Abercrombie & Fitch chairman describes a seismic change in American teenagers

Neelam Gill abercrombie & fitchDan Martensen/Abercrombie & FitchNeelam Gill in the latest Abercrombie & Fitch ad campaign.

Abercrombie & Fitch’s young customers have changed dramatically in the past decade.

The biggest difference? They’re spending money on categories other than apparel, CEO Arthur Martinez says.

“What clearly has happened is that apparel is a smaller share of wallets,” Martinez told Business Insider in a telephone interview.

“A greater share of their money is going to, I’d say, two things. Number one is technology: iPhones, iPads, iWatch, whatever it might be,” Martinez said. “And the other thing is — I’d call it experiences: dining out with friends.”

Abercrombie has been changing its strategy after years of steep sales declines. The brand’s signature sexy marketing campaigns and loud logos stopped resonating with young customers, who sought out cheaper fast-fashion alternatives instead.

Martinez took over as chairman in 2014, replacing controversial longtime CEO Michael Jeffries, who famously said he only wanted “cool kids” wearing his clothing.

The brand has been toning down its marketing and redesigning fashions to appeal to young consumers.

For Martinez that’s meant turning to his granddaughter.

“She spends all of [her time with] her friends, dining out with friends and doing things together — sometimes shopping, but not always shopping. Those two are probably the biggest divergences from where we were a decade ago,” Martinez said.

Social consciousness taking over

Additionally, the young consumer is more socially-conscious than ever before, a result of teens being plugged in to social media.

“I think the social consciousness of teenagers is definitely, I’d say, at a higher level than I can ever recall,” Martinez said to Business Insider. “We try and address it in a couple of ways.”

For instance, Abercrombie launched an anti-bullying campaign (bullying, according to Martinez, “has been a cancer among young people”) and heightening the brand’s focus on sustainability and its environmental impact.

It’s worth noting that Abercrombie & Fitch is now targeting an older consumer, someone 18-25, according to Martinez — hence the drastic shift in marketing.

Abercrombie & Fitch has toned down its notoriously sexy image. Its latest marketing campaign did not feature nearly naked models; rather, it featured a fully clothed Neelam Gill.

“The rebelliousness that was embodied in that [older] marketing and that positioning was very much directed at the teen who was … finding their own identity,” Martinez said. “We aim today to be a little further up the age curve … where people are little more grown up, if I can use that phrase. They’re entering a true adulthood, sort of 18-to-25 age band, collegiate and immediate post collegiate. They have a more refined sensibility, a great sense of themselves and the imagery that used to be used was designed to provoke.”

“Today, I think provoking is the wrong way to approach it. What we are trying to do is show a lifestyle and an ethos that is consistent with today’s 18 to 25-year-old who has [a] clearer sense of self and identity, and we can appeal to that lifestyle and that confidence that they have as they get to that age level.”

Neelam Gill Abercrombie & FitchDan Martensen/Abercrombie & FitchNeelam Gill in the latest Abercrombie & Fitch ad campaign.

Crucial shift in strategy

That older consumer, Martinez believes, is going to invest in apparel versus go the fast fashion route. He says disposable income. “We sense a shift that people are willing to invest in something, [that they will wear] more than one season,” he said.

This shift is crucial, as foregoing incessant promotions is a key tenet to Abercrombie & Fitch’s turnaround strategy, although “promotion is a fact of life,” as Martinez put it.

The efforts — that have been in effect since before Martinez jumped on board — have been paying off.

The company saw shares skyrocket Friday after it reported its quarterly results. Comparable sales — those in stores open at least a year — in the United States still fell 3%, but that’s still better than the staggering declines from the previous two quarters.

The company said in a statement that these results were “the strongest validation yet that our initiatives are working.”

“Clearly, it’s a challenging environment,” Moody’s analyst Mike Zuccaro said to Business Insider. “It’s a competitive marketplace, there’s a lot of alternatives for consumers. So you’ve got to have product that resonates with the consumer at a price that the consumer perceives as having good value.”

“It’s continued sequential improvement, based on the initiative the company has been implementing,” Zuccaro said. “But again, it’s a challenging environment.”

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