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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Fashion is experiencing a ’90s revival. Baggy jeans, oversized logos and grungy flannel shirts are trendy once again. So too are two of that decade’s most iconic brands.
Over the past two years, Abercrombie & Fitch has emerged as one of US retail’s biggest comeback stories. The company — once infamous for its shirtless models and heavily perfumed, darkly lit stores — has overhauled its image, taking a more inclusive approach to appeal to a broader range of shoppers.
Sales have soared. Between the start of 2023 and the end of 2024, the stock quintupled in value. Although the shares have been knocked back by tariffs and trade war concerns this year, they are still hanging on to a 290 per cent gain.
Gap — another ’90s mall fixture — is also undergoing a turnaround of its own under new CEO Richard Dickson and creative director Zac Posen. Its shares have climbed a fifth so far this year to take their gains over the past two years to 235 per cent. Analysts were expecting the company to report rising sales and profit with its first-quarter results due after the market’s close on Thursday.
Much of that momentum is being fuelled by Gen Z’s appetite for ’90s nostalgia. In its most recent quarter, Abercrombie pulled in $1.1bn in sales for the three months to May 3. It was the best start to a fiscal year in the company’s history and prompted management to raise the upper range of its guidance for full-year sales growth to 5 per cent.
Having regained their street cred, the challenge for the two brands will be to remain relevant. In a business driven by fashion and trends, that is easier said than done. At Abercrombie, the better than expected first quarter result was entirely driven by demand for its more affordable Hollister teen and college clothing line. The brand, which accounts for about half of overall group sales, grew its same-store sales, while the company’s namesake brand aimed at millennials shrank. Profitability fell, and could again if US President Donald Trump’s tariffs are revived.
That means 2024 could be as good as it gets for Abercrombie. But the recent drop in valuation makes it a good time for new investors to jump in. The stock trades at a multiple of nine times forward earnings. That is below its three-year average of 15 times and is a discount to the multiples that rivals Gap, American Eagle Outfitters and Urban Outfitters fetch. That seems unjustified: Abercrombie has not looked this sharp in a long time.
