Abercrombie & Fitch posts fall in quarterly profit despite 3% sales uptick

By

Benjamin Fitzgerald

Published
Mar 1, 2023

Abercrombie & Fitch Co on Wednesday reported a 41.5% drop in quarterly profit, as higher labor costs and inflationary pressures squeezed margins, despite clocking a 3% sales uptick.

The New Albany, Ohio-based company's net income attributable to Abercrombie fell to $38.3 million, or 75 cents per share, in the fourth quarter, from $65.5 million, or $1.12 per share, a year earlier.

For the fourth quarter ending January 28, net sales reached $1.2 billion up 3%, as compared to last year on a reported basis and 5% on a constant currency basis. For the full year, net sales remained flat at $3.7 billion compared to last year, and up 2% on a constant currency basis.

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"[Our fourth-quarter] results were driven by continued, strong momentum in the Abercrombie & Fitch brand and sequential improvement in Hollister as we continue to stabilize the brand’s performance," said Fran Horowitz, CEO, Abercrombie & Fitch.

"In a year with significant inflation and global macroeconomic disruption, our teams leveraged our agile operating model to redirect expense and inventory investments. These efforts helped drive sequential sales improvement in the last two quarters, while progressing on key growth initiatives across digital, technology and stores.

"We ended the year with 44% digital penetration, growth in AUR, net store count growth, inventory down 4% to 2021, and reported and adjusted operating margins consistent with 2019 pre-pandemic levels despite approximately $300 million of product cost inflation since that time," added Horowitz.

Moving into 2023, the owner of Abercrombie & Fitch and Hollister brands said it remains "cautiously optimistic on consumer demand," adding its Abercrombie & Fitch brand "continues to be a leader in the industry," and "multiple actions we have taken in the Hollister brand are resulting in sequential net sales trend improvement." 
 
The company sad it is "pleased" with its inventory levels and each brand "is in a position to chase,"  adding it does not expect to see "net product cost benefits in 2023, we will continue to tightly manage our expenses, inventory and cash flow to properly balance investing for the long-term while improving profitability."