Online Demand Fuels Abercrombie & Fitch Profit Beat

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Abercrombie & Fitch Co forecast first-quarter net sales above estimates on Tuesday after tightened costs and surging online sales of sweaters, fleece tops and knit bottoms helped it report a better-than-expected quarterly profit.

The company, which said it would resume share buybacks, also benefited from increased prices during the holidays as it reined in promotions and tightened inventory.

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The teen- and millenial-focused retailer has partnered with TikTok influencers Charli and Dixie D’Amelio and ramped up investments in its online business to combat declining store traffic as customers shift to online shopping due to the pandemic.

It projected a 30 percent to 40 percent increase in net sales in the first quarter versus an average analysts’ estimate for a 32.8 percent jump to $644.62 million.

Demand for its loungewear and Gilly Hicks brand’s activewear drove digital sales 34 percent higher, as customers staying at home turned to comfortable clothing.

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“Our distribution centres remained operational, enabling us to fulfil digital customer demand globally, partially mitigating lost sales from temporary store closures,” said Chief Executive Officer Fran Horowitz.

Net sales fell 5 percent during the quarter.

In a bid to rein in costs, the Ohio-based company reduced payroll expenses, suspended dividend and closed 137 stores last year, including eight larger format flagships, as it pivots toward smaller, newly remodelled stores to draw in customers.

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Excluding one-time items, the company reported a profit of $1.50 per share in the fourth quarter, beating analysts’ average estimate of $1.22 per share.

By Aditi Sebastian; Editor: Devika Syamnath.

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