Abercrombie & Fitch rallies over 20% after fiscal-Q1 earnings

Abercrombie & Fitch (ANF.US) is one of the best performing US companies today. Stock rallies over 20% following release of fiscal-Q1 2025 earnings report (calendar February - April 2024) and trades at fresh all-time highs. Fiscal-Q1 2025 earnings turned out to be better-than-expected and upbeat guidance for fiscal-Q2 2025 and full-year fiscal-2025.

Abercrombie & Fitch results for fiscal-Q1 2025 turned out to be better than expected all across the board. Net sales grew over 22% and exceeded $1 billion, driven by strong over-30% growth in sales of Abercrombie brand. Meanwhile, cost of revenue climbed just 5.2%, paving the way for an over 500 basis point improvement in gross margin, compared to a year ago quarter. Operating and net margins also improved significantly, with net income jumping increasing over 470% year-over-year. 

What drew even more attention than solid fiscal-Q1 earnings were new forecasts. Abercrombie expects net sales growth in 'mid-teens' in fiscal-Q2 as well as 10% growth in full fiscal-2025. Operating margin is seen at 13-14% in fiscal-Q2 and 'around 14%' in full-year. This means that the company not only expects strong sales growth to continue, but also expects further improvement in margins.

Fiscal-Q1 2025 earnings

• Net sales: $1.02 billion vs $0.96 billion expected (+22.1% YoY)
  • Abercrombie: $571.5 million vs $526.5 million expected (+31.1% YoY)
  • Hollister: $449.2 million vs $433.1 million expected (+12.3% YoY)
• Comparable sales: +21% vs +12.6% expected (+3% a year ago)
  • Abercrombie: +29% vs +17% expected (+14% a year ago)
  • Hollister: +13% vs +8.2% expected (-6% a year ago)
• Cost of revenue: $343.3 million vs $343.6 million expected (+5.2% YoY)
• Gross profit: $677.5 million vs $608.7 million expected (+32.9% YoY)
  • Gross margin: 66.4% vs 64.4% expected (61.0% a year ago)
• Adjusted operating profit: $129.8 million vs $99.0 million expected (+237.8% YoY)
  • Adjusted operating margin: 12.7% vs 9.4% expected (4.6% a year ago)
• Adjusted net income: $113.9 million vs $90.7 million (+474.4% YoY)
  • Adjusted net margin: 11.2% vs 8.4% expected (2.4% a year ago)
• Adjusted diluted EPS: $2.14 vs $1.69 ($0.39 a year ago)

Fiscal-Q2 2025 forecast

• Net sales growth: 'up mid-teens' vs +8.5% expected
• Operating margin: 13-14%

Full-year fiscal-2025 forecast

• Net sales growth: 10%, up from previous guidance of 4-6%
• Operating margin: 'around 14%', up from previous guidance of 'around 12%'
• Capital expenditures: unchanged at 'about $170 million'

Source: xStation5