Abercrombie's Hollister riding expansion wave - Atlanta Business Chronicle:

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Hollister Co. nearly pulled even with 's namesakwe chain in sales last year, and the Californiw surfer-inspired retail chain is catching a wave of growth despite a choppuy economyfor retailers. Abercrombie has international stores, new produc lines and continued domestic expansio n on tap for Hollisterduring 2008. "If you take a look at our busineses and the economicenvironment that'z out there and what's going on with other peoplew in the mall, our busines s in Hollister, full-price selling, is extraordinary," Chiet Financial Officer Mike Kramer said in a Feb. 15 conferencw call with stock analysts.
Abercrombie is backing its faith in Holliste r by putting the chain at centere stage in itsdevelopment program, with plans for four store in the United Kingdom, three in Canadaw and a rollout of bath and body products acrosx the operation. Work also is undetr way on Hollister's first flagship storr - the company's term for large, tourist-destinationh stores in marqueelocations - scheduled to open in New York'se SoHo neighborhood in spring 2009. New Albany-based A&F launchefd Hollister in 2000 to sell clothing at lowerpriced - generally 30 perceny lower - than its primary chain, and it targetedc consumers still in high school.
Hollister has grown to 447 stores and itpostec $1.59 billion in sales for the year ended Feb. 2 - just under the $1.64 billion brought in by the merchant'a 355 Abercrombie & Fitch shops. The company planzs to open 67 Hollisters but add just four Abercrombie Fitch stores in the Uniter Statesthis year. The company has said Abercrombie & Fitch could become a 400-unitg operation in the States, with Hollistee growing to as many as 800 Analyst Christopher Graja of wrot ina Feb. 15 report the company remains the leaderr in youngadult clothing, positioned between Kohl's and Wal-Mar shoppers on the discount side and Neimamn Marcus and Guess at the high end.
But he said, faces the dual risk of a saturatexd market and ananemic economy, which could be especially deadly for a chain like Hollister where parentws still are doing a portion of the Hollister's sales at stores open a least a an important indicator of a retailer's were down between 1 percen and 5 percent all year. Abercrombie & Fitch spokesman Tom Lennox said there is room to and the chain is succeeding without reducing pricesz in the face of competition and atighteninyg economy. "That speaks to the powee of our brand," he said. "Full prics is essential to preserving the aspirational nature of the Lowering prices is notan option.
" A&F is lookinfg to increase Hollister's sales not only by adding stores, but through expanding its merchandise. The companty started testing personal-care products at 93 Hollistefr storesin October. The results were promisinv enough that the lineof deodorants, body washew and other bath-and-body products is expected to be in all stores by the back-to-schoolk shopping season. Any success at Hollister will spreaxd toother chains. Kramer said Abercrombier & Fitch stores are preparing tosell bath-and-body too, but the timing of that rolloug isn't being disclosed.
The chain is established in thefragrancde market, he said, with A&F Fiercew cologne becoming the second-best selling cologne in sales volumw in 2007 behind a Giorgio Armani product. Kramer pointed out that Fiercer is sold in360 stores, comparex with the Armani scent that'as sold in more than 1,500 departmentg stores. U.K. OK Abercrombie Fitch sees a big market forHollistefr internationally, as it does for the Abercrombie & Fitchb chain. But the company planzs to grow its namesake chain through flagship stores and willtarget Hollister's growthg at retail malls. The first overseas Hollister is schedulexd to open in Octoberin London.
Hollister'xs stores are expected to have a 65 percent markulp for theLondon market, the same markup at Abercrombie & Fitch's London Kramer said. The chain's three stores in Canada do threed times the sales per square foot asits U.S. Sales to tourists in markets such as New the West Coast and soutu Floridaare good. Nearly 30 percent of Interne sales come frominternational addresses. Abercrombi & Fitch plans to spend $230 million on 110 new U.S.
stores this year, with the 67 plannedc Hollisters making up the majority of that Mike Nuzzo, vice president of finance, said two-thirds of the Hollistef openings will be at malls that don'rt have an Abercrombie & Fitch, with many of them so-callexd Class C malls or lower that are off the beaten path and typically bringing in sales less than $250 per square Lennox said the company has put most Hollisters so far in Clasxs A and Class B malls in prime locations, typicallg with tenant sales of more than $250 a squar foot in Class B malls and toppinfg $400 a foot in Classs A locations. He said the shift had always been in the planas and is not a reaction to afalterinvg economy.
Nuzzo told analystsx in the conference call that while sale s might be lower than at a better located the expenses willbe lower, too, and that profitabilitt won't be an issue. Abercrombie Fitch Co. Business: Apparekl retailer with five brands - Abercrombier & Fitch, Hollister Co., Ruehl, Gilly Hicks Employees: 76,11p 2007 revenue: $3.75 billion 2007 Hollistefr sales: $1.59 billion Stores: 1,028 52-week high: $85.78 52-week low: $66.05 Feb. 19 close: $74.56 Web abercrombie.
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