Updated March 6 at 2:01 p.m. EST
After a strong fourth quarter and 2023 overall, Abercrombie & Fitch Co. is approaching its goal of attaining $5 billion in annual sales.
“It’s been an amazing year. We’ve seen growth across brands, regions and channels. Our playbook is working,” chief executive officer Fran Horowitz told WWD, just after the youth specialty retailer on Wednesday reported that for all of 2023, sales rose 16 percent to $4.28 billion compared to $3.7 billion in 2022, and net income reached $328.12 million versus $2.82 million in 2022.
Also, the operating margin came in at 11.3 percent, the highest in 15 years, up 880 basis points from 2022 and meeting early the goal of a 10 to 12 percent operating margin, set in the company’s “Always Forward Plan” released in 2022. The plan outlines targets for growth at the brands, digital acceleration and financial discipline through 2025.
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For the fourth quarter, which ended Feb. 3, the company reported net income of $158.48 million, up from $38.33 million in the year-ago period.
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Net sales reached $1.5 billion, up 21 percent from $1.2 billion in sales in the year-ago period. The additional week in fiscal 2023 benefited fourth-quarter net sales by about $50 million, or 430 basis points.
Comparable sales rose 16 percent.
Chief financial officer Scott Lipesky told WWD the company expects its business to be better in the first half of 2024 rather than the second half, because of the fourth quarter of having the extra week.
The company forecasts 2024 net sales growth in the range of 4 to 6 percent from $4.3 billion in fiscal 2023, which includes the adverse impact of about $50 million from the 53rd week in fiscal 2023. Abercrombie is seen continuing to outperform Hollister and the Americas will continue to lead the regional performance.
For the first quarter of fiscal 2024, the company expects net sales to be up low double-digits from the 2023 first quarter sales of $836 million.
Despite the strong report, A&F’s stock price fell 3.6 percent, or about $5, to $134.94 on Wednesday. Investors likely pulled the price down due to perceptions of the general apparel and fashion sectors being soft, and A&F’s outlook for slower yet still healthy projected sales gains for 2024. It could also have been and a bit of a correction from how the stock surged last year. In March 2023, the stock was trading in the mid to high $20 range.
To sustain the business momentum, Horowitz said the company will continue to form new partnerships to build audiences, and maintain a significant amount of store openings and store remodels, and continue to work hard on pumping up Hollister, where men’s has been a work in progress.
In addition, the “A&F Wedding Shop” for Abercrombie online just launched this week. “Between baby showers, bachelor parties and rehearsal dinners, special occasion has been a growing franchise,” Horowitz said. Among the new shop’s offerings are maxidresses, minidresses, tiered gowns, pleated tops and ruffle tops.
Recently formed partnerships with Formula 1 and the NFL involving events and apparel offerings “have been terrific,” Horowitz said. She declined to cite any upcoming partnerships.
On the brick-and-mortar side, 75 new “experiences” are targeted for this year, Lipesky told WWD. Those include 45 new stores and 30 right-sizings or remodels all “tilted” to the Abercrombie brand and the Americas, Lipesky said. He did not specify how many of the 75 would be Abercrombie versus Hollister sites.
Last quarter, men’s and women’s bottoms at both the Abercrombie and Hollister brands were bestsellers. “We’ve developed a much more diverse offering in bottoms beyond denim,” said Horowitz, singling out cargo, utility and fleece bottoms, as well as the Sloane women’s pant at Abercrombie, suitable for the office and going out after work.
While Hollister men’s remains a work in progress, Horowitz said, “We’re seeing some greenshoots. We have a renewed focus on getting closer to the customer, keeping the inventory lean to be able to chase product and we are doing a lot of product testing.”
The Social Tourist brand has an uncertain future. Launched in 2021, Social Tourist shifted to selling digital only recently, and will continue to offer some skus for spring 2024. “It’s been a small part of our business. We’ll see where it goes,” Lipesky said. Horowitz referred to the brand as a “test and learn” exercise. TikTok personalities and sisters Charli and Dixie D’Amelio helped co-create the line and were the stars of the campaign.
Over the past several years, A&F has undergone dramatic transformation involving adept use of social media, staying close to target customers, refining offerings and recasting its store network by closing oversize, unproductive locations and setting more efficient formats with less square footage.
By brand in the fourth quarter, Abercrombie sales rose 35 percent to $755.2 million from $560.44 million. Hollister sales increased 9 percent to $697.7 million from $639.38 million.
“I am incredibly proud of how we performed throughout fiscal 2023, finishing with fourth quarter year-over-year net sales growth of 21 percent, which exceeded our January business update expectations,” Horowitz said in her prepared statement. “Our strong fourth quarter was fueled by sales growth across regions and brands. Abercrombie brands grew net sales 35 percent, continuing an impressive multi-quarter growth trend, while Hollister brands grew 9 percent, delivering a third consecutive quarter of sales growth. By staying close to our customers, tightly controlling inventories and continuing to operate with financial discipline, our team delivered year-over-year fourth quarter operating margin expansion of 800 basis points, reaching 15.3 percent.
“Following several years of transformation across our brands, people and operating model, fiscal 2023 was a defining year for our company. In the first full year of our Always Forward Plan, we executed our playbook, delivering the right product, voice and experience across regions and brands to our global customers,” the CEO said.