Abercrombie & Fitch raises sales forecast as new clothing styles attract shoppers

By Deborah Mary Sophia

(Reuters) -Abercrombie & Fitch raised its annual sales forecast on Wednesday after its second-quarter results comfortably beat estimates on strong demand for latest fashion styles at its Abercrombie label and improved assortment at Hollister, sending its shares up nearly 18%.

Abercrombie has been filling its shelves with a fresh collection of styles, including dressy apparel, knitwear and cargo pants, while also capitalizing on the demand for new denim silhouettes, as jeans become a post-pandemic workwear wardrobe staple.

The company's tight control over its inventories, which were down 30% at the quarter end, helped it cut back on discounts and markdowns and has also put its brands in a better position for the back-to-school season.

"The consumer is really responding to what we're doing....We really have expanded into a lot of new categories, so this young millennial (consumer) can now wear this brand from work to their weekend getaway," CEO Fran Horowitz said in an earnings call.

Abercrombie's upbeat forecast bucks a gloomy retail tone set by companies in recent weeks, with department store chains Macy's and Kohl's both leaving their annual forecasts unchanged despite quarterly profit beats as consumer spending remains pressured in the U.S.

"A lot of retailers are keeping their outlook conservative...but Abercrombie has incredible momentum (now) as their turnaround plan has helped in winning customers back," said Insider Intelligence analyst Rachel Wolff.

"They've been able to keep up with the consumer as they change, lean into trends and have the ability to chase demand instead of taking promotions," Wolff added.

Revenue from the Abercrombie brand rose 26% in the quarter, while that from Hollister recorded its first growth, with an 8% rise, following a decline in the past five quarters.

Abercrombie now expects fiscal 2023 net sales to rise around 10%, compared with its prior forecast range of 2% to 4% growth.

Its per-share profit of $1.10, for the three months ended July 29, crushed estimates of 17 cents, according to Refinitiv IBES data.

(Reporting by Deborah Sophia in Bengaluru; Editing by Shweta Agarwal)