Abercrombie & Fitch (NYSE:ANF) raised its annual sales growth forecast and reported better-than-expected first-quarter results on Wednesday, driven by new and trendy apparel and accessories. This news sent its shares soaring by as much as 19%.
Refreshing styles, including low-rise baggy pants and wide-leg jeans, to attract selective shoppers and reducing reliance on discounts helped improve the margins for the owner of the Hollister brand. “Our brands are delivering high-quality, on-trend assortments for new and retained customers across regions and brands,” said CEO Fran Horowitz.
Comparable sales rose 29% at Abercrombie and 13% at Hollister compared to the previous year.
The company also benefited from consumers returning to discretionary spending as inflation pressures eased. Its gross profit rate increased by 540 basis points to 66.4% in the quarter ending May 4.
Abercrombie & Fitch’s shares, which have risen nearly 74% this year, reached a record high of $180.67.
In a related development, shares of Dick’s Sporting Goods (NYSE:DKS) also hit a record high after the retailer raised its annual forecasts due to strong demand for sportswear.
Abercrombie & Fitch now expects fiscal 2024 net sales to rise by 10%, up from the previous forecast of a 4% to 6% increase. It also raised its annual operating margin forecast, benefiting from lower cotton and freight costs.
Earlier this month, major retailers such as Walmart (NYSE:WMT) increased their annual forecasts, betting on strong demand for groceries and non-essentials, while Target (NYSE:TGT) reported improvements in its apparel category despite a challenging quarter.
“Despite a choppy macro environment, Abercrombie continues to deliver an on-trend assortment with agility to meet demand, while investing in the business and drawing new customers to the brands,” said Dana Telsey, analyst at Telsey Advisory Group.
Abercrombie & Fitch reported net sales of $1.02 billion for the quarter, surpassing LSEG estimates of $963.3 million. Adjusted profit rose to $2.14 per share, compared to analysts’ estimate of $1.74 per share.
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