An Abercrombie & Fitch store is seen in midtown Manhattan in New York City on October 24, 2024.
Spencer Platt | fake images
Actions of Abercrombie & Fitch soared 37% on Tuesday after the company showed investors it will continue to grow even as its namesake brand slows.
During the clothing retailer’s fiscal third quarter, Abercrombie brand sales fell 2%. But at least for the third consecutive quarter, Hollister saved the retailer, as sales increased 16%. CEO Fran Horowitz said Abercrombie’s sales are expected to be flat in the current quarter, indicating that growth at Hollister will boost the company’s holiday shopping season.
Companywide, sales increased 7%, exceeding expectations.
Here’s how the clothing retailer fared in the period ending Nov. 1 compared to what Wall Street anticipated, according to a survey of analysts by LSEG:
- Earnings per share: $2.36 vs. $2.16 expected
- Revenue: $1.29 billion vs. $1.28 billion expected
The company’s reported net income for the quarter was $113 million, or $2.36 per share, compared with $131.98 million, or $2.50 per share, a year earlier.
Sales rose to $1.29 billion, up about 7% from $1.21 billion a year earlier.
The company’s namesake brand has pushed for a comeback in recent years, but now that the Abercrombie brand’s growth has begun to moderate, Hollister has taken over. During the quarter, Abercrombie’s sales fell to $617.35 million, while comparable sales declined by a staggering 7%. Sales were well below the $631.8 million analysts expected, according to StreetAccount.
Meanwhile, Hollister’s revenue rose to $673.27 million, well above the $649.7 million analysts were expecting, according to StreetAccount. Comparable sales increased 15%.
As the retailer heads into the peak shopping season, “Hollister’s exciting planned campaigns and collaborations will highlight some of the must-have items,” Horowitz said on a call with analysts. “We are just getting started and, more importantly, our team has been reading and reacting and has the right product to support sales all season long.”
He also said Abercrombie is investing more in the Hollister brand, as the company is on track to open 25 stores and renovate another 35 this year.
At the Abercrombie brand, Horowitz said last quarter that the slowdown was related to old inventory the company needed to write down to sell. He said he expected the brand to return to growth by the end of the year, but that no longer appears to be the case.
During Abercrombie’s conference call, executives did not respond when asked when the brand will return to growth. He talked about the “sequential improvement” Abercrombie saw after a 5% drop in revenue in the previous quarter. Horowitz pointed to recent collaborations with the NFL and luxury retailer Kemo Sabe as bright spots for the brand.
“Abercrombie Brands has inventory in the right place and a solid marketing plan heading into the holidays,” Horowtiz said. “We opened 30 new stores in the third quarter, with the goal of reaching a total of 36 this year. We remain focused on returning the brand to growth.”
For its holiday quarter, Abercrombie expects companywide sales to rise between 4% and 6%, which is well below Wall Street expectations of 5.6% growth, according to LSEG. It anticipates earnings per share to be between $3.40 and $3.70, roughly in line with expectations of $3.55 per share.
For the full year, it now expects sales to rise between 6% and 7%, greatly exceeding expectations for 6.2% growth, according to LSEG.
