(Reuters) – Abercrombie & Fitch on Wednesday raised its full-year sales growth forecast and beat estimates for its first-quarter results, expecting new and trendy apparel and accessories to drive demand for its Hollister and namesake brands.
Updating its style to attract discerning shoppers and relying less on discounts boosted the company’s earnings and boosted comparable sales by 29% at Abercrombie and 13% at Hollister in the quarter.
“Our brands offer high-quality, relevant assortments to new and returning customers across all regions and brands,” said CEO Fran Horowitz.
The company also benefits from people resuming purchases of unnecessary items as inflation declines. The company’s gross margin rose 540 basis points to 66.4% for the quarter ended May 4.
“Abercrombie’s resurgence as an inclusive lifestyle brand resonates strongly with Gen Z and millennials, allowing it to outperform the broader apparel sector and maintain (a) healthy momentum,” said Rachel Wolf, an analyst at eMarketer.
The company now expects its fiscal 2024 net sales to grow 10%, up from its previous forecast of 4-6% growth.
Earlier this month, major retailers posted mixed results, with Walmart (NYSE:) raising full-year forecasts, betting on strong demand for groceries and essentials, and Target reporting trends in the apparel category improved despite a tough quarter.
Abercrombie reported net sales of $1.02 billion for the quarter, compared with analysts’ average estimate of $963.3 million, according to LSEG.
Adjusted earnings rose to $2.14 per share, compared with analysts’ estimates of $1.74 per share.
The company’s shares rose 1.4% on the eve of trading. This year they are up almost 74%.