In a sea of dreadful third quarter apparel earnings, as consumers start to pay their returning student loans and higher credit card bills, it’s Abercrombie & Fitch (ANF) with a dose of early holiday cheer.
“Consumers are just choosing to shop with us,” Abercrombie & Fitch CEO Fran Horowitz said matter-of-factly on Yahoo Finance Live when asked how the company defied the fate of competitors such as Macy’s (M).
Abercrombie & Fitch hit the mark in almost every retail metric when it reported Tuesday morning, powered by demand amongst 20-40-year-olds.
The namesake Abercrombie & Fitch division saw third quarter same-store sales surge by 26% as Horowitz and her design team nailed back-to-school styles. The sales growth marked an acceleration from a 23% year-over-year increase in the second quarter.
The company hauled in $1.06 billion in total revenue, up 20% from last year.
By comparison, same-store sales at Macy’s and Kohl’s (KSS) fell 7% and 5.5% in the third quarter, respectively. Rival American Eagle Outfitters (AEO) saw its namesake brand notch a meager 2% comparable sales increase.
Amid improved assortments at Hollister, the brand finally showed some life again, with a 7% same-store sales increase.
Horowitz isn’t yet ready to declare Hollister a comeback success, but does acknowledge the business is finally headed in the right direction.
Gross profit margins rose 570 basis points year over year to 64.9% as Abercrombie sold more merchandise at full price, almost a shocker in the current macroeconomic backdrop.
To boot, inventories fell 20% — a clear sign of strong operational execution on ordering and planning.
Horowitz says inventories are “clean” entering the holidays, and the season is off to an “encouraging” start.
The company forecast fourth quarter sales growth of a “low-double-digit” percentage. Operating margins are pegged to almost double from the year-ago period.
Shares of ANF did sell off by about 2% on the results Tuesday. Shares are up more than 200% this year.
“Stepping back, this was a strong quarter, and the stock may struggle to move higher given already-high expectations,” Citi analyst Paul Lejuez said in a client note.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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