketing Really All That Sank A&F?

A&F once satisfied most Americans' teenage (sexual) fantasy of high school. Consumers woke up fast. The brand stayed asleep.

Muscles, cologne, hazy lighting, half-naked male models everyone gasped at. Over 23 years, Michael Jeffries, now 70, built Abercrombie & Fitch from nothing into a company worth $4 billion. Everyone wanted a part of that sexy dream.

Less than 10 years in, it had opened more than 600 stores in 19 countries; in its fastest-growing year, same-store sales rose 40%. The A&F that opened on New York's Fifth Avenue in 2005 stood next door to Gucci and Prada. When the Savile Row store opened in London in 2007, Jeffries stood on the corner in A&F flip-flops and told a BBC reporter: "I think we can stay here for 200 years."

All of that was before 2013.

Michael Jeffries left in February 2015. In 2014, A&F's profit was $106 million, less than half what it earned in 2012. As of this November, its sales had fallen for 15 straight quarters. In the US alone it closed 50 stores in a year, and the rest were stuck in a spiral of discounting to clear stock.

Everything A&F had been proud of suddenly stopped working.

The new management wanted to start clean. This Christmas, walk through downtown New York, Los Angeles or Chicago and you will pass countless red-and-white A&F billboards. Gone are the shirtless models that used to compete for attention with Guess and Calvin Klein. In their place, three lines of type: "People have a lot to say about us. They think they've got us figured out."

The YouTube spot released alongside them no longer sells six-pack abs. The stars are seven fully dressed twenty-somethings. They lie in the grass and sit on the roof of a Jeep in twill sweaters, plaid shirts and track jackets, smiling like a breath of fresh air. At the end, the second half of the tagline appears: "This is Abercrombie & Fitch."

A&F's fall/winter 2016 look — do you still recognize it?

A&F's latest ad, "This is Abercrombie & Fitch"

A&F spent 18 months preparing this campaign, which it calls the largest in its history. It created the first marketing creative director in the brand's history and gave the job to Ashley Sargent Price, formerly global vice president of brand creative at J. Crew, and poached a new brand president, Stacia Andersen, from Target.

A redesigned website and digital ads everywhere you look arrived with it. If you opened A&F's Instagram account on October 13, you found that everything posted before had been deleted overnight, leaving only that red-and-white ad, which reads with a faint note of hurt.

"Our customers no longer want to get into some small circle and be one of its members; they prize individuality and uniqueness. The new brand reflects that confidence and independence, and our respect for a diverse and inclusive culture," global president and chief sales officer Fran Horowitz said in a statement. She leaned hard on the word "inclusive," and said she did not want to talk about "teenagers" anymore, because "A&F will be a more mature brand."

That is not a rebrand. That is demolition.

Out of Every 1990s American Teenager's Idea of "Cool," He Built a Clothing Brand From Nothing

A&F in its golden years had nothing to do with inclusion.

Like a luxury house or a streetwear label, what it sold was superiority. The most quoted example is Michael Jeffries's answer in a 2006 salon.com interview, when asked why A&F made no plus sizes: "In every school there are the cool and popular kids, and then there are the not-so-cool kids... Candidly, we go after the cool kids."

The Abercrombie group ran three brands, all aimed young. The main line, A&F, targeted college students; the second line, Hollister, appealed to 12-to-18-year-olds; Abercrombie Kids was for children under 12.

Whoever the audience was, all three kept the design Michael Jeffries had fixed in the mid-1990s: sweaters, sweatpants, hoodies, T-shirts, polo shirts, jeans, flip-flops — classic American western style, stamped with the moose logo, large or small. The stores in the malls were just as easy to spot: dark wooden shutters, cologne thick enough to make you dizzy, dance music at deafening volume, black-and-white photographs of young male models baring tempting abs.

Jeffries called all of it "the essence of privilege and casual luxury."

That essence was not as simple as the shirtless-model marketing on the surface.

Before Jeffries joined A&F in 1992, the brand was already 100 years old. It began as a high-end sporting-goods outfitter for explorers and the business and political elite, with Teddy Roosevelt and Ernest Hemingway on its customer list. In 1988, badly run, it was bought for $47 million by a company called The Limited, and reduced to selling croquet sets and embroidered dresses. Les Wexner, who ran the company then, hired Michael Jeffries and asked him to start the brand over.

It is hard to see what Wexner saw in him. Jeffries was 48 by then. He had worked at the department store chain Federated Department Stores, and had run two preppy-look womenswear brands, Alcott & Andrews and Paul Harris. Both went bankrupt.

