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Abercrombie & Fitch Co. raised the full-year guidance, marking that it has confidence for the strong holiday shopping season after delivering a great quarter. The clothing retailer company was able to achieve its double-digit sales growth for a sixth consecutive quarter, breaking expectations on the Street after facing some challenges.
Abercrombie and Fitch reported fiscal third quarter earnings of $2.50 per share compared to an analyst estimate of $2.39 per share. Earnings revenues were up at $1.21 billion for the period, up some 14 percent from last year’s $1.06 billion and well above the forecast estimate of $1.19 billion. The company had quarterly net income of $131.98 million against the $96.2 million realized last year during the corresponding period.
Looking ahead, Abercrombie and Fitch Co. sees a very strong holiday quarter with sales growth expected to be in the range of 5% to 7%, above analysts’ projections of 4.8% growth. For the fiscal year, the company expects sales to grow by 14% to 15%, which is an upward revision from its previous projection of 12% to 13% growth, which indicates continued positive momentum. Though guidance translates into a deceleration compared with last year’s outstanding performance, the CEO Fran Horowitz remained positive and highlighted broad-based growth across regions and brands.
Positive results of both the Abercrombie and Hollister brands fueled Abercrombie’s performance. Abercrombie comparable sales rose 11%, while Hollister rose 21%. Hollister, which caters to Gen Z shoppers, is a particularly strong contributor and accounted for nearly half of the company’s total revenue. The company also saw huge international growth, with Asia-Pacific rising 32% in sales.
Abercrombie and Fitch Co. said that its fourth quarter was spectacular, but the company’s shares dropped by around 4% in intraday trading. Analysts are not surprised that the company’s growth is becoming increasingly hard to impress Wall Street, particularly when holiday sales projections are seen decelerating from last year’s stellar performance.
Under Horowitz’s leadership, Abercrombie has faced a tough retail environment. The company has focused on international expansion and diversified its product offerings to include new wedding collection and partnership with the NFL. The holiday season and further outlook for the company reflect the ongoing ability of Abercrombie to adapt to an ever-changing market.
Additionally, while earlier in the year there was some uncertainty generated by concerns about potential tariffs of the new incoming administration, Abercrombie’s exposure to tariffs has stayed miniscule since only 5% to 6% of its imports are sourced in China, so the company is better set up for continuing in their growth trajectory during the main holiday shopping period.
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