Abercrombie & Fitch posts surprise profit on lower costs, online boost

Abercrombie & Fitch Co (ANF.N) reported a surprise profit on Thursday as the apparel retailer slashed costs and benefited from a surge in online orders during the COVID-19 pandemic, sending its shares up as much as 17%.

The company has been ramping up investments in its online platforms to cushion the hit from coronavirus-induced restrictions, and has also partnered with TikTok Stars Charli and Dixie D’Amelio in an effort to attract younger shoppers.

Digital sales jumped 56% in the second quarter, helped by higher demand for Abercrombie’s Gilly Hicks brand’s activewear range, as well as its loungewear, as stuck-at-home customers opted for more comfortable clothing.

The company, which has furloughed employees, halted share buybacks and cut executive salaries to reduce costs, said store and distribution expenses were down nearly 18%, while marketing costs fell 16%.

Excluding items, Abercrombie earned a profit of 23 cents per share in the second quarter, while analysts were expecting a loss of 83 cents per share, according to IBES data from Refinitiv.

Net sales fell 17% to $698.3 million in the three months ended Aug. 1, but beat estimates of $658.44 million.

The company forecast a bigger-than-expected 15% to 20% drop in current-quarter sales, as the pandemic hampers its efforts to boost traffic through a revamped denim line and remodeled stores after past fashion missteps.

Abercrombie executives said on a call with analysts the company would still manage expenses, assuming that the sales trend would not improve, adding that there would more would be more promotional discounts in the holiday quarter.