Updated May 30 at 4:20 p.m. EDT
Abercrombie & Fitch Co., demonstrating particular strength in the Americas and with its Abercrombie brand, on Wednesday posted another solid quarter marked by sales and profit gains that exceeded Wall Street expectations.
The results marked the sixth straight quarter of gains for the operator of the Abercrombie, abercrombie kids, Hollister and Gilly Hicks brands.
Net income for the first quarter ended May 4 rose to $115 million, or $2.14 a diluted share, from $17.8 million, or 32 cents a share, in the year-ago period.
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Operating income rose to $130 million as compared to operating income last year of $34 million.
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Net sales rose 22 percent to $1 billion, up from $836 million a year ago. Comparable sales rose 21 percent.
Gross profit rate of 66.4 percent rose about 540 basis points as compared to last year.
Investors, highly impressed by the performance, pushed A&F’s up 24 percent, or $37, to $189.45, at the close of trading Wednesday. In after-market trading, the stock eased back only 0.4 percent to $188.70.
Abercrombie’s results are a standout in an industry beset by consumers spending less on discretionary products due to inflation and greater interest in travel and experiences.
“We are seeing very balanced buying from customers across genders, categories, wearing occasions, lifestyles and all three of our regions,” Fran Horowitz, A&F’s chief executive officer, told WWD, referring to the Americas, EMEA and APAC.
“When they see product they like, they are buying. They are always looking for something new,” Horowitz said.
“The other piece of this is that we are putting out fashionable products at great value. Consumers really appreciated that. We are staying so close to the customer. Our merchants and design team are always out shopping, speaking to customers and understanding their needs.”
Horowitz said that at A&F and its new Wedding Shop, launched last March, and at Hollister, “dresses have been a terrific category, casual through wedding events.”
She said Hollister’s men’s business has turned around, with sales most strong in baggy, looser denim and non-denim bottoms. She also cited an “acceleration” in sales of tops, including fleece tops and graphic T-shirts.
A&F raised its guidance for 2024. Net sales are now seen up around 10 percent from $4.3 billion in fiscal 2023, compared to the previous outlook of sales rising in the range of 4 to 6 percent. The Abercrombie brands will continue to outperform Hollister brands, and the Americas will continue to lead the regional performance, the company indicated.
For the second quarter of this year, net sales are seen increasing in the midteens compared to the fiscal second quarter 2023 level of $935 million. Operating margin is expected in the range of 13 to 14 percent compared to an operating margin of 9.6 percent in second quarter 2023.
“Our outstanding first-quarter results reflect the power of our brands and strong execution of our global playbook,” Horowitz said in a statement Wednesday. “We successfully navigated seasonal transitions with relevant assortments and compelling marketing, leveraging agile chase capabilities and inventory discipline, driving sales above our expectations. Growth was broad-based across regions and brands with Abercrombie brands registering 31 percent growth and Hollister brands delivering growth of 12 percent. Strong top-line growth, along with gross profit rate expansion, led to record first-quarter operating income and an operating margin of 12.7 percent.
“With excellent first-quarter performance,” Horowitz added, “we are increasing our full-year sales and operating margin outlook. We remain on track to achieve our 2024 goal of demonstrating sustainable, profitable growth after a defining year for the company in fiscal 2023. Our brands are delivering high-quality, on-trend assortments for new and retained customers across regions and brands. Importantly, we continue to make strategic investments across stores, digital and technology to further strengthen the company in pursuit of our long-term ambition.”
By division, Abercrombie sales, including the Abercrombie and abercrombie kids brands, rose 31 percent to $571.5 million from $436 million in the year-ago quarter. Hollister sales, including the Hollister and Gilly Hicks brands, rose 12 percent to $499.2 million from $399.9 million in the year-ago period.