Abercrombie (ANF) Gains From Strong Holiday Show, Lifts View

Abercrombie & Fitch Company (NYSE:ANF) raised its guidance for fourth-quarter fiscal 2017 in response to the spectacular performance by its brands — Hollister and Abercrombie — along with other channels, during the holiday season. This built optimism on the stock, which has gained 12.6% during the trading session on Jan 22.

Overall, shares of Abercrombie have gained 40.9% compared with the industry growth of 28.2%. Moreover, the company carries a Zacks Rank #3 (Hold).

Encouraged by the robust holiday sales, Abercrombie now expects fourth-quarter comparable store sales (comps) to increase high-single digits versus low-single digits increase projected earlier. The company anticipates sales growth in the low-teens range,against the previously forecasted mid- to high-single digits range. Notably, sales guidance for the quarter includes gains from the 53rd week and changes in foreign currency rates.

However, the company reiterated its previously stated gross profit guidance of nearly 100 basis points decline from prior-year’s rate of 59.3%. Operating expenses (including other operating income) for the quarter is however expected to increase slightly from $553.7 million reported in the prior-year quarter, compared with the earlier forecast of 1% decline. The increase in operating expenses is mainly attributed to volume-related expenses on better-than-expected sales for the quarter.

Throwing more light on the holiday results, Abercrombie revealed that strength persisted in its Hollister brand. Moreover, the company anticipates its namesake brand to positive comps for the fourth quarter, indicating a marked improvement from the recent dismal comps trend at the brand. Notably, comps for the Abercrombie brand declined 2% in third-quarter fiscal 2017.

Abercrombie is slated to report fourth-quarter fiscal 2017 results on Mar 7, 2018.

The holiday season this year was overwhelming for retailers backed by an increase in consumer spending. This has lifted the overall outlook for the Retail sector, raising hopes for a spectacular 2018. Per National Retail Federation, retail sales during the November/December period increased 5.5% to $691.9 billion. Additionally, online shopping sales this holiday season increased 14.7% to $108.2 billion, per Adobe Analytics.

Apart from Abercrombie, some other notable gainers during the period were American Eagle Outfitters Inc. (NYSE:AEO) , J. C. Penney Company, Inc. (NYSE:JCP) and Macy’s Inc. (NYSE:M) , which reported comps growth of 8%, 3.4% and 1.1%, respectively.

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