Abercrombie & Fitch It recorded its strongest first quarter in its history on Wednesday, continuing its winning streak that exceeded expectations once again.
The retailer's sales jumped 22% compared to last year, while profits were nearly seven times higher and came in ahead of Wall Street estimates.
Abercrombie shares rose nearly 20% on Wednesday.
Here's how the apparel company performed in its fiscal first quarter compared to what Wall Street expected, based on a survey of analysts conducted by LSEG:
Earnings per share: $2.14 vs. $1.74 expected Revenue: $1.02 billion vs. $963.3 million expected
The company's reported net income for the three-month period ending May 4 was $113.9 million, or $2.14 per share, compared to $16.6 million, or 32 cents per share, the previous year.
Sales rose to $1.02 billion, up about 22% from $836 million the previous year.
“We successfully navigated seasonal shifts through relevant assortments, compelling marketing, and leveraging agile pursuit capabilities and inventory discipline, which increased sales above our expectations,” Fran Horowitz, the company's CEO, said in a press release. “Growth was broad across regions and brands, with Abercrombie brands recording 31% growth and Hollister brands achieving 12% growth.”
Abercrombie has been one of the biggest winners in retail. While it faces a tough year of comparisons, the company is banking on the double-digit sales growth it saw in 2023.
The retailer's comparable sales grew 21%, on top of the 3% growth seen in the same period last year. Abercrombie expects sales to rise again in the current fiscal year and to increase its revenue guidance.
For the full year, the retailer now expects sales to grow about 10%, compared to previous forecasts of between 4% and 6%. Analysts were expecting growth of about 7%, according to LSEG.
For the current quarter, Abercrombie expects sales to increase by the mid-teens, beating estimates of 9%, according to LSEG.
Horowitz plans to build on the company's success by growing its Hollister brand, which accounts for about half of the company's total sales, and bringing more categories into its namesake logo. In March, the retailer debuted the “A&F Wedding Shop” — a collection of clothing for brides and attendants that can be used not only for the wedding day but also for other wedding events, such as bachelorette parties and rehearsals.
The prices of the collection's pieces, which include a range of dresses, bikinis, pajamas, skirts, etc., range between $80 and $150. The mid-day price point that is typically too expensive for many couples gives Abercrombie a place with the value-seeking consumer and a foothold in the overall wedding wear market, which is expected to reach $83.5 billion in the U.S. by 2030, according to To ResearchAndMarkets.com.
During the quarter, the bridal store “clearly exceeded” company expectations, Horowitz said.
“And wedding season hasn't technically started yet, right?” Horowitz said. “We went out before that and got it early.”
When it comes to Hollister, the company is seeing progress in both women's and men's products. In the same period last year, sales fell by 7%, but this year they rose by 12%.
“The men's division returned to growth led by sweatshirts and bottoms as well as pants, which performed well throughout the quarter. Women contributed well to accelerating growth with balance across categories,” Horowitz said. “We have seen improved traffic trends across both stores and digital channels, which has helped reflect the changes we have made to the assortment to teen customers. Most importantly, the Hollister team continues to look for opportunities to reduce discounts and promotions while tightly managing inventory levels, and increasing support ( average retail unit) and gross profit rate expansion in the quarter.”
The company is also looking at its international markets as another growth channel. During the quarter, sales in Europe, the Middle East and Africa rose 19%, led by the United Kingdom and Germany. In the Asia-Pacific region, sales rose 10%, led by China.
“Our teams continue to localize our assortments and operations, and we have made strategic investments in marketing to increase brand awareness in these two key EMEA markets,” Horwitz said of the UK and Germany on a call with analysts. “We have seen a fantastic shift in digital engagement from new marketing campaigns coupled with the benefit of new store experiences, especially in Greater London.”
The company believes there is “more runway in both regions,” Horowitz said, and the strong quarter is more evidence that “the playbook is working.”
Over the past six years, Abercrombie has transformed itself from an exclusive retailer that used loud branding and shirtless models to drive sales into an inclusivity-focused company geared toward working millennials.
The company's turnaround takes years, but it began to pay off in 2023 when the retailer achieved a 16% increase in annual sales at the same time as the U.S. apparel market contracted. Its stock is up 285% in 2023 and is up another 73% so far this year through Tuesday's close, outpacing the S&P 500's 11% gain.
Read the full earnings release here.
