Abercrombie & Fitch posts 21% sales gain, hikes outlook despite ‘increasingly uncertain environment’

Abercrombie & Fitch‘s revenue grew 21% during its fiscal second quarter as the apparel company builds on its torrid growth. 

The sales gain, which follows 16% growth in the year-ago period, led the company to issue bullish guidance for the current quarter. Still, its full-year outlook was largely in line with estimates as it prepares for one fewer week this year than last. 

CEO Fran Horowitz – who often says good companies win in any economic environment – may be bracing for a turbulent second half of the year because for the first time in four quarters, she referenced the uncertain state of the economy in the company’s earnings release.

“We delivered a strong first half of the year, and we are increasing our full-year outlook. Although we continue to operate in an increasingly uncertain environment, we remain steadfast in executing our global playbook and maintaining discipline over inventory and expenses,” said Horowitz. “We are on track and confident in our goal to deliver sustainable, profitable growth this year, while making strategic long-term investments across marketing, digital and technology and stores to enable future growth.”

The company’s shares — which are up nearly 89% this year — dropped about 9% in premarket trading.

Here’s how Abercrombie did compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: $2.50 vs. $2.22 expected
• Revenue: $1.13 billion vs. $1.10 billion expected

The company’s reported net income for the three-month period that ended Aug. 3 was $133 million, or $2.50 per share, compared with $57 million, or $1.10 per share, a year earlier.  

Sales rose to $1.13 billion, up about 21% from $935 million a year earlier. 

During the quarter, same store sales jumped 18%, driven by better than expected summer and back-to-school selling. 

For the current quarter, Abercrombie expects sales to rise by a low double digit percentage, better than the 8.9% growth that LSEG analysts had expected. 

Abercrombie raised its full-year sales guidance from 10% growth to a 12% to 13% increase, which is roughly in line with the 12% rise that LSEG analysts had expected. 

The company’s fiscal 2024 will have one fewer week than fiscal 2023, which is likely weighing on its full-year guidance. Abercrombie expects the loss of one selling week will have an $80 million impact on its holiday quarter, or 5.5 percentage points. For the full year, the company expects it to hit sales by $50 million, or 1.2 percentage points. 

Over the last year, Abercrombie has become known as retail’s biggest comeback story, and investors have been watching to see if the company can keep up its growth. 

Horowitz has looked to international markets and the company’s Hollister and Abercrombie Kids brands as growth vectors, which are already boosting sales. 

During the quarter, sales at Hollister jumped 17% while comparable sales rose 15%. In the company’s Europe, Middle East and Africa division, sales climbed 16%. 

Costly international expansion was one of the missteps that weighed on Abercrombie’s performance in the past, but the company is taking a different approach this time around.

Earlier this month, it announced a partnership with Haddad Brands – a licensor of children’s wear – to create new distribution channels for Abercrombie Kids and grow the product line to include infant and toddler categories. 

“As we work to diversify A&F Co.’s channel mix and drive sustainable, profitable growth, we are thrilled to partner with Haddad Brands to build on our success and create an opportunity to grow the brand in the years ahead by engaging with new customers globally,” Horowitz said in a statement at the time. 

Products from Abercrombie Kids are set to be available in Haddad Brands’ showrooms globally next month.