Abercrombie & Fitch stock flies 15% higher on surprise profit, holiday sales optimism
Abercrombie & Fitch Co. (NYSE:ANF) stock soared in premarket trading on Tuesday after posting better than expected Q3 earnings and bolstering full-year guidance.
The apparel retailer reported a surprise $0.01 in earnings per share, pushing well above the expected $0.12 loss. Meanwhile, $880.08M in sales came in $48.91M above the analyst consensus. The release notes that double-digit sales growth at the core Abercrombie & Fitch brand offset deteriorating sales trends at the Hollister brand.
Gross profit rate of 59.2% was down approximately 450 basis points as compared to the prior year as the company works through excess inventory and grapples with cost inflation. Inventories of $742M represented an increase of 36% as compared to Q3 2021.
“We were pleased to see year-over-year sales trends improve across brands in light of the global macroeconomic environment. While net sales were down 3% as compared to last year on a reported basis, net sales were flat on a constant currency basis,” CEO Fran Horowitz said. “We are cautiously optimistic as the holiday season kicks into high gear. While the environment remains dynamic, we are focused on what we can control. We have strategically adjusted our inventory receipts for holiday and early-2023, and unlike last year, we have the inventory on hand to fulfill holiday demand in the peak Black Friday to Christmas period. Additionally, we have reduced controllable spend where appropriate.”
Management now expects full-year net sales to decline 2 to 3% as compared to a prior forecast of a mid-single-digits drop and better than the 4.67% decline anticipated by analysts. That forecast is aided by Q4 guidance that anticipates a 2 to 4% decline in net sales as compared to a 6.15% decline forecast by analysts.
Elsewhere, the company announced a boardroom reshuffle. Current chair Terry Burman is due to step down as Board Chairperson and retire at the end of his current term, to be replaced by former Dunkin Brands and Papa John’s CEO and current Abercrombie independent Director Nigel Travis.
“We are fortunate to have a deep leadership bench on our Board of Directors. As a transformative business leader with experience growing multi-billion-dollar global brands, I’m confident in Nigel’s ability to help guide us through our next chapter as we continue to transform and position the company for future growth,” Horowitz commented.
Shares of the Ohio-based apparel retailer roared 15.83% higher shortly after the print.