A&F; Muscling In on Southland Surf Wear Firms

Attention surfer dudes: The preppies are invading the beach.

Having succeeded at spreading button-down East Coast youth fashion nationwide and then turning it more racy, Abercrombie & Fitch Co. is making major inroads in a whole new genre: the laid-back Southern California look. And the success of its chain of surfer-themed Hollister Co. stores is threatening the handful of Southland companies that have dominated the industry.

Since its launch two years ago, Hollister has opened 71 stores in 33 states that target high-school-age youth. With the Ohio-based company now stepping up its incursion into California -- the heart of the surf wear market -- and vowing eventually to have its tiki-hut-style stores in all 50 states, Hollister is emerging as a major growth prospect for the industry.

If its plans unfold, the number of stores could swell to 800 in the U.S. in the coming years, eclipsing the Abercrombie & Fitch chain itself.

Hollister -- named after a stretch of gated coastal property north of Santa Barbara that is coveted by surfers -- sells casual clothes for boys and girls. Surfing and the “West Coast lifestyle” are at the heart of the chain’s designs, said Hampton Carney, an Abercrombie & Fitch spokesman.”We’re doing our own interpretation of this great sport,” he said.

The new board in the retail waters has put local surf wear companies on notice that they must more aggressively market their own brands to the rest of the country, said Randy Hild, who handles marketing for the world’s largest surf wear maker, Quiksilver Inc. in Huntington Beach.

“There definitely is a perception that Hollister is ripping us off, and I think they are,” Hild said. “But we have to, as an industry, rally up and go to battle.”

Hollister illustrates the extent to which the surf apparel industry -- which is concentrated in Orange County -- has moved into the mainstream and onto the radar of companies with deep pockets. In January, for example, athletic shoe giant Nike Inc. bought Hurley International, a Costa Mesa youth-apparel brand favored by surfers.

But surf wear isn’t an easy industry to penetrate. The success of the big players -- brands such as Quiksilver, Billabong and O’Neill -- has been linked to the consumer’s sense that they are “authentic,” rooted in the sport of surfing.

Surfers want clothes that were made by “somebody who still had saltwater in their sinuses,” said Evan Slater, editor of Surfing magazine. They will be “totally suspicious of [Hollister]. It’s inevitable.”

Sam George, Surfer magazine’s editor, gets downright spiritual on the subject. “Authentic” brands are “from within the church,” George said. “No one has come from the outside.”

Of course, most of the people who buy the shorts, T-shirts and sweatshirts sold by surf wear companies aren’t surfers. And industry insiders concede that Abercrombie has one important edge: its prices.

The Pacific Sunwear store at Brea Mall was selling hooded Hurley sweatshirts last week for $54.50 and ones by Quiksilver for $46.50. Nearby in the mall, Hollister’s hooded sweatshirt with “Pacific League” on the chest sold for $39.50.

Prices matter to 16-year-old Kristen Schirm, who was shopping at the Brea Mall last week with two friends.

“That’s our favorite store,” the Phillips Ranch resident said of Hollister. “Their clothes aren’t that expensive, so an average teenager can afford them.”

Surf wear makers say Hollister can charge less for its clothes because they are designed, manufactured and sold by the same company, eliminating the markup that’s added when the apparel is passed from the wholesaler to the retailer.

The new brand holds considerable promise for Abercrombie & Fitch, according to a recent report by Brian Tunick of J.P. Morgan Securities Inc.

The upstart chain will account for 5% of Abercrombie’s earnings per share this year, double next year and eventually represent close to 25% of Abercrombie’s total profit, Tunick estimates.

One risk: Hollister could find itself “cannibalizing” the company’s namesake stores because the new chain’s prices are about 30% lower than those at Abercrombie stores, Tunick notes. Trying to keep that from happening, management has attempted to differentiate the two concepts and created a separate design and merchandise team to focus on Hollister’s younger customers.

The Hollister brand is the brainchild of Abercrombie Chief Executive Michael Jeffries, who in 1992 reinvented the then-100-year-old company, which initially sold fly rods and camping equipment. The 57-year-old Jeffries doesn’t surf, but he is “a West Coast guy” who attended Claremont McKenna College, said company spokesman Tom Lennox.

“He understands what it’s like to be cool,” Lennox said.

Jeffries, who declines interviews, also understands what it’s like to be controversial. He’s been at the helm as Abercrombie -- among other things -- infuriated parents by selling thong underwear to young girls at its abercrombie chain for younger kids; outraged Asian Americans with T-shirts bearing cartoonish, slanted-eyed characters in conical hats; and prompted a lawsuit from professional surfers who said the company used their picture in its catalog without their permission.

Abercrombie is again stirring debate in the surf wear industry, in which companies that sell apparel are expected to participate in and contribute to the sport. The major companies in the industry sponsor surfers and surfing contests, something Abercrombie said it does not plan to do.

“I don’t like the idea that parasites come into our business and try to latch onto our coattails,” said Billabong USA President Paul Naude.

Hollister is in some ways more like other mainstream specialty stores than it is like a surf shop. For example, the stores don’t carry board shorts -- a staple of any surf shop -- in the winter.

Still, the decor is impeccably planned.

Surfboards lean against walls. Half a dozen hang from the wall behind the cash registers. “They’re fake,” said a blond-haired employee who declined to give her name.

Fans blow continually, mimicking an ocean breeze. Comfy chairs invite shoppers to sit awhile and flip through surfing, skateboarding and snowboarding magazines. But a library it’s not. Music blasts throughout the store, causing one youngster in a stroller last week to cover his ears.

Quiksilver’s Hild vividly remembers his first trip to a Hollister store and his sense that Abercrombie had suddenly “upped the ante.”

“Not only was it good, they were doing things we weren’t doing,” he said. “With product presentation, amazing lighting, for example, a CD listening bar.... It just was good. The scary thing was their price points.”

Hollister has a major drawback, Hild insists: its brand name. Unlike Anaheim-based Pacific Sunwear of California Inc., a competitor that sells all the major surf brands, Hollister sells only its own label.

That doesn’t bother Jessica Talancon, 20, who wore a red Hurley sweatshirt and toted Nordstrom bags as she shopped at Brea Mall last week. The Chino Hills resident, who manages a Victoria’s Secret store, frequents Wet Seal, Guess and Express stores but likes Hollister for shorts and T-shirts.

“For everyday [clothes], it’s Hollister,” she said.

Local surf wear makers say Hollister’s splashy entry in the market actually could help sell their brands because it could raise awareness about surfing and make more young people want to buy their clothes.

Meanwhile, the surf wear industry is ramping up its own marketing plans, Hild said. For example, Quiksilver expects to partner with Pacific Sunwear to better promote its brand nationwide.

“We’ve done, as an industry, very little marketing of our brand out of our core area,” he said. “We’re going to be, I think, good at getting our message to the heartland. But we’ve got our work ahead of us.”