Abercrombie earnings top expectations in Q4

By

Robin Driver

Published
Mar 6, 2019

New Albany, Ohio-based lifestyle retailer Abercrombie & Fitch Co. has beaten out analysts’ estimates to report $96.9 million in Q4 earnings, or $1.42 per diluted share, shooting the company’s shares up approximately 22% in morning trading on Wednesday. According to Refinitiv data cited by CNBC, Wall Street analysts had expected the retailer’s earnings per share (EPS) to be 20 cents lower.

 
These figures for the fourth quarter ended February 2, 2019, were also an improvement when compared to the $74.2 million in earnings, or $1.05 per diluted share, reported by the retailer in the prior-year period.
 
Quarterly sales, however, were down 3% to $1.2 billion, reflecting the negative impact of the loss of fiscal 2017’s extra 53rd week, as well as foreign currency fluctuations. Comparable sales increased 3%.

Sales at the company’s flagship Abercrombie brand – which includes the retailer’s Abercrombie & Fitch and Abercrombie Kids banners – also fell 9% during the period, while comparable sales slipped 2%. The Hollister label, on the other hand, saw a slight improvement of 1% in its net sales and a 6% rise in its comps.


Breaking the company’s revenues down by region also reveals a mixed bag, with net sales falling 10% and comps declining 2% in the retailer’s international segment, while US sales rose 1%, or 5% on a comparable basis.
 
“We ended 2018 on a strong note, recording our sixth consecutive quarter and second consecutive full year of positive comparable sales while exceeding $1 billion in annual digital sales. I am proud of our team and all we have accomplished this year,” stated Abercrombie & Fitch CEO Fran Horowitz in a release. “We continue to keep the customer at the center of everything we do and are excited about the future of our brands. Our transformation initiatives are gaining traction and keeping us on track to deliver our previously disclosed fiscal 2020 targets.”
 
The company’s full-year net sales totaled $3.6 billion, up 3% compared to the $3.5 billion reported in the previous year. On a comparable basis, sales also increased 3%.
 
Here too, Hollister performed better than Abercrombie, with a 6% increase in net sales and a 5% rise in comps, while the company’s namesake brand posted a 1% decline in net sales and a 1% increase in comparable sales.
 
Annual US sales rose 5%, or 6% on a comparable basis, once again partially offset by the company’s international sales, which fell 1%, or 2% on a comparable basis.
 
Abercrombie & Fitch’s net income for fiscal 2018 ultimately came to $74.5 million, or $1.08 per diluted share, up from $7.1 million, or $0.10 per diluted share, in the previous year.
 
Looking forward to 2019, the company predicts full-year net sales will increase between 2% and 4%, and comparable sales will be up low single digits. For the first quarter net sales are expected to remain flat, while comparable sales are expected to stay flat or increase up to 2%.
Abercrombie & Fitch also announced the planned shuttering of 40 stores in the coming year. The company did not specify which of its brands would be impacted but did explain that the closures would be “primarily in the US”.

The retailer further promised to provide some 85 new store experiences, through the introduction of new store prototypes, remodeling and right-sizing.
 
The end of last year saw the opening of Abercrombie & Fitch’s second international prototype store in Manchester, England, after the new retail concept made its Asian debut in Hong Kong in December of 2017. The first of the brand’s prototype stores, which aim to offer increased customer engagement in a smaller retail space, opened in Columbus, Ohio’s Polaris Fashion Mall in February of the same year.
 
The company currently operates more than 850 stores under its different banners in North America, Europe, Asia and the Middle East, as well as brand-specific e-commerce websites.