This past holiday season was very generous to the retail industry and Abercrombie & Fitch (ANF) was a major beneficiary. Revenue for the quarter-ended February 3, 2018 of $1.2 billion was up 15% Y/Y. The quarter included an extra week relative to the year earlier period. Nonetheless, the results were impressive. Last summer Abercrombie & Fitch was nearly left for dead; sales were sagging as the company could not align products with customer preferences.

Chatter suggested management had put the company up for sale. It is a good thing that sale did not happen. ANF is up over 95% Y/Y versus an 18% gain for the S&P 500 (SPY). The question remains, “Will its fortunes change anytime soon?”

Hollister Continues To Outperform

The stalwart of the company has been the Hollister brand, which has experienced strong growth across all sales channels. Revenue from Hollister was up 19% Y/Y versus 9% for Abercrombie & Fitch. Management chalks up Hollister’s white hot growth to its closeness to its customer base, which allows it to understand and react to trends in real time. Abercrombie saw growth across both genders, and market improvements across distribution channels. The company has made major investment in omni-channel marketing and it is finally paying off for its house brand.

Comparable sales were 9% for the entire company. Comparable sales for Hollister and the Abercrombie brand were 11% and 5%, respectively. This is sea change for the Abercrombie brand which experienced comparable sales of -2% last quarter in -7% in Q2. The company is also making a big push online. Its direct-to-consumer (“DTC”) sales grew to 34% of total company sales, up from 31% last year. This implies sales through the DTC channel were up 26% Y/Y. This dwarfs the 11% growth the channel experienced last quarter, and puts it on par with other retailers like Urban Outfitters (URBN) and Target (TGT).


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