Shares of Abercrombie & Fitch (ANF +2.00%) rocketed 37% higher on Tuesday after the apparel retailer's fiscal third-quarter profits exceeded investors' expectations.
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Hollister's sales are booming
Abercrombie & Fitch's revenue rose 7% year over year to $1.3 billion in the quarter ended Nov. 1. The gains were driven by the exceptional performance of the company's Hollister brand, which saw same-store sales rise by a blistering 15%. That more than offset a 7% decline in the retailer's namesake Abercrombie brand's comparable sales.
Moreover, management expects Abercrombie's performance to improve in the coming quarters. "Abercrombie brands made sequential progress in-line with our expectations, and we are tightly managing inventory as we aim for fourth quarter brand net sales to be approximately flat to last year's record," CEO Fran Horowitz said in a press release.
NYSE: ANF
Key Data Points
Better still, Abercrombie & Fitch did an admirable job navigating a difficult cost environment. Despite a significant negative impact from tariff-related cost increases, the company's operating margin checked in at a respectable 12%, albeit down from 14.8% in the year-ago period.
Abercrombie & Fitch, in turn, generated earnings per share of $2.36. That was well above Wall Street's estimates, which had called for per-share profits of $2.16.
Management is optimistic about the upcoming holiday selling season
Looking ahead to the fourth quarter, Abercrombie & Fitch guided for net sales growth of 4% to 6% and earnings per share of $3.40 to $3.70.
"We remain on track toward record net sales for fiscal 2025, on the foundation of consistent quarterly top-line growth, top-tier profitability, and healthy cash flow," Horowitz said.
