Abercrombie & Fitch Co. beat analysts’ sales expectations for the sixth consecutive quarter, but it wasn’t enough to impress investors who have grown accustomed to the ’90s fashion comeback.
The retailer said comparable sales rose 18% in the second quarter, exceeding the 15% growth that analysts had projected. The outperformance was driven by the Hollister chain, while sales at namesake Abercrombie stores were roughly in-line with estimates. Gross margin was also slightly below expectations.
Shares of Abercrombie fell 15% at 9:37 a.m. in New York trading, their biggest drop since May 2022. Expectations were high ahead of the results as the stock had almost doubled this year through Tuesday’s close, the best performer among 15 companies in the S&P Composite 1500 Apparel Retail Index. That’s on top of a nearly 300% jump in the shares in 2023.
Abercrombie “is held to a higher standard than most retailers” so “people will probably be modestly underwhelmed” with these results, Adam Crisafulli, an analyst at Vital Knowledge, wrote in a note to clients.
Once known for its perfumed stores and shirtless models, the New Albany, Ohio-based company has won Gen Z and millennial adults with its denim offerings, wedding shop and weekly drops of new items. Sales at Abercrombie have continued to grow rapidly in recent quarters even as budget-conscious shoppers rein in spending on other discretionary purchases.
Chief Executive Officer Fran Horowitz highlighted the “increasingly uncertain environment” for retailers in a statement Wednesday. Even so, the company raised its full-year sales outlook. On a conference call, executives said they expect gross margin to benefit from lower cotton costs and fewer promotions than a year ago.
Abercrombie deserves credit “for bucking the trend of a tougher operating environment and holding price in a price-sensitive market,” William Blair analyst Dylan Carden said in a research note.
