Abercrombie & Fitch It said Wednesday that its Christmas quarter sales were up 21% and its profits grew thanks to higher prices and lower raw material costs.
The clothing retailer hopes its growth story will continue as it issued better-than-expected sales guidance.
Here's how Abercrombie fared in its fiscal fourth quarter compared to what Wall Street anticipated, according to a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $2.97 vs. $2.83 expected
- Revenue: $1.45 billion vs. $1.43 billion expected
The company's reported net income for the three-month period ended Feb. 3 was $158.4 million, or $2.97 per share, compared with $38.33 million, or 75 cents per share. action, a year earlier.
Sales rose to $1.45 billion, up about 21% from $1.2 billion a year earlier.
For the current quarter, Abercrombie expects sales to increase by a low double-digit percentage, compared with estimates of a 7.2% increase, according to LSEG. For the full year, it expects sales to grow between 4% and 6%, compared to estimates of 4%, according to LSEG.
During the quarter, comparable sales grew 16% and gross margin reached 62.9%, 7.2 percentage points higher than the same period last year. Higher average selling prices and lower freight and raw material costs boosted earnings. Analysts expected Abercrombie's gross margin to be 60.1%, according to StreetAccount.
“Our strong fourth quarter was driven by sales growth across all regions and brands. Abercrombie brands increased net sales 35%, continuing an impressive multi-quarter growth trend, while Hollister brands grew 9% , generating a third consecutive quarter of sales growth,” said the CEO. Fran Horowitz said in a statement.
“By staying close to our customers, strictly controlling inventories, and continuing to operate with financial discipline, our team achieved a year-over-year fourth quarter operating margin expansion of 800 basis points, reaching 15.3%,” he continued.
In the coming year, Horowitz said the company will focus on expanding its global customer base and getting closer to reaching its long-term goal of $5 billion in global annual sales. During fiscal 2023, Abercrombie moved closer to that goal, posting annual revenue of $4.28 billion.
Abercrombie, once known for its heavily scented mall stores and shirtless models, has transformed into an inclusive lifestyle brand that has traded in flashy logos for calmer, more refined styles that work for a variety of occasions and age groups. age.
With Horowitz at the helm, Abercrombie has redefined itself in the public eye, harnessing the power of social media marketing and an army of influencers to win over a new generation of customers and appeal to millennials who grew up with the brand.
Wall Street is pleased with the transformation, which took off strongly last year. At the beginning of 2023, its shares were trading around $23 per share, and by the end of the year, they were up almost 283% to $88.
So far this year, its shares are up about 59% as of Tuesday's close.
As Abercrombie prepares to face tougher year-over-year comparisons in the coming quarters, it remains optimistic.
In early January, Abercrombie raised its outlook for the fourth quarter and full year after holiday sales came in better than expected. It said it expected net sales to rise in the mid-teens and its operating margin to be around 15% for the fiscal fourth quarter, compared with a previous outlook of low double-digit sales growth and a margin range of 12%. % to 20%. 14%.
At the time, Horowitz said Abercrombie & Fitch's women's business was expected to record its highest sales ever during the fourth quarter. He added that revenue in the men's business, a growth driver for the company, had also increased. Horowitz added that the company's Hollister brand was on track for higher profits as it focused on better merchandising and inventory management.
As investors look beyond the holiday season and into spring and summer, they will be watching to see if Abercrombie can continue to grow as consumers become increasingly cautious, especially when it comes to discretionary purchases like clothing.
Read the full earnings release here.
Correction: Abercrombie's fiscal fourth quarter ended February 3. An earlier version incorrectly indicated the date.
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