Abercrombie & Fitch “confident” ahead of holiday quarter, lifts full-year outlook

Investing.com — Abercrombie & Fitch (NYSE:) has said that it has “confidence” heading into the all-important holiday shopping season, as strong demand from teenagers at the fashion retailer’s Hollister brand persuaded the company to lift its annual financial guidance.

In a trading update, Abercrombie & Fitch, which has been embarking on an effort to revive its image after a series of controversies under former boss Mike Jeffries, has said it is seeing “strong product acceptance” across its offerings.

Net sales in its third quarter jumped by 20% versus the corresponding period last year to $1.06 billion, topping Bloomberg consensus expectations of $987.3 million. Gross margin, or the portion of business revenue left over after input costs like labor and raw materials, also climbed to 64.9% from 59.2%. Estimates had called for 63.4%.

Chief Executive Officer Fran Horowitz noted an 11% uptick in sales at Hollister, saying “our assortment and brand evolution is resonating with our teen customer.”

“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,” she added.

Abercrombie & Fitch projects both operating margin and net sales growth to improve year-on-year in the fourth quarter, which includes key shopping events like Black Friday and Cyber Monday.

The Ohio-based company subsequently raised its guidance for annual net sales growth to a range of 12%-14%, up from its prior outlook of around 10%. Operating margin was also seen at approximately 10% from a previous band of 8%-9%.

Analysts at CFRA Research upgraded their rating of Abercrombie & Fitch to “hold” from “sell” in a note to clients, arguing that there is “clear momentum” in the firm’s eponymous brand, well-managed inventory, and better-than-expected gross margin expansion.

However, they flagged that they “remain cautious due to [Abercrombie & Fitch]’s volatile earnings power from year to year.”