Retail

Abercrombie quarterly results beat Wall Street estimates on online strength

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Key Points
  • Abercrombie & Fitch surged past Wall Street expectations for quarterly profit and sales on Tuesday.
  • The apparel retailer reined in costs and benefited from growing online demand from stuck-at-home consumers, sending its shares up about 10%.
A person carries a bag from the Abercrombie & Fitch store on Fifth Avenue in New York City, February 27, 2017.
Andrew Kelly | Reuters

Abercrombie & Fitch surged past Wall Street expectations for quarterly profit and sales on Tuesday, as the apparel retailer reined in costs and benefited from growing online demand from stuck-at-home consumers, sending its shares up about 10%.

The retailer also said it would exit four more of its European flagship locations by the end of January, as Abercrombie looks to reduce its dependence on demand from tourists that has taken a hit due to the Covid-19 pandemic.

Apparel retailers are ramping up investments in their digital platforms to combat declining store traffic as customers shift to online shopping due to the pandemic, tapping popular social media influencers and adding options such as curbside pickups.

Abercrombie's digital sales, which jumped 43%, were also boosted by demand for its Gilly Hicks brand's activewear and loungewear as customers staying at home turn to comfortable clothing.

Despite the robust results, Chief Executive Officer Fran Horowitz was still cautious about the future.

"We are encouraged by quarter-to-date results... However, this is tempered by uncertainty regarding the potential for increased Covid-related store restrictions and our expectation for elevated shipping, handling and freight costs."

Retailers are also benefiting from positive results from Covid-19 vaccine trials, on hopes that a successful vaccine would eventually help people return to stores.

The company has also cut costs by tightening its inventory, reducing payroll expenses and through the continued suspension of dividend payout and share repurchases.

The New Albany, Ohio-based company's stores and distribution expenses fell 8.3% in the quarter.

Excluding one-time items, the company reported a profit of 76 cents per share in the third quarter ended Oct. 31, compared with expectations of break-even, according to IBES data from Refinitiv.

Net sales fell 5% to $819.7 million, but beat estimates of $739.36 million.