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Abercrombie & Fitch raises annual sales growth target as trendy styles drive demand

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(Reuters) -Abercrombie & Fitch raised its annual sales growth forecast and beat estimates for first-quarter results on Wednesday, expecting new and trendy apparel and accessories to drive demand at its Hollister and namesake brands.

Refreshing its styles to appeal to picky shoppers and relying less on discounts have boosted the company’s margins, and lifted comparable sales 29% at Abercrombie, and 13% at Hollister in the quarter.

“Our brands are delivering high-quality, on-trend assortments for new and retained customers across regions and brands,” CEO Fran Horowitz said.

The company is also benefiting from people resuming shopping for discretionary items as inflation rates ease. Its gross profit rate improved by 540 basis points to 66.4% in the quarter ended May 4.

“Abercrombie’s reinvention as an inclusive lifestyle brand is resonating strongly with Gen Zers and millennials, enabling it to outperform the broader apparel sector and maintain (a) healthy momentum,” said Rachel Wolff, analyst from eMarketer.

The company now expects its fiscal 2024 net sales to be up 10%, compared with its prior forecast of a 4% to 6% rise.

Earlier this month, big retailers posted mixed results with Walmart raising annual forecasts, betting on strong demand for groceries and non-essentials, while Target said trends in its apparel category improved despite a dour quarter.

Abercrombie reported net sales of $1.02 billion in the quarter, compared with analysts’ average estimate of $963.3 million, according to LSEG data.

Adjusted profit rose to $2.14 per share, compared with analysts’ estimate of $1.74 per share.

Shares of the company were up 1.4% before the bell. They have risen nearly 74% so far this year.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Shinjini Ganguli and Shilpi Majumdar)

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