- Net Sales: Achieved record second quarter net sales of $1.1 billion, up 21% year-over-year, meeting analyst estimates of $1.1 billion.
- Comparable Sales: Increased by 18%, driven by broad-based growth across regions and brands.
- Operating Income: Reached a record second quarter operating income of $176 million, significantly higher than last year's $90 million.
- GAAP EPS: Reported net income per diluted share of $2.50, compared to $1.10 in the same quarter last year.
- Gross Profit Rate: Improved to 64.9%, up approximately 240 basis points from last year.
- Operating Margin: Expanded by 590 basis points to 15.5%, reflecting enhanced profitability.
- Liquidity: Strengthened balance sheet with liquidity of $1.2 billion, including cash and equivalents and borrowing available under the ABL Facility.
On August 29, 2024, Abercrombie & Fitch Co (ANF, Financial) released its 8-K filing for the second quarter of fiscal 2024, showcasing impressive financial results that surpassed analyst expectations. The specialty retailer, known for its casual clothing, personal-care products, and accessories, reported record net sales and significant growth across its brands and regions.
Company Overview
Abercrombie & Fitch Co is a specialty retailer that sells casual clothing, personal-care products, and accessories for men, women, and children. It operates through its stores and websites, including the Abercrombie & Fitch, Abercrombie kids, and Hollister brands. While most stores are in the United States, the company also has a presence in Canada, Europe, and Asia. Abercrombie ships to over 100 countries via its websites and sources its merchandise primarily from Asia and Central America. The company supports its North American operations with two distribution centers in Ohio and uses third-party distributors for sales in Europe and Asia.
Performance Highlights
Abercrombie & Fitch Co reported record second-quarter net sales of $1.1 billion, a 21% increase from the previous year, with comparable sales growth of 18%. The company's operating margin expanded by 590 basis points to 15.5%, resulting in a record second-quarter operating income of $176 million. The balance sheet was further strengthened with the redemption of all outstanding 8.75% senior secured notes and an amendment and extension of the ABL Facility, resulting in liquidity of $1.2 billion.
"Our team continued to execute at a very high level in the second quarter, resulting in better than expected sales growth and profitability. The strength of our brand portfolio and improvements we’ve made in global capabilities resulted in broad-based growth across regions, brands and channels," said Fran Horowitz, Chief Executive Officer.
Financial Achievements
The company's net income per diluted share for the second quarter was $2.50, compared to $1.10 in the same period last year. This performance was driven by a gross profit rate of 64.9%, up approximately 240 basis points from the previous year. Operating expenses, excluding other operating income, net, were $561 million, compared to $497 million last year, with operating expenses as a percentage of sales improving to 49.4% from 53.2% last year.
| Metric | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Net Sales | $1.1 billion | $935 million | 21% |
| Operating Income | $176 million | $90 million | 95.6% |
| Net Income per Diluted Share | $2.50 | $1.10 | 127.3% |
Segment and Brand Performance
Net sales by segment and brand for the second quarter were as follows:
| Segment | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Americas | $901 million | $731 million | 23% |
| EMEA | $200 million | $172 million | 16% |
| APAC | $33 million | $32 million | 3% |
| Brand | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Abercrombie | $582 million | $463 million | 26% |
| Hollister | $552 million | $473 million | 17% |
Financial Position and Liquidity
As of August 3, 2024, Abercrombie & Fitch Co had cash and equivalents of $738 million, compared to $617 million as of July 29, 2023. Inventories stood at $540 million, up from $493 million in the previous year. The company had no long-term gross borrowings, having redeemed all its outstanding senior secured notes. Liquidity, comprising cash and equivalents and borrowing available under the ABL Facility, was approximately $1.2 billion.
Cash Flow and Capital Allocation
For the year-to-date period ended August 3, 2024, the company reported net cash provided by operating activities of $260 million, net cash used for investing activities of $97 million, and net cash used for financing activities of $327 million. During the second quarter, Abercrombie & Fitch Co repurchased 84,054 shares for approximately $15 million, with $202 million remaining on the share repurchase authorization established in November 2021.
Fiscal 2024 Full Year Outlook
Abercrombie & Fitch Co has increased its full-year outlook, now expecting net sales growth in the range of 12% to 13% and an operating margin of 14% to 15%. For the third quarter of fiscal 2024, the company anticipates net sales growth in the low double-digits and an operating margin of 13% to 14%.
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