Pop culture is a good way to read the consumer market of those years. In 1990s America, teen movies and television were entering a golden age. American Pie, Clueless, Can't Hardly Wait — a first draft of Gossip Girl, thick with hormones.

A whole crop of American teen fashion brands rose around the same time. American Apparel was founded in 1986, Aeropostale in 1987. All of them seized on sex, the thing teenagers most love to talk about and least like to admit talking about: curves in the designs, and beaches and parties in the advertising, every setting loaded with suggestion.

But many brands missed the point. In every one of those stories, the American high school is a small society with a rigid hierarchy, and the top always belongs to the cheerleading captain, the football captain, the student body president (think of the Taylor Swift line, "...She's cheer captain and I'm on the bleachers"). They swagger. They have the looks, the family, the last word. Everyone else secretly wants into that circle, as if high school would otherwise be wasted.

Michael Jeffries caught the scent of it. In fashion, that circle is easy to copy. The method never fails — luxury does it with heavy spending and high prices, streetwear with limited runs and a manufactured subculture — but it demands strict, detailed control and execution.

That suited Michael Jeffries. His fixation on detail and taste bordered on neurotic. According to Bloomberg, as soon as he took the job Jeffries wrote a 29-page "Look Book" for sales staff that reads like student council bylaws: women may not wear makeup, nail polish or tattoos. No jewelry. Hair stays its natural color, preferably long. Men, remember to shave. There is one permitted greeting: "Hey, what's going on?" Store managers spent one day a week combing local colleges for good-looking kids to hire, starting with fraternities, sororities and sports teams, and every candidate went to headquarters for approval.

Every week, Jeffries also sent every store a schedule listing each task that had to be done, down to how the clothes were displayed: a hanging shirt had its top button undone, a shirt folded on the counter had two. Headquarters representatives raided stores without warning, and any store out of line was put under the watch of a so-called Rehab team.

He held himself to the same rules. His house looked much like an A&F store, and he wore nothing but A&F. Board members and shareholders said he sometimes turned up to meetings with a swollen face, fresh from cosmetic surgery, so that he could always stand for the flawless image A&F wanted.

The filters on open display were more numerous still: staff had to be white, good-looking and in shape; rows of muscle men filled the ads and the store openings; the sizes ran small, with no large sizes (Size 10); the $6 A&F Quarterly was full of sexual content and carried no age warning; and the company refused to discount at all, until the 2001 financial slump hit.

Some of it drew complaints from parents. It only made teenagers want the clothes more.

In 1996, four years after Michael Jeffries took over, A&F went public. It had 125 stores across the US, sales of $335 million and profit close to $25 million.

Alisa Durando, who joined as a designer that year, told Bloomberg: "We could influence his thinking on product, but not on marketing. He was amazing — as if he were directing a film the whole time, telling only the lifestyle story inside his own head."

The Kids Grew Up. A&F Didn't.

While the film made money, nobody questioned Michael Jeffries's methods.

By 2008 and 2009, A&F's same-store sales were falling two years running, down 13% and then 23%. The board began to limit Jeffries's use of the company's Gulfstream G550, the first signal that it wanted change.

A&F changed very little. The consumer changed.

Some background helps: as a brand bound tightly to American domestic culture, A&F leaned heavily on its home market. Take the 2014 numbers: the US accounted for 64% of total revenue, Europe for 26%, everywhere else for the remaining 10%.

Ten years on, the domestic consumers raised in the golden period from 1992 to 2002 had grown up, and "teenagers" meant a different set of people.

Take one example. In 2006 — a year before Gossip Girl's first season premiered and took off, when Twitter had just been founded and Facebook was two years old — Michael Jeffries's "cool kids" remarks drew little discussion. In 2013 the same remarks were dug up and raced across social media, and A&F's share price fell 30%.

This time the complaints came from the customers, not their parents. The Hollywood teen stars Miley Cyrus, Ellen DeGeneres and Kirstie Alley led a joint boycott, and a petition on the NGO platform change.org demanding that A&F "stop telling teenagers they aren't beautiful enough and make clothes for every body type" drew more than 80,000 signatures. That autumn, the research firm Piper Jaffray asked American middle- and high-school girls which brands they had stopped wearing; A&F and its sister brand Hollister came second and third. The same year, its same-store sales fell 11% and it closed 220 stores.

In 2014, consumer research from Nielsen, Harris Interactive, the Boston Consulting Group and others began to repeat an observation that now looks obvious: when millennials decide what to buy, they weigh sustainability and social responsibility more heavily than any generation before them.

Guo Zimeng went to Purdue University in 2010 to study communications. She told QDaily: "In my first weeks as a freshman I bought a lot of it. It felt collegiate, it was comfortable, and once it was discounted the value was pretty good. But it put so much weight on body and looks that I came to think it was a brand selling discrimination, so I resold all of it."

