Abercrombie & Fitch Co. has upped its outlook for the 2022 fourth quarter and full year and is now expecting to post positive sales instead of declining sales.
“I am pleased with our quarter-to-date performance. Our brands performed well during the peak holiday selling period, delivering sequential sales trend improvement from third-quarter levels, leading us to increase our fourth-quarter sales and operating margin outlook,” Fran Horowitz, A&F’s chief executive officer, said Monday in a statement.
“The strong momentum we have seen all year at the Abercrombie & Fitch brand continued in the holiday season with the women’s business on track to deliver its highest fourth-quarter sales ever,” said Horowitz. “Importantly, this strong performance has been complemented by an acceleration in men’s growth from third-quarter trends.
“For Hollister, while we expect to finish the fourth quarter with sales below 2021 levels, the sales trend improved nicely from third quarter as we have begun to realize initial benefits from assortment adjustments and personnel changes.”
For the fourth quarter, the company now expects sales to be up 1 to 2 percent, compared to the previous forecast of down 2 to 4 percent.
The operating margin is seen in the range of 6 to 8 percent, up from the previous forecast of from 5 to 7 percent.
For the full fiscal year, net sales are now seen as down around 1 percent, compared to the previous forecast of being down 2 to 3 percent. The operating margin is seen coming in at 2.5 to 3 percent, compared to the earlier forecast of 2 to 3 percent.
The improved outlook triggered a 10.9 percent, or $2.75, spike in A&F’s stock to $27.95, as of early afternoon Monday.
Horowitz said that for 2023, the company is playing it cautiously. “We continue to balance playing both offense and defense in this evolving macroeconomic environment,” Horowitz said. “We are managing operating expenses tightly, and we continue to target an inventory level consistent with 2021 by year end, positioning our brands to chase receipts in the spring season. At the same time, we are leveraging the company’s strong financial position to drive key, long-term investments in our operations, specifically in technology, stores and supply chain. We believe these investments will best position us to achieve our 2025 Always Forward Plan.” The three core principles of the Always Forward Plan are:
- Execute focused brand growth plans.
- Accelerate an enterprise-wide digital “revolution”
- Operate with financial discipline.