Abercrombie & Fitch raised annual sales growth forecast and beat first-quarter estimates on Wednesday, expecting new and on-trend apparel and accessories to drive demand at its Hollister and namesake brands, sending its shares up about 13%.
Refreshing styles in low-rise baggy pants and wide-leg jeans to appeal to picky shoppers and relying less on discounts aided the company’s margins and lifted comparable sales at Abercrombie to 29% and 13% at Hollister in the quarter.
“Our brands are delivering high-quality, on-trend assortments for new and retained customers across regions and brands,” CEO Fran Horowitz said.
The company also benefited from people resuming shopping for discretionary items as inflationary pressures begin to ease. Its gross profit rate improved by 540 basis points to 66.4% in the quarter ended May 4.
The company expects fiscal 2024 net sales to be up 10%, compared with its prior forecast of a 4% to 6% rise. It also expects annual operating margin to be around 14%, up from its previous projection of about 12%, benefiting from lower costs of cotton and freight.
Earlier this month, big retailers posted mixed results with Walmart raising annual forecasts, betting on strong demand for groceries and non-essentials, while Target said trends in its apparel category improved despite a dour quarter.
“Despite a choppy macro environment, Abercrombie continues to deliver an on-trend assortment with agility to meet demand, while investing in the business and demonstrating the ability to draw new customers to the brands,” said Dana Telsey, analyst at Telsey Advisory Group.
Abercrombie & Fitch reported net sales of $1.02 billion in the quarter, compared with analysts’ average estimate of $963.3 million, according to LSEG data.
Adjusted profit rose to $2.14 per share, compared with analysts’ estimate of $1.74 per share.
