Operating expense, excluding other operating income, net, was up 5 per cent compared to last year. Approximately half of the increase was due to the lapping of COVID-related rent abatements and payroll credits last year, and the other half due to an increase in marketing and digital fulfillment expenses. Operating expense as a percentage of sales increased to 56.9 per cent from 56.2 per cent last year, the company said in a press release.
“First quarter net sales exceeded expectations, rising 4 per cent to $813 million, our highest first quarter level since 2014. Results were driven by ongoing strength at the Abercrombie & Fitch brand, where global sales were above plan. Net sales at Hollister were in line with expectations. By region, the US continued to outperform, EMEA net sales returned to positive territory, and APAC was impacted by COVID lockdowns in China. We continued to reduce our promotional activity, contributing to our eighth consecutive quarter of AUR improvement. This was more than offset by higher-than-expected freight and product costs,” Fran Horowitz, chief executive officer, said.
“Looking forward, we expect higher costs to remain a headwind through at least year-end. We expect freight relief in the fourth quarter as our anniversary increased air usage last year due to the Vietnam shutdown. We will continue to manage expenses tightly and are committed to finding opportunities to offset these costs while protecting strategic investments in marketing, technology and our customer experience, which should drive sustained, long-term sales growth,” continued Horowitz.
Consistent with the above, beginning this quarter, the company will no longer provide a quarterly outlook on gross profit rate or operating expense. For the second quarter of fiscal 2022, the company expects net sales to be down low-single-digits to fiscal second quarter 2021 level of $865 million, reflecting a combined, estimated adverse impact of approximately 300 basis points from foreign currency and COVID-related lockdowns in China and approximately 300 basis points due to an assumed impact of inflationary impact on consumer demand. The company expects operating margin in the range of 3 to 4 per cent with the year-over-year decline driven by higher freight and raw material costs.
Fibre2Fashion News Desk (RR)