Abercrombie & Fitch shares soar 23% as retailer blows past earnings estimates, raises guidance


Abercrombie & Fitch

Courtesy: Abercrombie & Fitch

Shares of Abercrombie & Fitch soared Wednesday, after the retailer crushed Wall Street’s quarterly earnings and sales expectations and raised its forecast for the year.

On a call with investors, CEO Fran Horowitz said the retailer’s performance is the “culmination of years of hard work.” She stated that the company’s wide variety of fashion-forward and fresh options, including dresses and cargo pants, is attracting more customers. “We are definitely a lifestyle brand,” she said. “

And, she added, the retailer will keep opening stores and investing in its digital experience — even as the economic backdrop remains uncertain.

Here’s how the retailer did in the fiscal second quarter ended July 29 compared with what Wall Street expected, based on a survey of analysts by Refinitiv:

Earnings per share: $1.10 vs. 17 cents expected

  • Revenue: $935.3 million vs $842.4 million expected
  • The company’s shares closed more than 23% higher Wednesday.

Net income for the three-month period rose to $56.9 million, or $1.10 per share, from a loss of $16.8 million, or 33 cents a share, in the year-ago period.

Net sales rose from $805.1 million in the year prior.

Abercrombie said it now anticipates net sales will rise by about 10% for the full fiscal year, up from $3.7 billion in the prior year. The company had expected growth between 2% to 4%.

It also expects its operating margins will improve as freight costs and raw materials such as cotton

fall. It anticipates operating margins to be in the range of 8% to 9%, compared with prior expectations of 5% to 6%. The retailer’s sales and its stock price have shot up, as Abercrombie has reinvented its image from a mall store known for shirtless models and a strong scent of cologne to a retailer that resonates with a broader audience.

Abercrombie has also stood out because it’s defied industrywide trends. Retailers including

Home Depot, Target and Walmart have all spoken about consumers who aren’t spending as freely on discretionary items, such as clothing. Foot Locker echoed similar sentiments, as its sales plummeted and it cut full-year guidance on Wednesday.Abercrombie & Fitch

Courtesy: Abercrombie & Fitch

Abercrombie’s merchandise has evolved to offer clothing that customers can wear whether heading to the office or going out for happy hour, Horowitz said. These include tailored pants, Sloane. They come in different fabric options and have gained a following on TikTok. Also, there are dresses for weddings and parties that customers can wear. Horowitz informed investors that Hollister has seen a boost in digital marketing. She said customer traffic improved in the quarter and sales growth continued into early August.

Comparable sales, a metric that takes out the impact of store openings, closings and renovations, rose 13% across the company. Hollister’s comparable sales rose 5% year over year. For Hollister, they rose 5% year over year.

Inventory dropped by 30% year over year, as the company managed orders closely and chased merchandise needed based on demand.

On the call with investors, Horowitz said the company’s sales grew in the second quarter across genders and all regions.

In women’s apparel, she said shoppers bought dresses and pants. In men’s apparel, knit tops and pants proved popular as shoppers looked for versatile clothing that could work in different seasons and situations.

She also touted store openings, including the new Abercrombie store that opened last month on New York City’s Fifth Avenue.

The company plans to open about 35 new stores, remodel or renovate 20 and close 30, Chief Financial Officer Scott Lipesky told investors on a call.