US' Abercrombie & Fitch's sales rise 16% to $935 million in Q2

The net sales of Abercrombie & Fitch in the second quarter ended July 29, 2023, totalled to $935 million, up 16 per cent as compared to last year on a reported basis and up 16 per cent on a constant currency basis.

During the second quarter, the company recorded a gross profit rate of 62.5 per cent, up approximately 460 basis points as compared to last year. The year-over-year improvement was primarily driven by a benefit of 400 basis points from year-over-year AUR growth and 340 basis points from lower freight costs partially offset by 180 basis points from higher cotton and raw material costs and 60 basis points from the adverse impact from foreign currency, the company said in a press release.

During the second quarter of 2023, to drive ongoing brand growth and leverage the knowledge and experience of its regional teams, the company reorganised its structure and now manages its business on a geographic basis, consisting of three reportable segments: Americas, Europe, the Middle East and Africa (EMEA) and Asia-Pacific (APAC). There were no changes on the consolidated results of operations. All prior periods presented are recast to conform to this classification.

Fran Horowitz, chief executive officer, said: “Our net sales and operating margin exceeded our expectations as global growth accelerated throughout the second quarter. We continue to see strong customer receptivity of our brands and product, led by 26 per cent net sales growth in Abercrombie brands. To date, our efforts to evolve Hollister brands’ positioning and assortment are paying off, achieving a return to net sales growth at positive 8 per cent for the quarter. Both brands saw gross profit rate improvement on higher average unit retail and lower freight costs.

"Operating leverage from sales growth and gross profit rate performance contributed to an operating margin of 9.6 per cent, a significant expansion from the second quarter of 2022. These strong results showcase the power of our playbook and our team’s ability to align product, voice, and experience to meet our customers’ needs. Operationally, we are strategically managing inventory, leveraging chase capabilities to support demand, and driving efficiency across our business.”

For fiscal 2023, the company now expects net sales growth of around 10 per cent from $3.7 billion in 2022. This is an increase to the previous outlook of up 2 per cent to 4 per cent. The current outlook assumes that Abercrombie brands will continue to outperform Hollister brands. Also, fiscal 2023 includes a 53^rd week for reporting purposes, along with net store expansion. The 53^rd week is estimated to add approximately $45 million to total net sales in the fourth quarter and full year of 2023.