Abercrombie & Fitch (NYSE:ANF) increased its annual sales growth forecast and exceeded first-quarter estimates on Wednesday, driven by strong demand for its trendy apparel and accessories at both Hollister and its namesake brand.
The company’s efforts to refresh styles to attract selective shoppers and reduce dependency on discounts have improved margins, resulting in a 29% increase in comparable sales at Abercrombie and a 13% rise at Hollister during the quarter.
“Our brands are offering high-quality, on-trend collections that are appealing to new and loyal customers across various regions,” said CEO Fran Horowitz.
With inflation rates easing, consumers are resuming purchases of discretionary items, benefiting Abercrombie & Fitch. The company’s gross profit rate improved by 540 basis points to 66.4% in the quarter ending May 4.
“Abercrombie’s transformation into an inclusive lifestyle brand is strongly resonating with Gen Zers and millennials, allowing it to outperform the broader apparel sector and sustain strong momentum,” said Rachel Wolff, an analyst at eMarketer.
Abercrombie & Fitch now expects fiscal 2024 net sales to rise by 10%, up from the previous forecast of a 4% to 6% increase.
Earlier this month, major retailers reported mixed results, with Walmart (NYSE:WMT) raising annual forecasts due to strong demand for groceries and non-essentials, while Target (NYSE:TGT) noted improvement in its apparel category despite a challenging quarter.
Abercrombie & Fitch reported net sales of $1.02 billion for the quarter, surpassing analysts’ average estimate of $963.3 million, according to LSEG data. Adjusted profit increased to $2.14 per share, above analysts’ estimate of $1.74 per share.
Shares of Abercrombie & Fitch were up 1.4% in premarket trading and have risen nearly 74% this year.
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