Digital sales growth and sequential sales improvements in the global store base explains why Abercrombie & Fitch Co. (NYSE:ANF) is flying up the charts. Amid a challenging business environment, the specialty retailer delivered its best third-quarter operating income in eight years.
Updated product and marketing resonated will with existing and new customers across all brands, all but accelerating revenue growth in the quarter. Abercrombie & Fitch also succeeded in expanding its gross profit while tightly managing expenses.
Abercrombie & Fitch has benefited a great deal on reducing dependence on tourist-driven locations by repositioning within key markets. Likewise, the specialty retailer plans to exit four additional flagship locations by the end of January 2021. This will bring to seven the total closures by the end of the year.
Strong digital demand has helped offset any losses following the closure of some flagship stores. With customer shopping patterns switching online, Abercrombie & Fitch has also had to invest in e-commerce. Similarly, the company should be able to shrug off the effects of COVID-related store restrictions as the second wave continues to bite.
Sales Growth
Strong digital sales helped Abercrombie & Fitch shrug off the effects of the COVID-19 pandemic on brick and mortar sales. Likewise, the top and the bottom line surpassed estimates as the digital platform experienced improved traffic conversions and new customer acquisition.
Abercrombie & Fitch reported e adjusted earnings of 76 cents a share, more than triple earnings of 23 cents a share reported a year ago. Net sales came in at $819 million, surpassing consensus estimates of $735.3 million. However, sales were down 5% from a year ago as the retailer felt the full impact of the COVID-19 pandemic on store sales.
Digital net sales were up 43% year over year to $382 million. Looking ahead, Abercrombie & Fitch intends to bolster its Omni-channel capabilities. The specialty retailer is also working on rationalizing its store base by reducing dependence on underperforming tourist-driven locations.