At one time, Abercrombie & Fitch (NYSE:ANF) was on trend. If you wore the brand, it meant that you had money and style.

CEO Mike Jeffries arrived in 1992 and led the brand toward high-end and exclusivity. However, after his 2006 comments about the brand targeting "the cool kids" went viral in 2013, the company suffered a PR nightmare.

Over the past three years, the stock has depreciated 25.17%. Remember, this is during a time that the broader market has reached new highs. Comparatively, Urban Outfitters (NASDAQ:URBN) has seen stock appreciation of 11.36% over the same time frame. However, the two companies' strategies for these brands going forward might not be so different.

Fast fashion
In the past, a retailer would offer a particular style for a season, perhaps much longer. Today, retailers are attempting to keep up with up-to-the-minute trends. This is what today's young consumer demands. Therefore, retailers like Abercrombie & Fitch must figure out solutions.

Free People, a subsidiary of Urban Outfitters, is using the fast-fashion model, and it has so far led to success. Comps at Free People skyrocketed 20% for the fourth quarter year over year. It will also have a plus-size line debuting at New York Fashion Week. This gives Free People, and hence Urban Outfitters, an opportunity to establish itself in a market that Abercrombie & Fitch had alienated for so long.  

In a way, Free People is attempting to be the anti-Abercrombie & Fitch/Hollister. With this move, Free People is exhibiting diversity, in contrast to A&F's high-end exclusivity. 

Urban Outfitters is clearly doing something right. Consider the five-year chart revenue chart below:

URBN Revenue (TTM) Chart

URBN Revenue (TTM) data by YCharts.

Now consider bottom-line comparisons over the same time frame:

URBN Net Income (TTM) Chart

URBN Net Income (TTM) data by YCharts.

At Abercrombie & Fitch, Jeffries wants to revive the brand. Better yet, he needs to revive it. With Engaged Capital calling for his ouster and long-term succession plans under way, Jeffries surely wants to leave a strong legacy. This is one of the reasons Abercrombie & Fitch will also be going the fast-fashion route.

Abercrombie & Fitch will be going after what's hot now, which will require domestic local sourcing. This might increase costs, but that shouldn't be much of an issue since the company is fiscally sound, sporting a debt-to-equity ratio of just 0.11. 

The Foolish bottom line 
Today's consumer is more demanding than in the past, which has a lot to do with the power of social media. The difference between Abercrombie & Fitch and Urban Outfitters is that Urban Outfitters' Free People brand is on-trend. It might be difficult for Abercrombie & Fitch to mount a comeback, though definitely not impossible. Either way, at the moment,  Abercrombie & Fitch is trading at 57 times earnings, whereas the more on-trend and better-performing Urban Outfitters is trading at 19 times earnings.


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.