Abercrombie & Fitch Co.’s (ANF) shares soared 21% in premarket trade on Thursday after the company surpassed market expectations on both revenue and earnings for the third quarter of 2018.
Total sales rose slightly to $861 million from $859 million in the same period last year, despite negative impacts from foreign currency as well as the calendar shift, resulting from the 53rd week in 2017. Comparable sales increased 3%.
Net income attributable to Abercrombie & Fitch Co. grew to $23.9 million, or $0.35 per share, from $10 million, or $0.15 per share, in the year-ago period. Adjusted EPS was $0.33.
During the quarter, total sales in the Hollister brand grew 1% to $515 million while comparable sales grew 4%. The Abercrombie brand saw a decline of 1% in total sales to $346 million, along with a 1% increase in comparable sales.
Sales in the US grew 1% to $562.6 million while comp sales rose 6%. International sales fell 2% to $298.6 million, while comp sales dropped 3%. The company saw a growth of 16% in direct-to-consumer net sales which totaled $243.6 million in the quarter.
At the end of the quarter, total inventory remained flat at $572.2 million versus last year. The company had a total of 684 stores in the US and 195 internationally. The retailer indicated that the holiday season had started off strongly and that it was well-positioned to deliver top-line growth, gross profit rate expansion and operating expense leverage for the full year.
For the fourth quarter of 2018, the company expects net sales to decrease in the mid-single digits range, including adverse effects from the calendar shift and foreign currency exchange rates. Comparable sales are expected to be up low single digits. For the full year of 2018, both net sales and comparable sales are expected to grow 2-4%.
Abercrombie & Fitch expects to deliver around 70 new store experiences in fiscal 2018 through new store prototypes, remodeled stores and right-sizes. Based on better performance as well as success in lease renegotiations, the company now plans to close around 40 stores by the end of 2018, mainly in the US versus its previous plan of closing up to 60 stores.
Abercrombie & Fitch also announced the appointment of Kristin Scott, Brand President of Hollister Co., to the newly created role of President, Global Brands. She will be responsible for the global performance of all the company’s brands and will report to CEO Fran Horowitz.
This move comes as a part of organizational changes in planning and inventory management across brands in which the company has also eliminated the individual brand president positions. As part of this change, Stacia Andersen, Brand President of Abercrombie & Fitch and abercrombie kids will leave the firm.