Abercrombie & Fitch.
Courtesy: Abercrombie & Fitch
Abercrombie & Fitch Tuesday beat estimates, posting a 20% increase in sales thanks to a strong back-to-school shopping season and growth at both its namesake brand and Hollister.
The longtime mall retailer, which has rebounded after years of stagnation, also raised its outlook again as it continues to defy a general slowdown across the apparel industry.
The company’s shares fell more than 9% after markets opened, but recovered after an earnings call and were up 1% in afternoon trading. Through Monday’s close, the stock was up 215% for the year.
Here’s how Abercrombie fared in its fiscal third quarter compared to what Wall Street anticipated, according to a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $1.83 compared to the expected $1.18
- Revenue: $1.06 billion versus $981 million expected
The company’s reported net income for the three months ended Oct. 28 was $96.2 million, or $1.83 per share, compared with a loss of $2.21 million, or 4 cents per share, a year earlier.
Sales rose to $1.06 billion from $880 million a year earlier.
For its fourth quarter, Abercrombie expects double-digit net sales growth compared to a year ago, which is in line with the 11.6% growth analysts were expecting, according to LSEG.
It expects its operating margin to be in the range of 12% to 14%, compared with 7.7% in the same period a year ago and above expectations of 11.3%, according to StreetAccount. The expected rebound is due to a higher gross profit rate, lower freight costs and higher sales prices.
For the full year, the company expects net sales to grow between 12% and 14%, up from a previous outlook of around 10% and ahead of the 10.8% rebound analysts were expecting, according to LSEG. It is forecasting an operating margin of around 10%, up from its previous range of 8% to 9%, which is what analysts expected, according to StreetAccount. The expected increase is due to lower freight and raw material costs.
Abercrombie CEO Fran Horowitz told analysts that the company has seen an “encouraging” start to the holiday shopping season. But its forecast for the quarter failed to impress Wall Street and was only in line with consensus estimates despite the strong quarter.
“Our teams have worked hard to align our products and promotional messages to set us up for a successful holiday across all brands,” Horowitz said on the call with analysts. “We are confident that our customers will love what we have for them this holiday season.
Horowitz added: “While the macroeconomic environment remains challenging and uncertain, we have proven that we can generate growth across brands and regions if we stay focused on our customers and execute to our playbook.”
A similar dynamic was observed in the rival American Eagle, which also reported earnings Tuesday morning. While the mall retailer also performed better than expectations and raised its guidance, American Eagle’s Christmas forecast failed to surprise Wall Street, sending its stock plummeting.
During the quarter, Abercrombie saw sales of its namesake brand grow 30% to $548 million and Hollister revenue grow 11% to $509 million. Same-store sales increased 16% across both brands.
Abercrombie shares have soared this year as the company’s transformation continues to bear fruit. For years, Abercrombie was known for its designer T-shirts, jeans and shirtless male models, which in turn led critics to accuse the company of racism and exclusivity.
In the years since Horowitz took over as CEO of the brand, Abercrombie has transformed into an inclusive retailer with a product assortment that continues to resonate with consumers.
Read the full earnings release here.
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