Abercrombie sales soar 20%, earnings up, in solid quarter

Abercrombie & Fitch Co. continued its momentum in the third quarter with better-than-expected top- and bottom-line results amid a strong back-to-school season and growth across its main brands.

On an earnings call, CEO Fran Horowitz described the start of the company’s holiday shopping season as “encouraging.”

“We’re confident our customers will love what we have for them this holiday season,” she told analysts. "The apparel retailer reported income of $96.2 million, or $1.83 per share, for the quarter ended Oct. 28, compared with a loss of $2.21 million, or $0.4  per share, a year earlier. Adjusted per-share earnings came to $1.83, way ahead of the $1.18 analysts had expected.

Net sales surged 20% to $1.06 billion from $880 million, topping estimates of $981 million, Comparable sales rose 16%. 

Sales were led by the Abercrombie banners, with growth of 30%. The company’s teen-targeted Hollister brand had a solid back to school season, delivering 11% net sales growth for the quarter.

“Our strong third quarter results, with net sales and operating margin well-exceeding our expectations, speak to the power of our playbook working globally across our brand portfolio,” stated Horowitz in the earnings release. “With strong product acceptance and tightly-controlled inventories across brands, we delivered gross profit rate expansion of 570 basis points to last year in addition to global sales growth. 

Operationally, she added, the retailer made investments in technology, marketing and its people while delivering strong year-over-year operating leverage resulting in an operating margin of 13.1% for the quarter. 

“Entering the important holiday season, our fiscal 2023 year-to-date results give us the confidence that we can continue to deliver for our customers and drive profitable growth,” Horowitz said. “As such, we are increasing our full year outlook for both net sales growth and operating margin.”

For its fourth quarter, Abercrombie expects net sales growth to be up low double-digits compared to the prior year.

The retailer raised its full-year guidance. It now expects net sales to grow between 12% to 14%, up from a previous outlook of around 10% 

Abercrombie & Fitch Co. operates approximately 760 stores across North America, Europe, Asia and the Middle East.