Shares of Abercrombie & Fitch jumped 20% before the opening bell on Wall Street on Tuesday, driven by stronger-than-expected quarterly results and solid holiday guidance. The group posted a 7% increase in revenue in the third fiscal quarter, ended November 1, to $1.29bn, beating market expectations. Net income came in at $113m, or EPS of $2.36, compared with the $2.16 anticipated.
The momentum is largely driven by Hollister, whose sales rose 16% to $673.27m, with comparable sales up 15%. By contrast, the Abercrombie brand fell 2% to $617.35m, with comparable sales dropping 7%. This underperformance is curbing the momentum Abercrombie had built in recent years, and management is forecasting flat sales for the brand in Q4.
For the festive season the group expects overall sales growth of 4% to 6%, compared with a median forecast of 5.6% according to LSEG. Projected EPS is in a range of $3.4 to $3.7, broadly in line with consensus. The company's Chief Executive Fran Horowitz will now need to convince investors of her strategy to revive Abercrombie, as Hollister's support becomes crucial to sustaining the group's growth.
