Abercrombie & Fitch Co. shares soared the most in more than four years on Wednesday after the company reported stronger-than-expected first-quarter profit and boosted its outlook for the full year.
The results suggest that, despite economic uncertainty, some shoppers are still willing to spend on discretionary items like clothing. While sales at the retailer’s namesake brand rose in the first quarter, sales at Hollister — which caters to a younger shopper — declined, pointing to more weakness for customers with tighter budgets.
“Abercrombie’s offering is resonating meaningfully with our target customer, setting several other sales records this quarter across genders, categories and geographies,” Chief Executive Officer Fran Horowitz said in a statement, noting that “work continues” to improve performance at Hollister.
The shares were up 26% as of 11:17 a.m. in New York, with the stock enjoying its largest percentage gains since November 2018.
New Albany, Ohio-based Abercrombie isn’t alone among apparel retailers in bouncing back from recent poor performance. Kohl’s Corp. also reported better-than-expected first-quarter results on Wednesday, sending its shares up as much as 14% in premarket trading. And Urban Outfitters Inc. shares rose the same amount Wednesday morning after it topped expectations late Tuesday.
Abercrombie’s earnings of 39 cents a share came in above the average analyst estimate of break-even, while comparable sales rose 3% in the quarter ended April 29. For the full year, the company now sees net sales up as much as 4%, above a previous expectation of 1%-to-3% growth.
Abercrombie has raised its prices, known as average unit retail, by double-digits since the pandemic for both brands, Horowitz told analysts on Wednesday. “That was a big win for us,” she said. The company outpaced those gains in the first quarter of its fiscal year in both brands, she added, and aims to maintain that double-digit growth throughout 2023.
--With assistance from Jeannette Neumann.
(Updates with shares starting in first paragraph, commentary from analyst call in final paragraph.)