Abercrombie & Fitch Co (ANF) posted a surprise quarterly profit and lifted its full-year sales forecast, sending its shares up as much as 29%. The apparel retailer has worked to increase its stock across all its labels and lure affluent Americans to purchase for a variety of items including dresses, cargos and formal pants.
The company’s eponymous Abercrombie label posted a 14% increase in sales in the quarter, while the Hollister brand, dropped 7%. Gross margins rose 570 basis points to 61%, benefiting from lower freight costs and its efforts to control promotions.
ANF’s Q1 report suggests brands with good momentum have remained resilient despite macro pressures. The Ohio-based company now expects 2023 net sales to increase 2% to 4%, compared to its previous range of 1% to 3% growth. On an adjusted basis, Abercrombie reported a profit of 39 cents per share, compared with estimates of a loss of 5 cents.
Neil Saunders, managing director of GlobalData, said that while pressures are building in the retail market, they are not anticipating this to create a complete collapse in consumer demand. Abercrombie is fortunately on the right side of trends.