Abercrombie & Fitch (ANF) reported better-than-expected second-quarter earnings and revenue on Wednesday, but its shares fell more than 14% following the release.
The apparel retailer posted adjusted earnings per share of $2.50, surpassing analyst estimates of $2.19. Revenue came in at $1.13 billion, beating the consensus forecast of $1.1 billion and representing a 21% YoY increase. Comparable sales rose 18% in the quarter.
Abercrombie brands saw 26% growth, while Hollister brands accelerated to 17% growth. The company's gross profit margin expanded by 240 basis points to 64.9%.
"Our team continued to execute at a very high level in the second quarter, resulting in better than expected sales growth and profitability," said CEO Fran Horowitz in a statement.
For the full fiscal year 2024, Abercrombie now expects net sales growth of 12% to 13%, up from its previous outlook of around 10%. The company also raised its operating margin guidance to a range of 14% to 15%.
Looking ahead to the third quarter, Abercrombie forecasts low double-digit net sales growth compared to Q3 2023 revenue of $935 million.
Explaining the reasons for the stock's decline, Citi analysts said the Q2 results were "very strong," but they "didn’t hit a very high bar."
"The magnitude of the sales/GM beat was not as much as the market was anticipating with A&F comps +21%, slightly lower than cons +22%, which was offset by stronger Hollister comps (+15% vs cons +12%)," they explained. "While the strong momentum at both A&F and Hollister continues, underscored by the F24 implied EPS guidance raised from ~$9.50 to ~$10.25, the beat and raise is likely not enough to satisfy very high expectations."