Shares of Abercrombie & Fitch experienced a remarkable increase of 16% in premarket trading on Tuesday, following the retailer’s announcement of a 7% growth in quarterly sales and its holiday guidance. The company, known for its Abercrombie & Fitch and Hollister brands, is projecting fourth-quarter sales to rise between 4% and 6%. However, this forecast falls short of Wall Street’s expectations, which anticipated a growth rate of 5.6%, as reported by LSEG. Moreover, Abercrombie’s anticipated earnings per share (EPS) of between $3.40 and $3.70 aligns closely with analysts’ predictions of $3.55 per share.
In the fiscal third quarter ended November 1, Abercrombie exceeded Wall Street’s expectations on both valuation and revenue metrics. According to an analyst survey by LSEG, the retailer reported an earnings per share of $2.36, surpassing the expected $2.16. Revenue reached $1.29 billion, edging out Wall Street’s expectations of $1.28 billion.
The company’s reported net income for the quarter was $113 million, translating to $2.36 per share, down from $131.98 million, or $2.50 per share, during the same period last year. Total sales for the quarter increased to $1.29 billion, marking a 7% rise from $1.21 billion a year prior.
Breaking down the performance of Abercrombie’s brands, sales for its namesake line declined by 2%, totaling $617.35 million, which fell short of the expected $631.8 million, as per StreetAccount. Comparable sales also took a hit, plummeting by 7%. Conversely, the Hollister brand delivered a strong performance, with sales soaring by 16% to $673.27 million, surpassing analysts’ forecasts of $649.7 million. Comparable sales for Hollister saw a substantial increase of 15%.
CEO Fran Horowitz highlighted that while Abercrombie has been a key contributor to the company’s recovery in recent years, growth for the Abercrombie brand appears to be stabilizing. She indicated that flat sales are anticipated for Abercrombie in the current quarter, signaling that Hollister’s momentum will be crucial for driving the company’s performance during the holiday shopping season.
The previous quarter, Horowitz explained that the slowdown in Abercrombie’s sales could be attributed to outdated inventory that the company had to mark down. Initially, she had expressed optimism about the brand returning to growth by year-end, but that outlook now seems uncertain. Investors are likely to seek clarification on Abercrombie’s strategies during the upcoming conference call, particularly regarding plans to revitalize growth for its flagship brand.
