Abercrombie & Fitch, the popular apparel retailer among millennials and Generation Z, has recently announced a slower revenue growth forecast for the year. This news has raised concerns about the company’s momentum, as it has been experiencing a torrid run of success in recent years.
The company has outperformed other US apparel companies, such as Gap Inc., which have struggled to retain customers. Abercrombie’s Chief Executive Officer, Fran Horowitz, attributes the company’s growth to categories like dresses, tailored pants, and activewear.
However, Abercrombie now expects full-year net sales to rise only 4% to 6%, which is a significant slowdown compared to the 21% growth seen in the prior fiscal year. While this forecast aligns with analysts’ estimates, it indicates a potential loss of momentum for the retailer.
As a result of this news, Abercrombie’s shares were down 3.8% in New York. Nevertheless, the stock has experienced a remarkable turnaround over the past year, rising more than 400% from its lowest share price on record four years ago.
Abercrombie’s success can be attributed to various strategic initiatives. The company has heavily invested in e-commerce, recognizing the importance of online shopping for its target audience. It has also closed underperforming stores and experimented with new store formats to adapt to shifting consumer habits.
CEO Fran Horowitz emphasized that Abercrombie has expanded its addressable market beyond its traditional offerings of jeans and T-shirts. The company is launching a wedding-guest shop this week, catering to formal occasions and further diversifying its product range.
Horowitz expressed confidence in Abercrombie’s growth potential, stating that there is no finish line for the company. This positive outlook is supported by the company’s strong financial performance. Abercrombie reported earnings of $2.97 per share for the quarter ended February 3, surpassing analysts’ expectations of $2.82 per share.
In terms of sales performance, Abercrombie’s namesake brand experienced a significant surge of 28% in comparable sales during the fourth quarter, which includes the crucial holiday season. On the other hand, Hollister, the company’s brand targeting teenagers, has been struggling to grow but managed to achieve a 6% increase in same-store sales.
While Abercrombie’s slower revenue growth forecast may raise concerns among investors, the company’s recent success and strategic initiatives provide a solid foundation for future growth. With its focus on expanding its product offerings and adapting to changing consumer habits, Abercrombie is well-positioned to continue capturing the attention of millennials and Generation Z.
