Financial Roundup: Abercrombie Comps up on Hollister; Gap Rides Athleta, Old Navy to Sales Gains

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Abercrombie & Fitch

Abercrombie & Fitch continues to rely on Hollister gains, while positioning the Abercrombie brand for similar success. Gap sales up on Athleta, Old Navy performance.

Abercrombie & Fitch

In a Nutshell: Abercrombie & Fitch comes off of a good quarter thanks to a net sales increase at Hollister of 10 percent. The retailer continues to see dividends in the form of increased traffic from the chain’s remodels and the team’s focus on listening to the consumer, the company said. It is also seeing signs that similar tactics in the Abercrombie business will produce rewards there as well.

The quarter saw strong performance in denim, outerwear, fleece and graphics. The Abercrombie brands are seeing benefits from its focus on mobile, which now represents more than two thirds of its direct-to-consumer business. Heading into the fourth quarter, the retailer said it is in a better inventory position than last year when it was too lean, resulting in missed opportunities.

Looking ahead, the company anticipates comps to be up in the low single digits for the fourth quarter while net sales are expected to increase in the mid to high single digits.

Sales: Net sales totaled $859.1 million during the third quarter ended Oct. 28, up from $821.7 million during the same period last year. Comp sales across the business were up 4 percent in the quarter, boosted by an 8 percent gain for Hollister while Abercrombie dropped by 2 percent.

Earnings: Net income for the quarter reached $10.6 million, an increase over $8.3 million during the year-prior period.

CEO’s Take: “We are pleased by the clear progress across all brands, delivering another quarter of sequential comparable sales improvement, and a return to positive comparable sales. This sales performance in combination with disciplined expense management drove profit growth, despite the promotional environment,” said Fran Horowitz, chief executive officer. “We continue to execute on our strategic plan, and we are positioned to compete in what we expect to be a challenging and promotional fourth quarter. We maintain our focus on driving operating expense leverage, while also making strategic investments in marketing and omnichannel to meet our customers’ needs whenever, wherever and however they choose to engage with our brands.”

Gap Inc.

In a Nutshell: Gap Inc. continues to enjoy strong performance in its Old Navy unit compared to the “heavy lifting” ahead to turn around the Banana Republic business. Old Navy surged ahead to become the No. 4 denim retailer, up from No. 6 last year, according to the company. The brand did particularly well in denim in the quarter, resonating on colors, hem treatments, silhouettes and destruction detailing. Gap was able to fuel the demand thanks to a replenishment platform that gets goods into stores in nine to 14 weeks. The company opened 20 new Old Navy locations in North America with an accelerated new store pace planned for 2018.

Gap reports that Athleta is “on fire” with “exceptional growth” due to a quick six to 11 week turnaround on new products and targeted customer acquisition efforts.

Gap raised its diluted EPS guidance for the full year to the $2.18 to $2.22 range. Comp sales are expected to increase in the low single digits.

Sales: Net sales increased from $3.80 billion to $3.84 billion company wide for the quarter ended Oct. 28.

Comp sales across the company were up 3 percent during the quarter versus down 1 percent in during the same quarter last year. Old Navy comps saw a 4 percent uptick on top of a 4 percent increase for the quarter last year. Gap was up 1 percent over negative comps during the prior-year period. Banana Republic comps were down by 1 percent, which represented an improvement over negative 6 the year prior.

Earnings: Net income for the quarter totaled $643 million or 59 cents per share, up from $456 million, or 51 cents per share during the same period of FY16.

CEO’s Take: “Today, we are happy to report our fourth consecutive quarter of positive comps, reflecting the continued momentum in key parts of our business,” said Art Peck, president and chief executive officer, Gap Inc. “We continue to make progress against the balanced growth strategy we outlined in September, driving efficiency at our more mature brands, while growing our footprint in the value and active space, and investing in our online and mobile experience.”

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