ANF - Abercrombie & Fitch offers 'cautious optimism' on consumer spending in 2023

Abercrombie & Fitch ( NYSE: ANF ) posted a mixed earnings result on Wednesday, but voiced some optimism on consumer appetites for apparel spend in the year ahead.

The Ohio-based apparel retailer posted $0.81 in earnings per share, missing the analyst consensus by $0.05, while narrowly exceeding revenue expectations for the quarter. The company said that strong momentum in the Abercrombie & Fitch brand and sequential improvement in Hollister helped drive sales.

“In a year with significant inflation and global macroeconomic disruption, our teams leveraged our agile operating model to redirect expense and inventory investments,” CEO Fran Horowitz said. “These efforts helped drive sequential sales improvement in the last two quarters, while progressing on key growth initiatives across digital, technology and stores.”

She added that the company remains “cautiously optimistic on consumer demand” in 2023 and expects sales in Hollister to continue sequential improvement.

“We are pleased with our inventory levels and each of our brands is in a position to chase,” Horowitz said. “While we expect to see net product cost benefits in 2023, we will continue to tightly manage our expenses, inventory and cash flow to properly balance investing for the long-term while improving profitability as we execute to deliver our 2025 Always Forward Plan.”

Inventories fell 4% from the prior year to $506M due in part to production delays in Vietnam. Gross profit contracted 260 basis points year over year amid inflationary impacts and inventory clearing.

Moving into 2023, the company expects net sales growth in the range of 1 to 3% with growth to be weighted toward the second half of the year. Net sales are expected to be flat for the first quarter. A flat level of about $813M suggests upside to the $795.74M Street consensus.

Shares of Abercrombie & Fitch ( ANF ) rose 0.4% about 90 minutes prior to the market open.

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