Abercrombie & Fitch Stock Gains After Q2 Beat, Lower Inventories, Raised Outlook

Abercrombie & Fitch Company ANF reported second-quarter FY23 sales growth of 16% year-on-year to $935.35 million, beating the consensus of $842.38 million, driven by brand strength. 

Adjusted EPS of $1.10 beat the consensus of $0.17.

Segment Analysis: Geographically, Americas sales jumped 19% Y/Y, EMEA rose 4%, while APAC increased 18%. 

Brand-wise, Abercrombie brand sales rose 26%, while Hollister sales soared 8%.

Q2 gross profit margin of 62.5% was up approximately 460 basis points Y/Y. The year-over-year improvement was primarily driven by a benefit of 400 basis points from year-over-year AUR growth and 340 basis points from lower freight costs.

Operating income in the quarter was $90 million on a reported basis as compared to an operating loss of $(2) million in the year-ago period.

ANF exited the quarter with cash and equivalents of $617 million. Inventories in the quarter under review totaled $493 million, a decrease of 30% Y/Y, with brands leveraging chase capabilities.

Also Read: Abercrombie & Fitch's Ability To Lean Into Trends Amid Normalized Supply Chain: Analyst Sees Cleaner Inventories

"Consistent with our Always Forward Plan, we are continuing to open stores and make critical long-term investments in digital and technology that will keep our brands in position to exceed our customers' expectations," said CEO Fran Horowitz.

Outlook: ANF expects Q3 net sales growth to be up low double-digits. Operating margin is expected to be in the range of 8%-10%.

For FY23, ANF expects net sales growth of around 10% Y/Y (prior view: 2%-4% growth). Operating margin is expected to be in the range of 8%-9% (prior view 5%- 6%). 

Price Action: ANF shares are trading higher by 16.15% at $47.82 premarket on the last check Wednesday.