An Abercrombie & Fitch store in the Soho neighborhood of New York City, U.S., on Monday, Aug. 19, 2024. Abercrombie & Fitch Co. is scheduled to release earnings results on Aug. 28. Photographer: Yuki Iwamura/Bloomberg via Getty Images
Yuki Iwamura | Bloomberg | Getty Images
Abercrombie & FitchSales rose 21% in the second fiscal quarter as the apparel company continued its rapid growth.
The increase in sales, which follows 16% growth in the year-ago period, prompted the company to issue an optimistic forecast for the current quarter. Still, the full-year outlook was broadly in line with estimates as the company prepares to have one fewer week this year than last year.
CEO Fran Horowitz – who often says that good companies succeed in any economic environment – may be bracing for a turbulent second half of the year, as she referenced the uncertain economy for the first time in four quarters in the company's earnings release.
“We delivered a strong first half and are raising our full-year guidance. While we continue to operate in an increasingly uncertain environment, we remain steadfast in executing our global strategic plan and maintaining disciplined inventory and spending levels,” Horowitz said. “We are on track and confident that we can deliver sustainable, profitable growth this year while making strategic long-term investments in marketing, digital and technology, and stores to enable future growth.”
The company's shares, which had risen nearly 89 percent this year by Tuesday's close, fell about 15 percent in early trading.
Here's how Abercrombie performed compared to Wall Street expectations, based on an analyst survey by LSEG (formerly known as Refinitiv):
- Earnings per share: USD 2.50 versus expected USD 2.22
- Revenue: $1.13 billion compared to expected $1.10 billion
The company reported net income for the three-month period ended August 3 was $133 million, or $2.50 per share, compared to $57 million, or $1.10 per share, a year earlier.
Sales rose to $1.13 billion, an increase of around 21% over the previous year's $935 million.
During the quarter, store sales increased 18%, driven by better-than-expected summer and back-to-school sales.
For the current quarter, Abercrombie expects sales to increase by a low double-digit percentage, exceeding the 8.9 percent growth expected by LSEG analysts.
Abercrombie raised its full-year sales forecast from 10% growth to 12-13%, roughly in line with the 12% increase LSEG analysts had expected.
Fiscal 2024 will have one fewer week than fiscal 2023, which will likely weigh on full-year guidance. Abercrombie expects the loss of one week of sales to impact the holiday quarter by $80 million, or 5.5 percentage points. For the full year, the company expects sales to decline by $50 million, or 1.2 percentage points.
Last year, Abercrombie became known as the biggest comeback in retail, and investors were watching closely to see if the company could sustain its growth.
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Horowitz sees international markets and the company's brands Hollister and Abercrombie Kids as growth vectors that are already leading to increasing sales.
During the quarter, Hollister's sales increased 17 percent, while comparable sales rose 15 percent. In the company's Europe, Middle East and Africa division, sales increased 16 percent.
Costly international expansion has been one of the missteps that has hurt Abercrombie's performance in the past, but this time the company is taking a different approach.
Earlier this month, the company announced a partnership with Haddad Brands – a children's clothing licensor – to create new distribution channels for Abercrombie Kids and expand the product line into the infant and toddler category.
“As we work to diversify A&F Co.'s channel mix and drive sustainable, profitable growth, we are excited to partner with Haddad Brands to build on our success and create an opportunity to further grow the brand by reaching new customers globally in the years to come,” Horowitz said in a statement at the time.
Abercrombie Kids products will be available in Haddad Brands showrooms worldwide next month.
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