Abercrombie & Fitch has reported another solid quarter, with sales growing 7 per cent year-on-year.
The retailer’s net sales for the third quarter ended November 2 rose to a record $1.3 billion, marking its 12th consecutive quarter of growth.
Net sales improved 7 per cent in both the Americas and EMEA, but fell 6 per cent in Apac.
GlobalData MD Neil Saunders said the company had a very solid quarter, with sales growth well ahead of the wider apparel market.
“This points to another market share gain, mostly driven by the US where Abercrombie & Fitch remains a standout retail performer. The consistency of solid execution over the past few years continues to pay dividends on both customer-facing and operational sides of the business,” he said.
Performance was mixed between the company’s two brands during the quarter.
Abercrombie saw a relatively soft period with a 2 per cent decline in sales. Comparable sales, which exclude the contributions from new stores, fell by a sharper 7 per cent.
Saunders said the decline was not entirely unexpected, as the brand was cycling over elevated prior-year gains while its core consumers were a little more hesitant to buy.
The trajectory, however, is improving sequentially, with the brand posting better numbers as the year progresses, he continued, adding that fourth-quarter sales will have a good chance of stabilizing.
At Hollister, sales surged 16 per cent and comparable sales soared 15 per cent. Saunders attributed the impressive growth to a very strong back-to-school assortment, from which flowed an equally strong fall range.
The brand’s sharpened positioning and much stronger outreach have helped it resonate with younger consumers, including a significant number of new additions over the past year, the analyst said.
On the bottom line, the company’s net income shrank 14 per cent. Saunders said the results here were complicated by the impact of tariffs, which created a 210 basis-point margin drag.
“Abercrombie & Fitch made a conscious choice to absorb most of these costs rather than pass them across to consumers and disrupt the value equation,” he said.
“In our view, this is the right decision: Protecting the value proposition is critical in today’s environment. While this depresses quarterly profit rate, it arguably protects longer-term loyalty as well as short-term volume growth.”
For the full year, the retailer expects net sales to grow 6-7 per cent, compared to the previous guidance range of 5-7 per cent.