Zhang Yunzhen, 23, who had just graduated from Saint Ann Arbor State University, felt the same. She had an observation of her own: "I have no evidence for this, but I feel their stores often open in places where the white share of the population is above average. Take Ann Arbor, where I studied — the white share is very high, and the Black share is under 1%. A&F seems to have more white customers than Black ones too. I've wandered past that store on Fifth Avenue in New York a few times and barely saw a Black customer."

Cathy, 33, who has worked in the US for two years, put it more bluntly: "America's obesity rate is so high, and a lot of it comes from poor people eating badly. Then look at what this brand does — what it sells is discrimination."

Set the values aside and judge on looks alone, and the muscle men of the American western style were out of date anyway. The retail analyst Kristin Bentz has followed A&F for more than a decade, and her view is that after Twilight opened and became a hit in 2008, the look teenagers wanted was that of the film's male lead, Edward: "pale, thin, but stylish."

"The normcore style of the last few years has also worked against A&F," Zhang Zhengyang, brand manager at Hiuman, told QDaily. "Its target customers are teenagers, and its advertising image has always been on the revealing, sexy side."

In fact this American western style had been under steady attack since the start of the 2000s. First fast fashion, at its height around 2005, ate into the market; then in 2013 the plain, minimal normcore look took nearly all the attention away.

Plenty of people had simply tired of this whole group of brands that rose together in the 1990s with similar designs and similar marketing. "How many times can you turn a hoodie over and sell it again? Charging that much, and printing your own logo on it so you advertise for free — that really puts me off," Emily Evans, a 19-year-old student at the University of Arizona, told The Guardian.

Zheng Mianmian, a trend analyst at WGSN, thinks A&F's problem resembles that of older Chinese brands such as Metersbonwe. She told QDaily: "At the start these brands could read what people in their twenties wanted, and the market rewarded them. But by the time those people turned 30 or 40, a new set of consumers had arrived. Only then did they start building online retail and changing the offline shopping experience, and by then it was late."

The First Rebrand, Launched in 2015, May Already Have Been Too Late

If A&F was going to change, Michael Jeffries had to go. Investors began saying so in 2013.

"Jeffries tied his whole personality, his whole soul, to the image of the brand... It would take the greatest psychologist in the world to get him to change it," the retail consultant Robin Lewis told Bloomberg.

In 2015, A&F filled the empty seats with executives from Ralph Lauren, PVH and Lucky magazine, trying to rescue a brand whose sales had fallen for 13 straight quarters. They decided the problem lay mostly in marketing — that is, in how the brand talked to consumers.

Michael Scheiner, A&F's global senior director of marketing and public relations, told QDaily in mid-2015: "Consumers aren't as interested in sexy marketing as they used to be. What they want to see now is a brand that cares about a way of living."

Michael Scheiner was not the only one to notice. Last June, American Apparel told investors that to revive stalled sales it would drop the sexy advertising that had been "very offensive to a lot of people" and stress diversity and inclusion instead, widening its age range to "confident, naturally beautiful people between 16 and 60," "with no racial difference or discrimination," and a "fresh, natural" look. The strategy of that company, sold off cheaply for $66 million this month, sounds little different from the new A&F marketing described at the top of this piece.

What does caring about a way of living actually mean? The answer did not seem clear either. That year, A&F's biggest changes were taking the logo off the clothes, ending the shirtless-model marketing, brightening store lighting and cutting the cologne by 25%, and launching an athleisure line. None of it had much to do with a way of living. It looked more like stripping "Michael Jeffries" out of the brand.

The question is where A&F's new distinctiveness comes from once "Michael Jeffries" is stripped out. Design?

A&F's Main Changes, 2015-2016

Spring 2015

Design begins to drop the logo

2015.04

Announces the end of shirtless-model marketing

2015.06

Redesigns store layouts, brightens lighting, cuts the cologne by 25%

2015.06

Katia Kuethe, former creative director of the fashion magazine Lucky, becomes A&F's new creative director

2015.07

Launches an athleisure line — no logo, no sexy advertising — to a decent reception on social media

2015.08

Aaron Levine from Ralph Lauren and Kristina Szasz from PVH become design directors of A&F's men's and women's lines

2015.12

Hollister president Fran Horowitz is promoted to president and chief commercial officer of the A&F group; the share price jumps 6.62%.

2015.12

Announces it will stop looking for a CEO and will have several executives run A&F together

2016.04

Hires Ashley Sargent Price from J.Crew as marketing creative director

2016.05

Hires Stacia Andersen from Target as brand president.

