Abercrombie and Gap Are Leading an Apparel Rebound in 2024

Turns out fashion is a little more fashionable this year. Growth will rebound in 2024 for Abercrombie & Fitch, Gap Inc. and the entire apparel and footwear category, despite an overall slowdown in consumer spending, according to Moody’s. For the global apparel and footwear segment, earnings before interest and taxes will grow 8% in 2024, according to the firm. That’s a substantial rebound from the nearly 8% decline of 2023, when the sector faced an oversupply of inventory and a pressure to slash prices, according to Moody’s economist Nick Villa.

Among apparel and footwear retailers, Abercrombie & Fitch and Gap Inc. stand out, he added. Both posted strong sales growth and performance metrics in the first quarter of 2024.

Abercrombie & Fitch’s turnaround has been years in the making after a series of scandals, Villa wrote in a research note. “Efforts to reposition its brand by offering a wider range of sizes, fewer logos and less-sexy clothing, for instance, has resonated with Millennial customers,” he wrote. The company’s transformation owes in part to initiatives like The A&F Wedding Shop. Launched in March, the collection of dresses and apparel for events from bachelorette parties to honeymoons appears in all Abercrombie & Fitch-brand stores.

Parent company Abercrombie & Fitch includes its eponymous brand, as well as Abercrombie Kids, Gilly Hicks and Hollister. In the first quarter, its sales growth accelerated for the fifth straight quarter and net sales jumped 22% year over year to just $1 billion, the highest in company history. The company’s operating margins also improved, rising 860 basis points year over year to 12.7%. And the more it sells, the more it markets: The company aims to spend 5% of topline sales on marketing to reach its target audience. “Abercrombie is seeing new customer acquisition through initiatives like the Wedding Shop and increased top-of-funnel marketing,” CEO Fran Horowitz said on the retailer’s earnings call. It previously anticipated flat net sales growth for 2024 but now expects sales to rise slightly for the year. Abercrombie & Fitch operated 765 stores as of the end of fiscal year 2023, which ended Feb. 3.

Gap Inc., meanwhile, is attracting younger customers thanks to new executives, new design talent and innovative marketing campaigns, Villa wrote. The company — which includes the Athleta, Banana Republic, Gap and Old Navy banners — raised its sales and operating guidance for the full year after first-quarter year-over-year sales numbers came in: For each of the four brands, sales grew at stores that had been open for at least one year. Net sales across Gap Inc. climbed 3% year over year.

According to Placer.ai data, weekly visits have risen at Gap and Old Navy and less time is passing between visits to those brands. “Though it may be premature to declare an end to the troubles that have plagued the clothier in recent years, early 2024 foot traffic provides further evidence that the company is heading in the right direction,” Placer.ai writer Bracha Arnold indicated in a May 28 research note. Gap Inc. ended the quarter with 3,571 stores globally.

6 More Retailers in the Headlines, Including a Movie Theater Acquisition Making History

First Movie Studio Purchase of a Theater Chain in More Than 75 Years

Sony Pictures Entertainment has become the first movie studio to buy a cinema chain since a 1948 U.S. antitrust case forbidding the practice was overturned in 2020. The company acquired Alamo Drafthouse Cinema, a hybrid restaurant and movie theater with 35 units across 25 states. Those figures are after a franchisee’s bankruptcy caused the sudden closure last week of five locations in the Dallas metro and one in Minnesota. Alamo Drafthouse units will continue to screen films from all studios and distributors, not just Sony.

BinStar Capitalizes on Other Retailers’ High Return Rates

BinStar, a retailer that sells, at deep discounts, other retailers’ e-commerce returns, overstock, shelf pulls and liquidations, opened its fourth store on June 8 in Kingston, Massachusetts. The chain is one of many bin stores around the country that buy such items from larger retailers that don’t want to sort, resell or trash them. Bin stores place the merchandise into bins through which shoppers can dig to find deals. Typically, prices descend throughout the week encouraging repeat treasure hunt visits. At BinStar, new stock is priced at $19 on Saturday and by Friday, many items are only $1.

