Abercrombie & Fitch (ANF) Q2 FY25 Earnings call transcript Aug 28, 2024

Abercrombie & Fitch, a leading retailer of clothing and accessories, recently held an earnings call to discuss the financial performance of the company in the second quarter of 2024. The call, led by Mohit Gupta, Executive Vice President, was a testament to the company's resilience and growth in a dynamic retail environment.

Record Sales and Operating Profit

The company reported strong second-quarter net sales growth of 21%, reaching $1.1 billion, with an operating margin of 15.5%. This impressive performance was achieved while also funding long-term growth priorities across regions and brands. The management team expressed confidence in the company's ability to sustain and grow its sales, with Fran Horowitz-Bonadies, Chief Executive Officer, stating that they are "energized to see the progress we've made to localize our playbook across regions this quarter."

Growth Across Brands and Regions

Abercrombie & Fitch's growth was broad-based, with both Abercrombie and Hollister brands experiencing significant sales growth. The Americas led the way with 23% net sales growth, while EMEA demonstrated growth on growth for the first time in over 10 years, with 16% growth on top of 4% in the second quarter of 2023. APAC also grew 3% in the quarter, driven by strong performance in China and Japan.

Marketing and Customer Engagement

The company highlighted its marketing efforts, particularly in digital channels, as a significant contributor to its sales growth. Abercrombie & Fitch has been investing in effective marketing campaigns to drive customer engagement, with campaigns like the NFL collection and the latest back-to-school initiatives attracting significant attention. The company also announced the launch of Hollister's Collegiate Graphic Shop, a collection of quality basics featuring vintage-inspired university logos and graphics.

Operating Margin and Expenses

Operating income for the quarter was a record $176 million, nearly double the second quarter results from the prior year. Operating margin expanded to 15.5%, driven by strong sales growth and effective cost management. The company also highlighted its focus on marketing, digital, technology, and people investments to support its long-term aspirations.

Guidance for the Rest of the Year

Looking ahead, Abercrombie & Fitch expects to deliver growth across regions and brands in the third quarter, with net sales up low double digits compared to the third quarter of 2023. The company is also optimistic about its full-year sales growth, raising its expectations to 12% to 13% for 2024, up from the 2023 level of approximately $4.3 billion. This outlook includes an adverse impact of around $50 million from the loss of the 53rd week in 2023.

Conclusion

Abercrombie & Fitch's strong second-quarter results and upbeat outlook for the future are a testament to its ability to adapt and innovate in a challenging retail environment. The company's focus on customer engagement, strategic investments, and operational efficiency have positioned it well for continued growth in the coming quarters. With a robust portfolio of brands, a proven track record of success, and a clear vision for the future, Abercrombie & Fitch is well-positioned to capitalize on the opportunities ahead.