Abercrombie&Fitch recorded its best first quarter in its history on Wednesday, continuing a streak that once again exceeded expectations.
The retailer’s sales were up 22% from a year earlier, and profits were nearly seven times higher and well above Wall Street estimates.
Abercrombie shares rose nearly 20% on Wednesday.
Here’s how the apparel company performed in its fiscal first quarter compared to Wall Street forecasts, based on a survey of analysts conducted by LSEG:
- Earnings per share: USD 2.14 against expected USD 1.74
- Income: $1.02 billion against the expected $963.3 million
The company’s reported net income for the three months ended May 4 was $113.9 million, or $2.14 per share, compared with $16.6 million, or 32 cents per share, a year earlier.
Sales rose to $1.02 billion, up about 22% from $836 million a year earlier.
“We successfully navigated seasonal changes with the right mix and compelling marketing, leveraging pliant pursuit capabilities and inventory discipline, driving sales above our expectations,” CEO Fran Horowitz said in a press release. “Growth was across multiple regions and brands, with Abercrombie brands growing 31% and Hollister brands growing 12%.
Abercrombie is one of the biggest winners in retail. Looking ahead to a hard year of comparisons, the company is banking on the double-digit sales growth it saw in 2023.
The retailer’s comparable sales increased 21%, compared with 3% growth reported in the year-ago period. Abercrombie expects sales to grow again in the current financial year and has raised its revenue forecasts.
The retailer now expects full-year sales growth of about 10% compared to its previous forecast of 4% to 6%. Analysts expected growth of around 7%, according to LSEG.
According to LSEG, Abercrombie expects that sales will augment by several percent in the current quarter, compared to estimates of 9%.
Horowitz plans to build on the company’s success by expanding the Hollister brand, which accounts for about half of the company’s total sales, and adding more categories to its namesake banner. In March, the retailer debuted the “A&F Wedding Shop,” a collection of apparel for brides and grooms that can be used not only on their wedding day, but also at other wedding events such as hen parties and rehearsals.
Prices for pieces in the collection, which include dresses, bikinis, pajamas, skirts and more, range from $80 to $150. The mid-price level for one day, which is typically steep for many couples, gives Abercrombie exposure to value-seeking consumers and a position in the overall bridalwear market, which is expected to reach $83.5 billion in the U.S. by 2030. Down ResearchAndMarkets.com.
Horowitz said the bridal salon “clearly exceeded” the company’s expectations during the quarter.
– And wedding season hasn’t technically even started yet, right? Horowitz said. “We left early and got it early.”
As for Hollister, the company is seeing progress across women’s and men’s items. During the same period last year, banner sales were down 7%, but this year they are up 12%.
“The men’s division returned to growth, led by sweatshirts and fleece pants, as well as trousers, which performed well throughout the quarter. Women’s apparel has contributed significantly to accelerating growth while maintaining balance across categories,” Horowitz said. “We have seen improved traffic trends both in-store and across digital channels, which has helped show teen customers the changes we have made to our assortment. Importantly, the Hollister team continues to look for opportunities to reduce discounts and promotions while closely managing inventory levels, ensuring continued support [average unit retail] and an augment in the gross profit rate this quarter.”
The company also sees international markets as another growth channel. Sales in Europe, the Middle East and Africa increased 19% this quarter, led by the UK and Germany. In the Asia-Pacific region, sales increased by 10%, with China being the largest leader.
“Our teams continue to localize our product mix and business, and we have made strategic investments in marketing to drive brand awareness in these two key EMEA markets,” Horowitz said of the U.K. and Germany on a call with analysts. “We have seen powerful conversions in digital engagement as a result of fresh marketing campaigns and the benefits of fresh in-store experiences, particularly in Greater London.”
Horowitz said the company believes “we have more runway ahead of us in both regions,” and the powerful quarter is further evidence that “the playbook is working.”
Over the past six years, Abercrombie has worked to transform itself from an exclusionary retailer that used thunderous branding and shirtless models to boost sales to a company focused on inclusivity and targeting working millennials.
The company’s transformation was years in the making, but began to bear fruit in 2023, when the retailer reported 16% annual sales growth at the same time that the U.S. apparel market contracted. The company’s shares are up 285% in 2023 and are up another 73% this year as of Tuesday’s close, outpacing the S&P 500’s gain of 11%.
Read the full results announcement Here.
