Shares in Abercrombie & Fitch (ANF) rose 12% in midday trading on Wednesday after the company beat analysts’ estimates in its fourth-quarter report. The apparel retailer announced strong sales and earnings results for the period.
The positive results were hailed by analysts, prompting the shares to move more than 12%. However, analysts expressed concern after the company’s announcement that it would be shutting down 60 Hollister and Abercrombie stores this year.
ANF Earnings & Outlook
The company has invested significantly in its stores over the last year. In 2016, its operating income sunk to $15.1 million — down from $72.7 million during the previous year — and shut down 55 stores. Abercrombie reported that its total sales in the fourth quarter rose $1.19 billion or 15%, ahead of $1.16 billion analysts’ estimates.
Comparable sales jumped 11% at Hollister and recovered 5% at Abercrombie, posting an improvement from a decline of 10% in the Q1 of the year. Overall, comparable sales increased by 9% while “direct to consumer” sales were up 34%, representing a 3% rise from a year ago.
However, the company’s gross margin was down 90 basis points to 58% because of lower selling prices and higher input costs. Nonetheless, a decline in distribution expenses and stores helped in doubling the retailer’s operating income and earnings per share from a year ago.
Abercrombie’s EPS jumped to $1.38 from last quarter’s $0.65, which easily surpassed $1.11 analysts’ expectation.
Abercrombie & Fitch’s Executive Comments
Chief executive officer Fran Horowitz said that Abercrombie’s focus is to stay close to its customer. He added that the company was able to post great results by having executed its playbook and sticking to its disciplined approach in matters of expense management. That helped it deliver a strong performance both the on the bottom and top line. “We will continue improving customer experience with our unending investments in omnichannel and direct-to-consumer capabilities, and loyalty programs,” Horowitz said.