Abercrombie & Fitch in record Q2 sales; plans new store, remodels
Abercrombie & Fitch reported its 15th consecutive quarter of top-line growth on record second-quarter sales, and raised its full-year outlook.
The retailer also posted its best-ever second quarter sales across brands, led by Abercrombie, up 8%, with Hollister up 2%. Sales increased across all regions, with the Americas up 5%, Asia-Pacific up 19%, and Europe, Middle East and Africa up 2%.
A&F is on track to deliver about 130 “new experiences” this year, including 50 new stores and 80 remodels and right-sizes. On the earnings call, CEO Fran Horowitz noted this is the company’s fifth year of being a net store opener, and it continuing with the strategy as it moves forward.
“To answer the question on how many new stores are left, there is no finish line,” she told analysts. “In retail, there is always new opportunities for us to explore, just like we have been doing with these street locations for Abercrombie recently.
In June, Abercrombie unveiled its new “heritage meets modern” concept at its new store in New York City’s SoHo. Horowitz said the concept represents the “modern expression” of the brand and has been well-received by customers.
“We are so excited to continue to implement that in some stores going forward,” she added.
Wholesale
Horowitz said that Hollister’s partnership with Target — the brand’s first meaningful wholesale and category expansion in the U.S. — has performed very well against expectations and added nicely to top-line growth during the quarter.
“Having our product in over 1,500 Target locations has also given us access to new Hollister customers across the country while providing our existing customers new categories available on our owned digital app and web experiences to outfit their dorms,” she told analysts. “We are very encouraged by this partnership, and [it] underlies the potential for our brands to expand their reach through new distribution channels and categories”
The company is also expanding its partnership with the NFL. It will start selling in NFL stadium stores and on nflshop.com and other channels as well.
”We’re entering our second year as the NFL’s official fashion partner with an expanded collection across several categories, serving fans of all 32 teams with styles for men, women, kids, babies, and toddlers,” Horowitz said on the call.
Second Quarter
Net income increased to $185.5 million, or $4.17 a share, for the quarter ended Aug.2, from $143.4 million, or $2.91 a share, in the year-ago period. Operating income rose to $252.7 million, from $206.7 million in the year-ago period.
Total comparative sales were flat for the quarter, up 4% at Abercrombie but down 3% at Hollister. CEO Fran Horowitz told WWD that demand increased inventory with regard to the comp decrease at Hollister.
“We were chasing inventory literally all quarter,” she said. “Now that we’re finally caught up, we have seen that business accelerate.”
A&F received about $100 million in tariff refunds, adding an estimated $1.75 per diluted share. (An additional $20 million is expected in tariff refunds.) But the company noted that it beat its outlook by more than that on the bottom line.
The retailer raised its full-year outlook for net sales growth to about 5%, up from its previous estimate of 3% to 5%. It now expects earnings per share of $13.10 to $13.60, compared to its previous projection of $10.20 to $11 per share.
“After a strong start to the year, we are updating our full-year sales and operating margin outlook and remain confident in our long-term growth path and investment priorities. Importantly, we are adding incremental growth levers across partnerships, distribution channels and product categories,” Horowitz said in the earnings statement. “We are so excited about the foundation we’ve built and the significant growth opportunities ahead to strengthen our brands and create long-term shareholder value.”
