Abercrombie & Fitch Co has reported more modest sales growth in the latest quarter, but analysts viewed the pattern as a reset after very strong periods rather than a sign of brand weakness.
Net sales for the fourth quarter ended February 1 grew 5 per cent to $1.67 billion, with comparable sales up 1 per cent. This followed a 7 per cent uplift in the third quarter.
According to GlobalData MD Neil Saunders, the company had some big hurdles to clear this quarter, as it lapped prior-year sales growth of 9 per cent and comparable growth of 14 per cent.
The results showed that the firm had vaulted over both, Saunders said, adding that the respectable gains underline the continued traction of the brands in the market.
“The point is sometimes made that a decompression in growth is a sign that the company has peaked. While it is tempting to see this pattern in the raw numbers, the truth is more nuanced.
“Overall, Abercrombie & Fitch is driving more revenue through the business and is reaching record levels in most quarters. And both the main brands continue to resonate with customers, which provides opportunities for expansion that support topline growth,” he elaborated.
At Abercrombie, net sales grew 4 per cent while comparable sales declined 1 per cent during the quarter.
Saunders viewed this as more of a reset after some extremely exuberant years rather than any inherent softness with the brand.
“We see very few signs of brand weakness in our own customer tracking,” he said. “What we do see, however, is sharper competition in many locations and a customer who shops around a little more than they once did. That puts some pressure on the share of wallet, but it hasn’t led to defections from Abercrombie.
“That said, as a more mature brand, Abercrombie needs to stay fresh and to continue innovating the range to drive growth,” he added.
At Hollister, sales rose 6 per cent and comparable sales were up by 3 per cent. According to the analyst, the brand is still on a growth curve thanks to improved marketing and a sharper assortment.
“That said, as it starts to lap tougher comparatives in the year ahead, the growth rate will start to normalize.
“However, the important thing – especially in a teen market that remains fickle – is to retain the gains that have been hard won over recent years. And from our channel checks, we believe that Hollister is showing up in a way that will allow them to do this.”
On the bottom line, net income was down 7.4 per cent to $175 million. Saunders attributed much of the decline to elevated costs from tariffs.
“There is a deliberate decision here that those costs should not be passed across in full to consumers. This hurts the bottom line, although not fatally so, but we believe it is the right decision,” he said.
For the full year, net sales increased 6 per cent and comparable sales grew 3 per cent. Net income went down from $574 million to $515 million.
Abercrombie & Fitch expects net sales growth in the range of 3-5 per cent in FY26, an outlook that Saunders considered solid.
“The company is well run, has focus and knows what it is about. Now that both brands are motoring along nicely, we wonder whether a modest acquisition or a new retail brand launch to target a different segment of the market might make sense.
“Neither are imperative, but they could add weight to future growth prospects,” Saunders said.
