Abercrombie reports strong Q4

Abercrombie & Fitch Co.’s fourth quarter earnings and sales beat Street expectations amid rising demand for its namesake brand.  

The apparel retailer expects to take a hit of $60 million to $80 million to its fiscal 2020 revenue due to the coronavirus (COVID-19) outbreak. It expects 2020 sales to be flat to up 2%, reflecting the COVID-19 impact. Analysts were looking for 1.1% growth.

Abercrombie’s net income fell to $83.1 million, or $1.29 a share, for the quarter ended Feb. 1, from $96.9 million, or $1.42 a share, in the year-ago period. Adjusted earnings per share came to $1.31, beating analysts’ estimates of $1.23. 

Net sales rose 3% to $1.18 billion, also above estimates. Same-store sales rose 1%.   Same-store sales at Abercrombie stores rose 8%, while Hollister same-store sales declined 2%.

“We finished the year on a strong note, with record Black Friday week results contributing to net sales growth and positive comparable sales for the fourth quarter, and for the third consecutive year,” said CEO Fran Horowitz. “Consistent with recent trends, Abercrombie outperformed Hollister and the U.S. outperformed international, which although still lagging registered significant sequential improvement."

For the past couple of years, Abercrombie has closed some flagship locations in favor of opening smaller stores and pop-ups. It has an active remodeling program, updating stores with a more modern look that includes spacious fitting rooms and brighter interiors.

Analyst Neil Saunders, managing director, GlobalData Retail, commented that Abercrombie is widening its appeal as a result of its marketing efforts and brand reinvention. Its holiday “Do 96 Hours In” campaign, which featured pop-up experiential stores and events in Los Angeles and Brooklyn, showcased fashion in the context of travel and self-care staycations, resonated with consumers and helped to educate non-shoppers about many of the changes that have been made to the Abercrombie brand, according to Saunders. 

“In many ways, the campaign encapsulates the transition away from a brand that was once obsessed with looks and external image, to one that is now about making people feel good about themselves on the inside,” Saunders said. For more analysis, click here.
   
For the full year, Abercrombie’s total net sales rose 3% to $1.18 billion. Total same-store sales rose 1%. 

“Over the past two years we have delivered a combined 157 new store experiences, reduced gross square footage by 6%, accelerated the rationalization of our flagship fleet and introduced local customer and product-facing teams in the EMEA and APAC regions,” Horowitz said. “We have laid the groundwork, and remain confident in our long-term vision and the global opportunities available to us as we continue to evolve with our customer."

The retailer said that it expects the majority of the impact of the coronavirus to be felt in its first half. It also said the Asia-Pacific region contributed less than 10% of 2019 net sales, with China contributing about half of the region's sales.

"Total company manufacturing exposure to China was 22% in fiscal 2019, down from 36% in fiscal 2018, and is planned in the low-teens for fiscal 2020," Abercrombie said in a statement. "The company has seen, and expects to continue to see, a direct impact to sales and margin from lost sales in the APAC region and in locations across Europe and North America."