Driving the impressive performance in Q1 FY23 was a positive total company comparable sales increase of 3 per cent. The company's gross profit rate significantly improved, coming in at 61 per cent, a leap of approximately 570 basis points compared to last year. However, the company also experienced increased costs related to cotton and raw materials, and was impacted by adverse foreign currency factors, slightly offsetting the overall gross profit rate improvement.

In Q1 FY23, the retailer's operating expense, excluding other operating income, net, rose by $16 million or 3 per cent compared to last year. This rise can be attributed to increased expenses in technology and incentive-based compensation. Operating expense as a percentage of sales increased slightly to 57.3 per cent from 57 per cent last year.

In terms of operating income, the company showed a major turnaround in Q1 FY23, recording $34 million on a reported basis and $38 million on an adjusted non-GAAP basis. This is in stark contrast to the operating loss of $10 million and $6 million the company suffered last year on a reported and adjusted non-GAAP basis, respectively.

Finally, the company posted net income per diluted share of $0.32 on a reported basis and $0.39 on an adjusted non-GAAP basis in Q1 FY23. This reflects a significant upswing when compared to the net loss per diluted share of $0.32 and $0.27 on a reported and adjusted non-GAAP basis, respectively, in the same period last year.

Fran Horowitz, chief executive officer, said: “Fiscal 2023 is off to a strong start with first quarter net sales and operating margin above our expectations. Net sales grew 3 per cent to last year, led by Abercrombie brands where we grew 14 per cent, achieving the highest first quarter sales in more than a decade. Abercrombie’s offering is resonating meaningfully with our target customer, setting several other sales records this quarter across genders, categories, and geographies.

“Work continues in Hollister brands, where we managed a healthy business from a gross profit rate and inventory perspective and continued to improve the assortment as we prepare for the summer and back-to-school seasons. Both brands were able to deliver year-over-year AUR growth and lower freight costs, driving 570 basis points of gross profit rate improvement and a first quarter operating profit above our expectation.”

Fibre2Fashion News Desk (DP)