Abercrombie & Fitch easily beat Wall Street sales expectations for the third quarter, pushed by strong results in Europe, leading the company to raise its full-year earnings outlook yesterday.
Abercrombie & Fitch easily beat Wall Street sales expectations for the third quarter, pushed by strong results in Europe, leading the company to raise its full-year earnings outlook yesterday.The news sent shares of the trendy apparel retailer up 34.5?percent.
The New Albany-based company said sales in the company’s international stores increased by 37 percent. Direct-to-consumer sales, which include online purchases, were up 20 percent. Sales in the United States were flat.
International and U.S. stores benefited from the company’s faster introduction of new products, something that was a problem in the second quarter, said Mike Jeffries, CEO and chairman.
“We’re working to become faster, and we’re doing that with conservative plans, shorter lead times,” Jeffries said. “I think that’s affecting the fashion content of our inventory. We’re also working hard to be different by brand. We’ve invested more in brand-specific design talent. And just in terms of fashion component, we’re reacting quickly to runway and street.”
One analyst gave a qualified thumbs-up to the retailer’s performance.Abercrombie did have an “ undeniably solid quarter,” analyst Oliver Chen wrote in a note to investors. “We do believe (Abercrombie) has product, geographic, sector challenges ahead, but (the company) is now positioned to at least meet rather than miss” fourth-quarter forecasts.
The company, parent of chains including Abercrombie & Fitch, abercrombie kids and Hollister Co., reported sales of $1.2?billion, up from $1.1?billion in the same quarter last year. Net income was $71.5 million, or 87 cents per share.
Wall Street analysts had thought Abercrombie would earn 59 cents on revenue of $1.11 billion.
Not every category showed gains, however.
Comparable-store sales, a key category for retailers, were down 3?percent overall. Among its chains, the flagship Abercrombie & Fitch chain turned in the worst performance, with sales down 4?percent. That was followed by the children’s stores, which fell by 3?percent. Hollister Co. was off by 1?percent.
Some analysts attributed the market’s positive reaction to low expectations. “I don’t believe Abercrombie is suddenly the share winner in teen apparel land, and what is being seen today is management of (Wall) Street expectations,” analyst Brian Sozzi of NBG Productions wrote in a note to investors.
Retail analyst Brian McGough of Hedgeye Risk Management agreed with Sozzi’s downbeat appraisal, telling investors that he was “neither here nor there” on Abercrombie’s third-quarter performance. “ I call that a miss,” he said. “The irony of this quarter is that it was flat-out lousy when viewed in isolation.”
But Abercrombie raised its outlook for the full year, estimating that it will report earnings of between $2.85 and $3 per share. Analysts had been predicting full-year earnings of $2.48 per share.Shares closed at $41.92, up $10.74. The 34.5 percent gain was the second-highest by percentage of any on the New York Stock Exchange.