Shares of Abercrombie & Fitch Co. Inc. jumped in pre-market trading after the company posted better-than-expected first-quarter results and guided fiscal 2018 comps gains at up 2 to 4 percent.
The company narrowed its net loss for the quarter ended May 5 to $42.5 million, or 62 cents a diluted share, from the year-ago net loss of $61.7 million, or 91 cents. The earnings per share loss on an adjusted basis was 56 cents. Net sales rose 10.6 percent to $730.9 million from $661.1 million. The company said comparable sales rose 5 percent, comprised of a 6 percent gain at its Hollister brand and an increase of 3 percent at its core Abercrombie brand.
Wall Street’s consensus estimate was a loss of 77 cents on revenues of $696.7 million. Shares of Abercrombie were trading up 6.6 percent to $25.47 at 8:12 a.m.
Fran Horowitz, chief executive officer, said, “We are pleased with our performance across all brands, with the consistent execution of our playbooks delivering a solid quarter of sales growth, and bottom-line improvement. Results exceeded our expectations driven by a 5 percent increase in comparable sales, gross margin expansion and 460 basis points of expense leverage.”
By geography, the company said comp sales were up 8 percent in the U.S. and flat at 0 percent for its overseas business. Net sales in the U.S. were up 10 percent to $449.1 million and rose 12 percent in its international markets to $281.8 million. The company also said direct-to-consumer net sales rose 14 percent to $200.7 million, representing 27 percent of total net sales for the quarter.
According to Horowitz, “Hollister continued to drive strong sales growth across channels and geographies and Abercrombie built momentum with another quarter of positive comparable sales led by strength in North America.”
Looking ahead, the ceo said the company’s efforts are focused on transforming its operating model to deliver an improved customer experience, with strategic investments in omnichannel experience, marketing and technology to strengthen its engagement with customers. “We are off to a strong start in 2018 and we are committed to delivery top and bottom line growth, as we work toward our goal of being a leading global omnichannel apparel retailer,” she said.
The company is targeting capital expenditures in the range of $135 million to $140 million for fiscal 2018. It expects to spend $85 million for store updates and new stores and between $50 million and $55 million for direct-to-consumer and omni-channel investments. Abercrombie plans to open 22 full-price stores during the year, including 13 Hollister and nine Abercrombie stores. It also expects to close up to 60 U.S. stores through natural lease expirations.
The company guided fiscal 2018 comparable sales to be up 2 percent to 4 percent, with net sales also up in the 2 percent to 4 percent range. Net sales for the second quarter were forecast to be up in the “high-single digits.”