Abercrombie & Fitch off to strong start; raises outlook

Abercrombie & Fitch Co. reported a surprise profit as it beat Street estimates on its top and bottom lines, fueled by ongoing strength in its namesake brand. 

Net income totaled $16.57 million, or $0.32 a share, for the quarter ended April 29, compared with a loss of $16.46 million, or $0.32 cents a share, in the year-ago quarter. Adjusted earnings came to $0.39 cents a share. Analysts were forecasting a loss of $0.01 per share. 

Sales rose 3% to $836 million from $812.8 million last year, ahead of estimates for $814.9 million.  By brand, Abercrombie sales rose 14% to $436.0 million. Sales at Hollister dropped 7% to $400 million. (Hollister results include the Hollister, Gilly Hicks and Social Tourist banners.)

“Abercrombie’s offering is resonating meaningfully with our target customer, setting several other sales records this quarter across genders, categories and geographies,” stated CEO Fran Horowitz. “Work continues in Hollister brands, where we managed a healthy business from a gross profit rate and inventory perspective and continued to improve the assortment as we prepare for the summer and back-to-school seasons.”

Total same-store sales rose 3% in the quarter. Abercrombie same-store sales rose 14%. Hollister same-store sales fell 6%.

“Looking ahead, we remain cautiously optimistic on consumer demand and our ability to react to a dynamic macro environment, further supported by our strong balance sheet,” Horowitz continued. “We are managing inventory tightly and each brand is in a position to chase demand.  Importantly, we are progressing on key, strategic investments across stores, digital and technology to deliver growth on both the top and bottom lines from 2022 levels consistent with our Always Forward Plan.”

The company raised its guidance for fiscal 2023. It now expects net sales to increase between 2% and 4%, compared to a previous range of 1% to 3%. It expects its operating margin to be in the range of 5% to 6%, compared to its previous outlook of 4% to 5%.

For the fiscal second quarter, the retailer expects net sales to increase 4% to 6% and an operating margin in the range of 2% to 3%.

As of April 29, Abercrombie had a total of 758 stores, including 202 international locations.