Zinger Key Points
- Abercrombie's Q2 FY24 earnings beat estimates, with a 21% sales growth and a 240 basis point increase in gross margin.
- ANF shares drop premarket despite strong earnings, as the company warns of an uncertain economic outlook.
Abercrombie & Fitch Co ANF shares are trading lower after the company reported second-quarter earnings.
Sales grew 21% Y/Y to $1.134 billion, beating the analyst consensus estimate of $1.101 billion. Comparable sales jumped 18% Y/Y. Adjusted EPS of $2.50 beat the analyst consensus estimate of $2.22.
Americas sales increased 23%, EMEA grew 16% and, APAC sales climbed 3% Y/Y. Abercrombie brand sales rose 26%, while Hollister sales improved 17% Y/Y.
Gross profit margin expanded 240 basis points Y/Y to 64.9% in the quarter. Operating expense, excluding other operating income, net of $561 million for the quarter, with the operating expenses ratio improving to 49.4% from 53.2% last year.
Operating income for the quarter was $176 million versus $90 million a year ago, with a margin expansion of 590 basis points Y/Y to 15.5%.
As of August 3, the company held $738 million in cash and equivalents. The operating cash flow was $260 million for the year-to-date period ended August 3. Inventories were $540 million, compared to $493 million as of July 29, 2023.
Fran Horowitz, Chief Executive Officer, said, “Although we continue to operate in an increasingly uncertain environment, we remain steadfast in executing our global playbook and maintaining discipline over inventory and expenses.”
Outlook: Abercrombie expects third-quarter net sales to grow in the low double digits year over year. The company projects an operating margin of 13% – 14%, compared to 13.1% last year.
Abercrombie & Fitch raised its FY24 net sales growth outlook to 12% to 13% (from around 10%) and revised the operating margin forecast to 14% – 15% from the prior view of around 14%. The company continues to expect capital expenditure of about $170 million.
Investors can gain exposure to the stock via Tidal Trust II YieldMax Ultra Option Income Strategy ETF ULTY and Invesco Dorsey Wright Consumer Cyclicals Momentum ETF PEZ.
Price Action: ANF shares are down 10% at $149.95 premarket at the last check Wednesday.
Photo Courtesy: Helen89 On Shutterstock.com
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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