May 30, 2024 - Business

Revenge of the mall retailers: Why sales are up at Abercrombie and American Eagle

Illustration of an escalator with steps made out of 5 and 10 dollar bills.

Illustration: Brendan Lynch/Axios

It's the revenge of the mall retailers: Several chains that were once floundering are enjoying a sudden resurgence.

Why it matters: The American mall has been under siege for years from digital competitors and big-box stores, prompting many to pursue reinvention with alternative tenants like fitness chains and restaurants.

Zoom in: Several retailers are on the comeback trail, as evidenced by their earnings reports this week and last:

  • Abercrombie & Fitch smashed expectations with a 22% jump in sales in its first fiscal period, compared with a year earlier.
  • Gap beat top and bottom line expectations for all four of its brands, Gap, Banana Republic, Athleta and Old Navy.
  • American Eagle Outfitters reported record revenue.
  • Foot Locker's comparable sales were down 1.8%, but that was much better than expected — and CEO Mary Dillon said more customers are paying full price.
  • Macy's reported its plan to shutter underperforming locations and bolster its surviving stores is "gaining traction."

Between the lines: Stores catering to millennials and Gen Z are leading the comeback.

  • "Gen Z shoppers are bringing back the mall shopping center experience," Kristin Grove, senior VP of national retail leasing at real estate firm JLL told the LA Times earlier this year. "They want a sense of community. They want to bridge the gap between the social media that they're doing, and meet and shop in-person."

Reality check: This new generation of mall rats aren't lifting everyone inside.

  • Teen fashion retailer rue21 filed for bankruptcy for the third time in early May and is closing all of its stores.
  • Clothing retailer Express filed for bankruptcy in April and is closing 100 stores.
  • Capri Holdings — which owns Michael Kors, Jimmy Choo and Versace — reported disappointing sales declines Wednesday.

What they're saying: "Abercrombie, American Eagle, and Foot Locker are all reaping the rewards of strategies that are focused on the consumer," GlobalData retail analyst Neil Saunders tells Axios in an email.

  • "All the businesses have worked hard to secure loyalty and spending and their efforts are paying off."

The intrigue: That a brand like Abercrombie can make a comeback should be an encouraging sign for others.

  • Once seen as yesterday's news, the company reworked its approach to fashion, downplaying its logo and focusing on an older crowd than the teens it once focused on, according to Fast Company.
  • "There are very few established retailers producing this level of growth in the market," Saunders said.

The bottom line: The demise of mall retail has been greatly exaggerated.

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