Abercrombie & Fitch said Wednesday that sales rose 21% during the holiday quarter and profits grew thanks to higher prices and lower raw material costs.
The apparel retailer expects its growth story to continue as it issued better-than-expected sales guidance.
Here's how Abercrombie did in the fourth fiscal quarter, compared to what Wall Street expected, based on a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $2.97 versus $2.83 expected
- Revenue: $1.45 billion versus $1.43 billion expected
The company's reported net income for the three-month period ended Jan. 28 was $158.4 million, or $2.97 per share, compared with $38.33 million, or 75 cents per share, a year earlier.
Revenue rose to $1.45 billion, up about 21% from $1.2 billion a year earlier.
For the current quarter, Abercrombie expects sales to rise by a low double-digit percentage, compared to estimates of a 7.2% increase, according to LSEG. For the full year, the company expects revenue to grow between 4% and 6%, compared to estimates of 4%, LSEG said.
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 plus lower freight and raw material costs resulted in higher profits. Analysts had expected Abercrombie's gross margin to be 60.1%, according to StreetAccount.
“Our strong fourth quarter was driven by revenue growth across regions and brands. Abercrombie's brands grew net sales by 35%, continuing an impressive multi-quarter growth trend, while Hollister's brands grew by 9%, delivering their third consecutive quarter of sales growth,” CEO Fran Horowitz said in a declaration.
“By staying close to our customers, maintaining tight inventory control and continuing to operate with financial discipline, our team was able to increase operating margin by 800 basis points year-over-year in the fourth quarter to 15.3%” , she continued.
In the coming year, Horowitz says the company is focused on expanding its global customer base and moving closer to achieving its long-term goal of $5 billion in global annual revenue. During fiscal 2023, Abercrombie came close to that goal, with annual revenue of $4.28 billion.
Abercrombie, once known for its heavily perfumed mall stores and shirtless models, has transformed into an inclusive lifestyle brand that traded in screaming logos for calmer, sophisticated styles suitable for different occasions and age groups.
With Horowitz at the helm, Abercrombie has redefined itself to the public and leveraged the power of social media marketing and an army of influencers to win over a new generation of customers and win back millennials who grew up with the brand.
Wall Street is happy with the transformation, which started in earnest last year. At the start of 2023, the stock was trading around $23 per share, and by the end of the year it had risen almost 283% to $88.
So far this year, the stock is up about 59% as of Tuesday's close.
As Abercrombie prepares for tougher comparisons to prior years in the coming quarters, it remains optimistic.
In early January, Abercrombie raised its fourth-quarter and full-year guidance after better-than-expected holiday sales. The company expects net sales to rise in the mid-teens and operating margin for the fourth quarter of the fiscal year to be around 15%, compared to previous guidance of low double-digit sales growth and a margin of 12% to 14%. %.
At the time, Horowitz said Abercrombie & Fitch's women's business was expected to post its highest-ever sales in the fourth quarter. She added that sales in the men's sector, 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 past the holidays and into spring and summer, they will be looking to see whether Abercrombie can continue to grow as consumers become increasingly cautious, especially when it comes to discretionary purchases such as clothing.
Read the full earnings release here.