Dollar Tree Could Sell and Spin Off Family Dollar Stores

Dollar Tree Inc. is considering strategic alternatives for its Family Dollar business, including a potential sale, spinoff or other disposition. “The unique needs of each banner at this time — transformation at Family Dollar and growth acceleration at Dollar Tree — lead us to the decision,” explained Dollar Tree Inc. CEO Rick Dreiling. After a fourth-quarter portfolio review, Dollar Tree Inc. planned to shutter approximately 600 Family Dollar stores in the first half of fiscal 2024. The company said an additional 370 Family Dollar and 30 Dollar Tree stores would close over the next several years as their leases expire. During the first quarter, it opened 116 Dollar Tree and 41 Family Dollar stores. As of May 4, the company had 8,520 Dollar Tree stores and 7,877 Family Dollar stores.

Primark Grows in D.C.

Primark is expanding in the Washington, D.C., metro area. In July, the apparel chain will open a 35,000-square-foot store at Tysons Corner Center in Virginia, in a space that once housed L.L.Bean. This will be Primark’s second D.C.-area store; in September, it opened a unit at Arundel Mills in Hanover, Maryland, toward Baltimore. In addition, Primark has announced leases at both Potomac Mills in Woodbridge, Virginia, and the Mall at Prince George’s in Hyattsville, Maryland. The Tysons store will bring Primark’s U.S. store count to 25 across 10 states. The Ireland-based chain has more than 440 stores globally and aims to reach 530 by the end of 2026.

The Shopko Name Lives On in Optical

Investment firm Monarch Alternative Capital sold Shopko Optical, a business it built from the ashes of a defunct department store chain, to eyewear giant Fielmann Group. Shopko Optical, which operates more than 140 stores across 13 states, formed as a standalone company in 2019 when Monarch purchased 80 store-in-store optical units during discount department store chain Shopko Stores’ 2019 bankruptcy auction. Monarch transitioned them into freestanding stores. Over the past five years, Shopko Optical has expanded into new states. The acquisition adds to Germany-based Fielmann’s U.S. footprint. In 2023, Feilmann, which has more than 1,000 stores worldwide, entered the U.S. market by acquiring online eyewear retailers Befitting and SVS Vision.

A DTC Brand That Achieved Profitability and Is Nearing 100 Stores

6 Recent Property Trades, Including a $495,000 Deal That Closed Yesterday

Federal’s Portfolio Moves

Federal sold its remaining eight buildings, totaling 185,000 square feet, on Santa Monica, California’s Third Street Promenade, which sits a quarter mile from Santa Monica Beach. This $103 million deal adds to a December trade to bring Federal’s gains from its Santa Monica portfolio — 147,000 square feet of retail and 60,000 of office — to $120 million. The disposition gives the REIT flexibility to snap up available properties — for example, its acquisition this month of Virginia Gateway — said executive vice president and chief investment officer Jan Sweetnam. The firm purchased the 665,000-square-foot Gainesville, Virginia, property for $215 million. The 110-acre Virginia Gateway is organized into five components, including a town center and lifestyle center. Tenants include Giant grocery, Hobby Lobby and HomeGoods.

3 Off-Market Deals

Not all transactions taking place are on the open market.

Pine Tree and a state pension fund acquired six open-air shopping centers from Site Centers for $495 million. The 95%-leased, 2.5 million-square-foot portfolio spans two properties in Columbus, Ohio, and one each in Cincinnati; Fort Lauderdale, Florida; Phoenix; and Portland, Oregon. Anchors include Kroger, The Fresh Market, Target, Nordstrom Rack, Dick’s Sporting Goods and 13 stores from TJX Cos. concepts. The transaction brings Pine Tree’s assets under management to nearly $2.5 billion. Site Centers kept 93,607 square feet of gross leasable area at three of the six properties to include in its planned spinoff of Curbline Properties.

And Last Mile Investments acquired the 65,000-square-foot Galleria West in Brookfield, Wisconsin, from Galleria West Associates. The company plans to add a 20-foot monument sign, make major facade improvements and enhance patio space. Mid-America represented both the buyer and seller.

In another off-market transaction, Tova Capital acquired the 18,600-square-foot East Willow Village in Signal Hill, California, for $6.75 million. Turner’s Outdoorsman anchors the center.

Multifamily Firm Makes Its First Retail Buy Since 2008

Decron acquired California’s 238,747-square-foot Mira Mesa Market West Shopping Center from Stockbridge for $99 million. CVS, The Home Depot and Smart & Final grocer anchor the center. This is Decron’s first retail acquisition since 2008. The company owns and manages 600,000 square feet of additional retail and nearly 10,000 multifamily units in Arizona, California and Washington. In December, it acquired a 240-unit, luxury multifamily community in nearby San Diego for $125.5 million.