Abercrombie & Fitch sales rose for the second consecutive year as its restructure and new store format begins to pay off.
Comparable sales rose by 3 per cent in the year to February 2, to US$3.6 billion and operating income, after excluding extraordinary items, was $138.6 million compared to $100.8 million last year. However fourth-quarter sales fell by 3 per cent.
CEO Fran Horowitz said the fashion retailer achieved an improvement in gross profit and reduced operating expenses, resulting in a 77-per-cent improvement in net income.
“We continue to keep the customer at the centre of everything we do and are excited about the future of our brands. Our transformation initiatives are gaining traction and keeping us on track to deliver our previously disclosed fiscal 2020 targets.”
Neil Saunders, MD of GlobalData Retail, said while the sales decline during the fourth quarter looks poor on the surface, the dip is a function of a calendar shift and a shorter trading period compared to last year.
“The comparable Abercrombie & Fitch sales figure, which strips out these negative influences, provides a more balanced assessment of performance and here we believe A&F continues to deliver good growth. The comparable growth rate of 3 per cent is particularly impressive when set against last year’s stellar 9 per cent uplift.”
He said there was now a clearly evident divergence between the performance of the Abercrombie and Hollister brands. The former posted a 2 per cent decline in comparables with the latter recording an impressive 6 per cent uplift.
“In our view, Hollister is a brand that is strongly connected to its core customer base, both through impressive marketing and an assortment that is attuned to their needs and tastes. Our own tracking shows that the brand has strong traction and is attracting and converting a core group of shoppers on a regular basis at the same time as adding some new shoppers into the mix. Provided Hollister remains on trend with its range – and we see no reason why this should not be the case – we believe it should continue to perform well as the company moves into its new fiscal year.”
Saunders said that while Abercrombie’s performance was a little soft this time around, the brand was up against tougher prior year figures.
“Nevertheless there has clearly been a loss of momentum. Our data show that affinity to the brand, although much improved, is a more tenuous than Hollister. This means that Abercrombie was more exposed to the loss of consumer momentum in the general economy after Thanksgiving and Black Friday.”
But he said the brand continues to show good potential and there were a number of fashion wins over the period, including good traction in outerwear.
“Despite the slowdown we remain confident that Abercrombie is on the right track and can improve its numbers as it fine-tunes both marketing and merchandising.”