Hollister has plans to launch a store in New York later this month, in the bustling Herald Square shopping district.

The Abercrombie & Fitch-led brand closed its flagship in the SoHo neighbourhood of New York along with other flagship stores that occupied more than 40,000 sq. ft.

Hollister has revamped its real estate strategy to boost profitability – retailing through smaller stores rather than big stores during times when real estate prices are very high.

Executives from A&F have been reiterating the profitability of small-format stores, with benefits related to a greater variety of delivery options, like buy online, pick up in store, while taking up less space and thus costing less money from a rent perspective.

Fran Horowitz, CEO, Abercrombie, commented on the subject during an interview saying that the flagship model has become obsolete but stores still matter. She added that their stores are evolving and the millennial and Gen Z customers are reacting differently to the store.

The new store will be opened in a location that A&F has a short-term lease for. It will decide how long to extend the lease after reviewing the response to the store and location.

Hollister joins a host of other retailers focused on building small-format stores, including Target, Kohl’s, Nordstrom with Nordstrom Local and Amazon with its pint-sized Go stores. The trend has accelerated as more shoppers are turning to the Internet to buy things, and companies realise they don’t need so much space to showcase inventory.

Abercrombie has said that it will launch 40 new outlets this fiscal year, net of any closures. The firm believes it will end 2019 with more stores than in 2018, but less square footage overall.