Abercrombie & Fitch sales hit record despite headwinds; to open 50 stores
The war in the Middle East weighed on Abercrombie & Fitch Co.’s first-quarter results, but its earnings still topped analyst expectations and its sales hit a new quarterly record.
The apparel retailer gave weaker-than-expected guidance for the current quarter, and said the conflict in the Middle East has “directly impacted” sales. In the earnings statement, CEO Fran Horowitz said that demand softened in Abercrombie’s Europe, Middle East and Africa region (EMEA) as the Middle East conflict ramped up, particularly impacting Hollister Brands, “and we are proactively managing inventory and marketing to support the region.”
Sales in the region, which represent about 15% of Abercrombie's total sales, declined 10% during the quarter.
Abercrombie expects to deliver about 130 “new experiences” this year, including 80 remodels and right-sizes, and 50 new stores, CFO Robert Ball said on the company’s earnings call.
“We expect net store openings to be relatively balanced across brands, but tilted to the Americas,” he added.
First Quarter
The company’s net income fell to $67.13 million, or $1.47 per share, for the quarter ended May 2, down from $80.41 million, or $1.59 per share, in the year-ago period. Analysts had expected earnings per share of $1.28.
Net sales rose 2% to a first-quarter record of $1.11 billion, just missing analysts estimates of $1.12 billion. It was the company’s 14th consecutive quarter of growth. Performance was led by Abercrombie brands, with growth of 3% Hollister brands sales were flat.
Comparable sales fell 1%. By region, comp sales rose 1% in the Americas, 13% in APAC, and were down 11% in EMEA.
"Our bottom-line results reflect discipline and consistency, with both operating margin and earnings per diluted share exceeding our outlook," Horowitz stated. "We continued to invest in stores and marketing to strengthen our brands and customer experiences, while also returning $105 million to shareholders through share repurchases, supported by our strong balance sheet."
For the current quarter, Abercrombie expects earnings per share to be between $1.80 and $2, which is signficantly lower than what analysts expected. But it reaffirmed its full-year guidance, which calls for net sales to rise 3% to 5%, with earnings per share of $10.20 to $11.
Abercrombie & Fitch Co. operates approximately 840 stores under its brands across North America, Europe, Asia and the Middle East.
