Abercrombie & Fitch shares rally on record Q1 results, upbeat outlook – update
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Robert Way
Updated 13:55ET with share price gains, excerpts from earnings call.
Buoyed by solid Q1 results and an improved outlook for FY24, shares of Abercrombie & Fitch were rallying during Wednesday’s regular session as investors poured into the stock, driving it to a new all-time high.
Shares are up more than 22%. ANF is up 385.3% year-over-year versus +26% for the S&P 500.
With sales up 22% from the same quarter last year to a record $1.0B, the parent company of Hollister and Abercrombie stores earned an adjusted profit of $2.14 per share versus $0.39 a year ago, both of which beat expectations by $55M and $0.42, respectively.
Comparable sales were up 21% with sales growth broad-based across regions and brands with Abercrombie brands registering a 31% sales growth and Hollister sales up 12%. Strong top-line growth, along with gross profit rate expansion of 540 basis points to 66.4% led to record Q1 operating income and operating margin of 12.7%.
As of May 4, the company had cash and cash equivalents of $864M versus $447M in the same quarter a year ago. Inventories were relatively unchanged at $449M.
For FY24, ANF now expects net sales up ~10% to $4.73B versus prior guidance of up 4% to 6%, above the $4.58B consensus. Operating margin is forecasted to be 14% from prior outlook of 12%, driven by a higher gross profit rate and some operating expense leverage.
For Q2, net sales are expected to increase by mid-teens and operating margin in the range of 13% to 14% versus 9.6% in Q2 2023.
During the analyst call, CEO Fran Horowitz said she believes the “company has the pieces in order to deliver global brand growth this year as [Q1 results] are further evidence that we are off to a strong start.”
By strengthening its brand portfolio, ANF achieved double-digit growth in each region led by a 23% gain in the Americas, and is increasing its expectations for the full year based on actual Q1 results and outlook for Q2.
The outlook for Hollister is equally optimistic as the company reinvests in marketing towards a teen consumer with the spend likely to match Abercrombie.