Abercrombie to close more flagships; posts better-than-expected Q3
Abercrombie & Fitch easily topped Wall Street estimates for quarterly sales and earnings amid cost controls and strong online demand.
The apparel retailer plans to close four additional flagships in Europe by the end of January, on top of the three previously announced flagship closures in 2020. Abercrombie said it will end the year with eight operating flagships, down from fifteen at the beginning of the year.
“These actions align with our multi-year strategy of reducing dependence on tourist-driven locations to reposition within key markets and deliver a better omnichannel experience to our local customer,” said Fran Horowitz, CEO.
Abercrombie’s net income rose to $42.3 million, or $0.66 a share, for the quarter ended Oct. 31, from $6.5 million, or $0.10 a share, in the year-ago period. Excluding non-recurring items, adjusted earnings per share totaled $0.76. Analysts had estimated a loss per share of $0.04
Net sales fell 5.1% to $819.7 million, beating estimates of $739.4 million. Digital sales rose 43% to $382 million.
By brand, Hollister store sales fell 7% to $476.7 million. Abercrombie store sales edged down 2% to $343.0 million. Both brands beat analysts’ forecasts.
In addition to closing flagships, Abercrombie has been cutting costs by reducing payroll expenses, tighter inventory controls and reducing payroll expenses and the continued suspension of dividend payout and share repurchases.
Despite the upbeat quarter, Horowitz sounded a cautious note.
"We are encouraged by quarter-to-date results, including ongoing strong digital demand, with our customers responding favorably to new product and messaging," said Horowitz. "However, this is tempered by uncertainty regarding the potential for increased COVID-related store restrictions and our expectation for elevated shipping, handling and freight costs.
As we have done since the start of the pandemic, we will utilize our proven playbooks to remain agile and provide the best omnichannel experience for our customers.”