Abercrombie Regains Its Cool As Lifestyle Brand Pays Dividends


Who said you can’t recapture your cool in fashion? On Tuesday Abercrombie & Fitch
bucked trends and blew analyst estimates out of the water with a 20% jump in sales.

The apparel retailer cited a strong back-to-school shopping season, plus growth at both its namesake brand and Hollister after previous years of flat and declining sales, as it raised its outlook again and continued to defy an overall slowdown across the apparel industry.

Despite a slightly mystifying dip in its stock price upon the announcement – perhaps as some investors cashed out, or with some analysts anticipating the results – shares in the company quickly lifted to close to their pre-announcement levels and are up an incredible 210% on the year to date.

Earnings per share were $1.83 against an analyst consensus of around $1.18, while revenues hit $1.06 billion, up on the circa $981 million predicted and well above on the $880 million achieved a year prior.

The company’s reported net income for the three-month period to Oct. 28 was $96.2 million, compared with a loss of $2.21 million a year earlier, while for its fourth quarter, Abercrombie expects net sales growth to be up low double digits compared with the prior year.

Abercrombie Predicts Strong Sales

For the full year, Abercrombie predicts that net sales will increase between 12% to 14%, up from a previous outlook of around 10%.

After a positive update in August, Abercrombie CEO Fran Horowitz had said that the retailer’s strong performance was the “culmination of years of hard work.”

She said the company is attracting more shoppers with a wider range of “fresh and fashion-forward” options, from dresses to cargo pants.

“We’ve talked about it before, but we are no longer a jeans and T-shirt brand,” she said. “We certainly are a lifestyle brand today.”

This time round she told analysts that the company had seen an “encouraging” start to the holiday shopping season and added on her call with analysts: “While the macro environment remains challenging and uncertain, we’ve proven that we can deliver growth across brands and regions if we stay focused on our customer and execute our playbook.”

During the quarter, Abercrombie saw sales at its eponymous brand grow by 30% to $548 million and revenue at Hollister grow by 11% to $509 million, with same store sales up 16% across both brands.

Its operating margin of around 10% improved from the previous outlook which was in the range of 8% to 9%. The current outlook includes a benefit of around 250 basis points from full year 2022 levels on expected net improvement in freight and raw material costs, and modest operating expense leverage with sales growth expected to more than offset higher expenses from the combination of inflation and increased investments, the company said.

Abercrombie Stock Price

Abercrombie’s stock has soared during 2023 as the company, which built its original empire on branded t-shirts and became famous, or perhaps infamous, for its ‘beautiful people’ models and an increasingly strong focus on exclusivity, with stores very dimly lit.

In the years since Horowitz took over as the brand’s CEO, Abercrombie has transformed its merchandise with a product assortment that has resonated with consumers and has borne fruit this year.

Abercrombie & Fitch also said that it had stopped providing additional retirement income to its former CEO following allegations of sex trafficking. On top of his standard pension, Mike Jeffries had been receiving lifetime bonus payments totalling about $1m a year.

But in October, British broadcaster the BBC revealed claims of exploitation by young men while he was boss and a subsequent lawsuit accused the U.S. retailer of funding a sex-trafficking operation.

The BBC reported that Abercrombie had told it that it has now suspended these extra retirement payments to Jeffries.


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