The Stock of Abercrombie & Fitch Extends Record Run After Q1 Sales Top $1 Billion

Shares of Abercrombie & Fitch Co. continued their remarkable ascent on Wednesday, driven by another strong quarterly earnings report and an upgraded sales growth forecast, bolstered by the strength of the Abercrombie brand.

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CEO Fran Horowitz highlighted in a post-earnings call with analysts that the fiscal first-quarter sales growth was extensive, covering various regions and brand segments.

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Horowitz stated, according to an AlphaSense transcript, “I’m also pleased to share that women’s and men’s divisions grew across our brand families in the quarter. We entered the year with a clean inventory position and maintained that discipline through Q1, allowing for fewer promotions, which contributed to gross profit rate improvement.”

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The stock, trading under the ticker ANF, surged by 19.3% in midday trading, positioning it for a fourth consecutive record close.

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For the quarter ending May 4, net income surged to $113.9 million, or $2.14 per share, up from $16.6 million, or 32 cents per share, in the same period last year.

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Excluding nonrecurring items, adjusted earnings per share (EPS) rose to $2.14 from 39 cents, significantly surpassing the FactSet consensus of $1.76. This marks the fifth consecutive quarter of exceeding bottom-line expectations.

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Net sales increased by 22.1% to $1.02 billion, a record for the first quarter, surpassing the FactSet consensus of $967.4 million. Abercrombie sales soared 31.1% to $571.5 million, while Hollister sales rose 12.3% to $449.2 million.

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Comparable sales, which account for stores open at least one year, climbed 21%, with Abercrombie’s sales jumping 29% and Hollister’s sales rising 13%.

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The launch of the Wedding Shop, an extension of Abercrombie’s “best dressed guest” collection, significantly boosted Abercrombie sales. For Hollister, the men's division saw strong performance in fleece tops and bottoms, while growth in the women's division was well-distributed across categories.

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Horowitz explained that the addressable market for Abercrombie is "a bit larger" than Hollister's, which targets a "teen-specific" demographic. Abercrombie, however, attracts customers beginning in their early 20s and retains them well into their 40s.

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For fiscal 2024, Abercrombie & Fitch raised its net sales growth guidance to "around 10%" from the previous range of 4% to 6%, with Abercrombie brands expected to continue outperforming Hollister brands.

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The stock has more than doubled year to date, increasing by 106.1%, whereas the SPDR S&P Retail ETF (XRT) has gained 3.8% and the S&P 500 index has advanced by 10.5%.

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In summary, Abercrombie & Fitch's impressive earnings report and optimistic sales forecast underscore the company's robust market position and potential for sustained growth. The significant increase in net income, adjusted EPS, and net sales highlights effective management and operational efficiency. The strategic inventory management and fewer promotions have improved gross profit rates, while the launch of new collections has driven customer engagement and sales. The company's ability to attract a broad customer base, from teenagers to adults in their 40s, further supports its growth trajectory. The stock's substantial year-to-date performance reflects strong investor confidence and the company's ability to deliver consistent financial results.

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