2016.11

Opens stores in Nanjing and Ningbo; ends the lease on the flagship store in Hong Kong's Pedder Building early

2016.11

Unveils the rebranding campaign "This is Abercrombie and Fitch"

The clothing market had long since grown more varied and more crowded. The largest share still belongs to fast fashion, with the lowest prices and the fastest turnover; internet-born brands that cut out the middleman and sell on value, such as Everlane, are rising; and a growing number of affordable-luxury designer labels and contemporary commercial brands are trying to mine the middle class.

Betty Chen, managing director at Mizuho Bank, told Business Insider: "In 2012, colored denim was still a new trend that could break out. Since then it has been rare to see a new trend take the market, and retailers have struggled."

Another problem is that consumers may no longer fall into tidy circles. Zheng Mianmian, the WGSN trend analyst, told QDaily: "Consumption from here will be divided by mindset, not by age or gender. You can see plenty of older bloggers abroad joining the conversation, sometimes dressing younger than millennials do. Closeness to nature, being green — a 16-year-old can hold those ideas and so can a 60-year-old. Whether you've caught a consumer's mindset matters far more than talking about age."

It May Still Have a Chance to Survive, But That Golden Age Is Gone for Good

Apart from the marketing, all of A&F's rebranding happens inside the stores. "Only when people cross the threshold do we have control again," Arthur Martinez said.

So how do you get people back into the stores?

On channels, A&F's plan was to close US stores, cutting inventory and rent, and raise the share of online sales. Arthur Martinez, the chairman of the board, told Bloomberg in early 2015 that "online revenue could rise to 40% over the next three years." In the fourth-quarter results released this year, the figure had reached only 26%, slower than expected.

A&F also tried to develop the overseas markets it had long neglected. According to figures Fortune published in 2015, between 2010 and 2012, as domestic sales slid, the Abercrombie group concentrated on opening stores in Europe, raising the count there from 52 to 139; Europe accounted for 75% of all overseas revenue.

On return, that looked like a good choice: sales per square foot at the group's overseas stores ran 85% above the domestic ones. But they depended on tourists, and most sat in cities packed with them, which left same-store sales more exposed to swings in tourist numbers. In a downturn, or after a terrorist attack in the region, they fell harder than the domestic stores did — down 8%, 19% and 12% from 2012 to 2014.

Faced with these old problems, A&F seems to have concluded that closing stores and selling more online is the most efficient answer. In August it signed a wholesale deal with Zalando, Europe's largest online retailer, hoping to reach the site's 18 million active users.

In Hong Kong and South Korea, store sales are also being hit by economics and politics. A&F has just announced it will close its only Hong Kong store, in Pedder Building in Central, ahead of schedule; ending the lease cost $16 million (about HK$124 million), roughly a year and a half of the store's rent. The reason it gave was that this would be "beneficial to the group in the long run." It plans to close its South Korean flagship early next year.

"Pulling out of Hong Kong isn't necessarily a bad thing," Zheng Mianmian of WGSN told us. "The age of retail experience has arrived and the whole industry is turning over. The mainland is trying experiences and new models everywhere; Hong Kong is actually changing more slowly than the mainland."

Against other markets, mainland China looks like the better bet. A&F has 180,000 followers on Weibo, and its WeChat posts average more than 10,000 reads. Of its 15 stores in Asia, 6 are on the mainland, with the seventh opened in Ningbo on November 8; a Sanlitun store is said to be opening on December 2. Next to Chinese fashion brands that think nothing of running hundreds of stores, A&F may still have room to dig, online and off.

Wu Shuang, 26, who works at a state-affiliated institution, heard about the brand through her boyfriend: "In 2011 he happened to buy a fake on Taobao, found it comfortable, and bought through a daigou reseller after that. I don't remember seeing the stores much. We both like the brand — we think it's decent value."

There are probably many more consumers like her. In a market as large as China's, fashion still runs behind the rest of the world; the high-school nostalgia that Americans born in the 1970s and 1980s feel for brands like A&F, and the verdict a newer generation of consumers has passed on A&F's values, have not spread far here. What sells is still, above all, value for money. As of publication, 2,334 Taobao shops were reselling A&F one shirt listed at 316 yuan sells 153 units a month.

But can A&F ever recover the hold it had on teenagers in its golden age?

It is hard to say which answer would be the "right" one. Someone put that question to Martinez, the current president, and his reply was: "The best and the worst thing about retail is that standing at the summit is a very dangerous place to be. Wanting to stay at the summit makes you fragile. The world has moved on, and the company has to find a way to move on too."