Abercrombie & Fitch (ANF.N) raised its annual sales growth forecast and surpassed first-quarter estimates this week, driven by new and on-trend apparel and accessories at its Hollister and namesake brands. This positive momentum sent its shares soaring by approximately 13 per cent.
The company’s strategy of refreshing styles with low-rise baggy pants and wide-leg jeans to attract discerning shoppers, while reducing reliance on discounts, significantly boosted margins. Comparable sales at Abercrombie surged by 29 per cent, and Hollister saw a 13 per cent increase in the quarter.
“Our brands are delivering high-quality, on-trend assortments for new and retained customers across regions and brands,” CEO Fran Horowitz remarked.
The easing of inflationary pressures has also encouraged consumers to resume shopping for discretionary items. As a result, Abercrombie & Fitch’s gross profit rate improved by 540 basis points, reaching 66.4 per cent in the quarter ended May 4.
Positive Outlook for Fiscal 2024
The company now anticipates fiscal 2024 net sales to rise by 10 per cent, up from its previous forecast of a 4 per cent to 6 per cent increase. Additionally, it expects the annual operating margin to be around 14 per cent, an improvement from the earlier projection of about 12 per cent, thanks to lower costs of cotton and freight.
Earlier this month, major retailers posted mixed results. Walmart (WMT.N) raised its annual forecasts, banking on strong demand for groceries and non-essentials. Meanwhile, Target (TGT.N) reported improved trends in its apparel category despite a challenging quarter.
“Despite a choppy macro environment, Abercrombie continues to deliver an on-trend assortment with agility to meet demand while investing in the business and demonstrating the ability to draw new customers to the brands,” said Dana Telsey, an analyst at Telsey Advisory Group.
Abercrombie & Fitch reported net sales of $1.02 billion in the quarter, surpassing analysts’ average estimate of $963.3 million, according to LSEG data. Adjusted profit rose to $2.14 per share, exceeding analysts’ estimate of $1.74 per share.
