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Abercrombie shares soar 22% after earnings beat

Key Points
  • Abercrombie & Fitch shares soared after the company reported strong fourth-quarter results.
  • The teen retailer earned $1.35 per share during the quarter, topping Refinitiv estimates by 20 cents.
  • Same-store sales jumped 3 percent, thanks to strong performance in the U.S. 
Pedestrians pass in front of an Abercrombie & Fitch Co. store in San Francisco.
David Paul Morris | Bloomberg | Getty Images

Shares of Abercrombie & Fitch soared by about 22 percent in morning trading Wednesday after the teen retailer reported strong earnings and same-store sales growth during its fiscal fourth quarter.

Abercrombie, which also owns Hollister, earned $1.35 per share during the fiscal fourth quarter ended Feb. 2, topping average analyst estimates by 20 cents, according to Refinitiv. Sales at locations open for at least a year jumped 3 percent, beating Wall Street estimates of 1.5 percent, thanks to strong performance in the U.S.

The teen apparel company has been trying to turn around its struggling business by shrinking the size of its stores and changing up its marketing strategy through loyalty programs and other initiatives.

The company reported revenue of $1.16 billion during the quarter, beating analysts' expectations of $1.13 billion but still a 3 percent decline in sales from the same time last year. Sales for its namesake brand tumbled by 9 percent. Hollister, on the other hand, saw revenue rise by 1 percent.

Its international business, which makes up nearly a third of its revenue, saw sales drop by 10 percent. The company attributed the plunge to macroeconomic uncertainty and soft tourism sales.

Looking to fiscal 2019, Abercrombie is forecasting revenue increases by 2 to 4 percent, driven by same-store sales growth rising by low-single digits. The retailer is planning to remodel or add 85 locations this year, up from 67 in 2018. It is also planning to close up to 40 stores, mostly in the U.S.

Abercrombie told analysts on its conference call Wednesday that is planning to trim its Chinese imports from 25 percent in 2018 to less than 20 percent this year in order to reduce the impact of tariffs on the goods.

President Donald Trump recently announced that he is delaying additional tariffs, originally slated for the beginning of this month, on apparel and other goods imported from China. However, the threat of an escalation of the trade dispute hangs over the heads of retailers like Abercrombie.