Abercrombie & Fitch ended a strong year with a drop in net income amid inventory delays and fallout from Omicron.
For the first time since 2008. the retailer, whose banners also include Hollister and Gilly Hicks, plans to open more stores than it closes, with 50 openings on top for 2022 and 30 closings, reported WWD. Stores will be smaller, with varied presentations, the report said, with more off-mall locations.
“In our tool kit, we’ve got all sorts of store sizes and layouts,” CEO Fran Horowitz told WWD.
The expansion will include Abercrombie's intimates and activewear brand, Gilly Hicks. It currently has one freestanding location, which opened in July, in Columbus, Ohio. Additional stores are planned to open this year in the U.S. and Europe, including a 3,000-sq.-ft. location in London this spring, the report said.
The company posted net income of $65.5 million, or $1.12 per share, for the quarter ended Jan.29, down from $82.4 million, or $1.27 per share, in the year-ago period. Adjusted earnings per share of $1.14 missed analysts estimates of $1.27.
For the full year, Abercrombie had net income of $263 million, compared to a loss of $114 million in the year-ago period, which was heavily impacted by the pandemic and tax charges.
Net sales rose 4% to $1.161 billion in the fourth quarter, below estimates of $1.183 billion. (Net sales fell 2% compared to the 2019 quarter.) Digital sales accounted for 48% of total net sales.
By division, Hollister’s sales rose 2% to $668.78 million from the year-ago period, and were down 6% compared to the 2019 period. Abercrombie’s sales increased 6% to $492.58 million and rose 4% compared to the 2019 period.
"Following inventory receipt delays that impacted the peak holiday selling period, sales trends initially improved as product began to arrive," stated Horowitz. "While mid-January was impacted by the Omicron surge, sales rebounded in late January as cases fell and new assortments set.”
Momentum has continued, Horowitz added, with an acceleration in the sales trend from total fourth quarter levels.
“Importantly, response to early spring assortments has been strong, and we do not anticipate significant inventory supply issues for the remainder of the quarter,” she said.
In comments on the full year, Horowitz called 2021 “a testament to the fundamental changes we have made to strengthen our foundation and improve our profitability.
“For the year, we delivered net sales of $3.7 billion with 47% digital penetration; a double-digit AUR growth rate; reported and adjusted operating income of $343 million and $355 million, respectively, roughly 330% above 2019 levels, and a 9.6% adjusted operating margin, our highest in over a decade. In addition, by returning cash to shareholders through share repurchases, we reduced our ending share count by 15%,” she said.
For the first quarter, the company is guiding for a sales increase in the low-single digits. Abercrombie's sales outlook for the year is for growth of 2% to 4%.
The company repurchased $142 million, or 4.1 million shares, in the fourth quarter for a total of $377 million, or 10.2 million shares in fiscal 2021, contributing to a 15 percent reduction in shares outstanding from fiscal 2020.
The company says it doesn't anticipate significant inventory issues for the remainder of the quarter.
“Looking ahead, we will continue to thoughtfully manage the business to support long-term growth leveraging our multi-year investments in systems, processes and tools across digital, technology and data and analytics,” Horowitz said.
Abercrombie & Fitch Co. operates approximately 720 stores across its brands across North America, Europe, Asia and the Middle East, as well as the e-commerce sites