Shares of Abercrombie & Fitch jumped 37% on Tuesday after the retailer reported a stronger-than-expected quarter, signalling to investors that momentum remains intact even as its flagship brand shows signs of slowing.
The company’s performance once again leaned heavily on Hollister, which delivered another quarter of double-digit growth and offset declines in the Abercrombie label.
During the fiscal third quarter ending Nov. 1, sales at the namesake brand fell 2%, while Hollister posted a 16% gain.
CEO Fran Horowitz told investors that Abercrombie’s sales are expected to remain flat in the current quarter, reinforcing expectations that Hollister will continue to carry the company through the holidays.
Companywide revenue rose 7%, ahead of Wall Street estimates.
The retailer reported earnings per share of $2.36, beating analyst expectations of $2.16.
Revenue came in at $1.29 billion, slightly above the $1.28 billion forecast.
Net income was $113 million, or $2.36 per share, compared with $131.98 million, or $2.50 per share, in the same period last year.
Sales rose from $1.21 billion a year ago.
The Abercrombie brand, which has powered the company’s revival in recent years, is now showing signs of cooling.
Quarterly sales for the label fell to $617.35 million, with comparable sales down a steep 7%.
Analysts had projected sales of $631.8 million.
Hollister, by contrast, delivered revenue of $673.27 million, easily beating expectations of $649.7 million.
Comparable sales for the brand rose 15%.
Horowitz said the company expects Hollister to continue generating momentum during the holidays.
“Hollister’s exciting campaigns and collaborations planned will highlight some must haves,” she said.
“We are just getting started and importantly, our team has been reading and reacting and has the right product to support sales throughout the season.”
She added that Abercrombie is allocating more resources to Hollister, which is on track to open 25 stores and refresh 35 locations this year.
At Abercrombie, the slowdown has partly been linked to older inventory that required markdowns.
Horowitz had previously anticipated a return to growth by year-end, but the company no longer expects that timeline to hold.
Executives did not specify when the brand may regain momentum, but highlighted signs of improvement compared with the previous quarter’s 5% revenue drop.
Horowitz pointed to collaborations with the NFL and luxury retailer Kemo Sabe as evidence that the brand is still resonating with customers.
“Abercrombie Brands has inventory in the right place and a strong marketing plan heading into holiday,” she said.
“We’ve opened 30 new stores in the third quarter, aiming for a total of 36 stores this year. We remain focused on bringing the brand back to growth.”
For the holiday quarter, Abercrombie expects revenue to climb 4% to 6%.
Analysts were looking for about 5.6% growth.
The company forecast earnings per share between $3.40 and $3.70, roughly in line with expectations of $3.55.
For the full year, Abercrombie now projects sales growth of 6% to 7%, ahead of estimates of 6.2%.
